Boosting spending Keynesian way

This weeks discussion on How big is the Government? to remain effective?

The case study of the US Government current public spending in FY 2011

All answers are depicted by billion USD and % share towards the GDP

  1. Using the standard measurement of government expenditure as share of GDP,
    1. Assumption undertaken i): That the OMB report was issued on February 14, 2011 whereas the CBO report was issued on August 2011. The OMB report can be seen here
      Fiscal Year 2012 budget documents can be accessed for free at:
       http://www.gpoaccess.gov/usbudget/fy12/<...
      This will set foot towards a more fix outlook towards the changes happening in a period of 0.5 years (CBO report more updated that OMB report);
    2. The CBO report can be accessed here:
    3. This document and supplemental material can be accessed for free at:
       http://www.cbo.gov/ftpdocs/123xx/doc1231...
      
    4. Assumption ii): Both OMB and CBO agree that the growth of Nominal GDP is accounted are roughly 4.0% (4.0 vs. 3.9) and the Real GDP (2.7 vs. 2.4) changes are at 2.7%. The base number given through the OMB has shown very optimistic values;
    5. Assumption iii): The inflation are relatively stable for the past 15 years (figure 2-11 CBO report);
    6. Assumption iv): The CBO was issued in August 2011, therefore we assume that this has include the funding of ‘act’ or ‘bill’ that was issued from January to August 2011;
    7. How large would you estimate the public sector in the United States to be in fiscal year 2011? The answer is 25.3% vs. 23.8 % (OMB vs. CBO). With a GDP estimate of 15,080 vs. 15,238. With the assumption that the Nominal GDP will touch the 15,240 (OMB report). Therefore, I would put the basis of numeration for GDP as 15,238 to show more significant value.
    8. What would you include and exclude and why?

I would include the discretionary policy for both the security agencies, and non security agency amounting to a propose 10% to further add the value from 3,819 + 20.92 = 3939.92;

I would include the ‘American Jobs Act’ costing 450, as an example of how the President would still need discretionary policy (funds) to be available to him (there is an excess of 1416 – 1279.9 for his discretion for contingency operations);

  1. What additional information would make this estimate more accurate?

i.     I would include the additional debt concur by the US Government. The current debate of the ‘debt-ceiling crisis’ with debt surpassing the GDP is not well depicted in both reports (Budget Control Act 2011). The OMB vs. CBO report has only depicted 72% vs. 67.3%. This figure can be found as the Debt held by the public. The difference in the ratio has caused the deficit of the FY 2011 to be inaccurate. It is seen for FY 2011, the deficit ratio to be 10.9% vs. 8.5% of the overall GDP. I would argue instead that the current public debt has surpass the GDP;

ii.     To also include the outlook given by the discretionary policy for both the security agencies, and non-security agency worth for a grand total of 1279.9. Presuming that these values should account for the changes in actual spending compared to actual in FY 2010 (from 1257.6 vs. 1279.9) is worth roughly 1.02%, , I would argue that additional value of 1.02% should be added to the FY 2011 as a historical approach to address the various situational condition;

 

Conclusion, the Final spending should also include State and Local expenditure and also Tax expenditure.

Amazingly the final value of consolidated spending (ON/OFF) is at 25% + State and local expenditure at 10% and Tax Expenditure is at 7% amounting to 43% in all.

A very high number for a rich income country.

 

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