Graph of the Day

The graph shows that, after 60 years, the private economy is 5 times its 1950 size. But state and local governments are spending almost 13 times as much as they did in 1950. “This is like a household whose income has grown five-fold over a period of time,” Mitchell reports. “That’s great news. But, unfortunately, their spending habits have grown 13-fold. This divergence is unsustainable.

Perhaps Mitchell is correct and this trajectory is unsustainable. Though, if we would have said that in 1975 when public spending was double that of private GDP (with respect to their 1950 levels) we would have spoken at least 35 years too soon. Being unsustainable is no reason for something not to be sustained.

Via The Mercatus Center (HT: Marginal Revolution)

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One thought on “Graph of the Day

  1. The knee jerk reaction by many upon seeing these graphs is to panic and call for cuts in government spending. The issue of course is that even with 13 times the spending governments struggle to keep up with infrastructure to meet the requirements in a complex and continually developing society.

    The development must be sustained. The challenege is in identifying when, where and how the costs are re-couped and understanding that it will be difficult to quantify this with hard dollar values.

    What is easy to determine is cost when expenditure slows.
    These costs need to be serviced by the private sector or more infrastructure needs aren’t met, which in a country that now has 47million people living in poverty makes it increasingly difficult to find and participate in enough work to navigate their way out of the cycle.

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