by Mitch Kokai
Senior Political Analyst, John Locke Foundation
According to the dictionary, “austerity” means “self-denial” and “asceticism.” So when the term is applied to spending, we naturally assume it means substantial cut-backs. But according to the Newspeak of Keynesian economists, a budget can be austere without any cutbacks to speak of, so long as it’s the government’s budget.
Bentley University economics professor and blogger Scott Sumner goes even further. “In the world of Keynesian economics,” he recently declared, “spending can soar much higher, and they’d still insist that austerity is occurring. If the Keynesians are to be believed, we have savage cuts in government spending in America, despite data showing spending levels much higher than before the recession.”
The chart on this page, tracking inflation-adjusted federal outlays generated by the White House’s own Office of Management and Budget, confirms Sumner’s point. We might call it “austerity” if constant-dollar outlays were headed back to the level of fiscal years 2006 and ’07, just before the onset of the Great Recession. But even then, it would be a stretch. Real spending in ’06 and ’07 was at a peak up to that point: As a share of nominal gross domestic product, spending ran 19.9%, up from a 10-year average through 2005 of 19.2%.
Yet the trend has been anything but austere. After the surge in spending through 2009, real outlays have been on a plateau, with the OMB’s projection for 2014 running more than 20% above the level of ’06 and ’07. At more than $3 trillion, real spending in 2014 is projected to run 2.5% below the ’09 peak, with nominal spending running 7.3% higher. To call that austere would be like calling it ascetic when you manage a 2.5% decline in a daily calorie intake of 3,500.