November 6, 2013
Sergeant Friday Questions a Treasury Spokeswoman – Just the Facts, Ma’am
Sergeant Friday: What has been the behavior of total federal outlays in the past five fiscal years?
Treasury Spokeswoman: As shown in Chart 1, the year-over-year change in federal outlays ballooned to 17.9% in FY 2009 because of the sharp increase in income security expenditures (e.g., unemployment insurance benefits, food stamps) due to the most severe recession since the early 1930s, TARP expenditures to recapitalize our financial system and a fiscal stimulus program.
Sergeant Friday: Just the facts, ma’am. I did not ask you why total federal outlays ballooned in FY 2009.
Treasury Spokeswoman: Okay. In three of the subsequent four years following FY 2009, total federal outlays contracted, by 1.7%, 1.8% and 2.3% in FY years 2010, 2012 and 2013, respectively.
Chart 1
Sergeant Friday: Prior to this recent experience, when was the last time total federal outlays contracted and by what percentage?
Treasury Spokeswoman: 1965, by 0.25%.
Sergeant Friday: And before that?
Treasury Spokesperson: 1954 and 1955, by 6.9% and 3.4%, respectively.
Sergeant Friday: In the five fiscal years ended 2013, what was the compound annualized rate of growth in total federal outlays?
Treasury Spokeswoman: Even with the ballooning in FY 2009 outlays, the compound annualized growth in total federal outlays in the past five years has beenjust 3.0%, rounded to the first decimal place.
Sergeant Friday: Again, please no editorializing. Just the facts, ma’am. How do the most recent fiscal years compare with the past 60 years?
Treasury Spokeswoman: The data are shown in Chart 2, starting with the compound annualized growth in total federal outlays in the five years ended 1954. The median five-year annualized growth rate over this 60-year period was 6.6%. Previous to the five years ended 2013, the last time the annualized growth in total federal outlays was as low as 3.0% was in the five years ended 1997. To find five-year compound annual growth in total federal outlays as low as 3.0% or less prior to 1997, you would have to go all the way back to the five years ended 1957 and 1958, with annualized growth rates of 2.5% and 1.6%, respectively.
Chart 2
Sergeant Friday: Given the sharp deceleration in growth of total federal outlays in the past five fiscal years, I would assume that there has been a corresponding sharp deceleration in the growth of total federal debt. Right?
Treasury Spokeswoman: There has been a deceleration in the growth of total federal debt in the past five years, but, forgive me for editorializing, I would hardly describe the deceleration as “sharp”.
Sergeant Friday: I’ll be the judge of what constitutes a sharp deceleration. Just give me the facts, ma’am.
Treasury Spokeswoman: Okay. Chart 3 shows the five-year compound annualized rate of growth in total federal debt for the years 1954 through 2013. I have included in the chart the five-year compound annualized growth in total federal outlays for purposes of comparison. In the five years ended FY 2013, total federal debt grew at a compound annualized rate of 10.8%, down from 12.3% in the five years ended FY 2012. Someone as perceptive as you will notice that whilst (I worked at the UK Treasury before coming to the U.S. Treasury) growth in total federal outlays reached a local peak in the five years ended FY 2009, growth in total federal debt continued to rise until FY 2013. A similar phenomenon occurred in the mid 1980s when growth in total federal debt continued to move higher after growth in total federal outlays had begun moving lower.
Chart 3
Sergeant Friday: Interesting. Please add in the five-year compound annualized growth (CAG) of total federal receipts to what you have in Chart 3.
Treasury Spokesperson: (He really is a perceptive fellow!) The blue line in Chart 4 shows the five-year compound annualized growth rate of total federal receipts. In the five years ended FY 2013, total federal receipts grew at a compound annualized rate of just 1.9%. After peaking at a compound annualized growth rate of 15.0% in the five years ended 1981, growth in total federal outlays has been oscillating lower. In the 12 fiscal years from 2002 through 2013, on only two occasions, 2007 and 2008, was the five-year compound annualized growth in total federal revenues greater than that of total federal outlays. In only one of those years was the five-year compound annualized growth in total revenues, at 7.2%, higher than the 1954 – 2013 median growth rate of 7.1%. From 2002 through 2013, on only one occasion was the five-year compound annualized growth in total federal outlays, at 8.9%, higher than the 1954 – 2013 median growth rate of 7.7%.
Chart 4
Sergeant Friday: Thank you for your factual information. You may leave now.
Treasury Spokeswoman: I’m here to serve the public. I’ll be on my way now.
Sergeant Friday: The word on the street is that Washington has a spending problem. If the “spending problem” reference is to the growth in federal spending, the word on the street must be an opinion. The facts don’t support this opinion. In three of the past four fiscal years, total federal spending has contracted. In the five years ended FY 2013, the compound annualized rate of growth in total federal spending was 3.0%, 470 basis points below the five-year annualized median growth rate over the past 60 years.
The word on the street is that Washington has a federal debt problem. The facts dosupport the notion that growth in the federal debt is relatively high by historical standards. But the facts also show that the relatively high rate of growth in the federal debt in the past five years is due to the historically low rate of growth in total federalreceipts. In the five years ended FY 2013, the compound annualized rate of growth in total federal receipts was 1.9%, 520 basis points below the five-year annualized median growth over the past 60 years.
Having reviewed the Treasury spokeswoman’s data, I am reminded of Daniel Patrick Moynihan’s comment that everyone is entitled to his own opinion, but not his own facts.
Paul L. Kasriel
Econtrarian, LLC
1-920-818-0236
