K-12 Tax & Spending Climate: The Size of the State

The Economist:

At first glance, Mr Obama's critics have ample ammunition. Federal spending during his term was the highest relative to GDP since the end of the second world war. A record number of the population now gets federal entitlements such as Medicaid and food stamps. The federal government backs 90% of new mortgages, up from half before the financial crisis, as well as a growing share of student loans. Staffing levels at regulatory agencies have ballooned, and they churn out more and costlier rules than their predecessors.

Behind these bits of data, however, lies a more complicated reality. Much of the expansion in government is a direct consequence of the weak economy. Last year a record 45m people received food stamps, up 58% from 2008, while a record 53m were on Medicaid (the health-care programme for the poor), up 21%. This is almost entirely caused by unemployment and shrunken pay-cheques; eligibility has not changed for either programme in that time, although the 2009 stimulus act temporarily raised food stamp benefits and state Medicaid transfers. Similarly, because investors have lost their appetite since the crisis for securities without a federal guarantee, federally-backed agencies have been forced to underwrite a growing share of new mortgages.

Posted by Jim Zellmer at August 7, 2012 2:09 AM
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