Why can’t the US be like the US of the 1950s?

Sam Zell says Brazil is like ‘US in the 1950s.’ CNBC reports:

Brazil is booming and brimming with business opportunities—like the “US in the 1950s”—billionaire businessman Sam Zell told CNBC Wednesday. He said if Brazil continues on the same course, he predicts that the “fiscally conservative” nation will soon be one of the top two countries in terms of growth.

The real estate tycoon said Brazil has 8 percent debt, compared to 70 percent (of GDP) in the US. The country has a AAA rating from several major credit-rating institutions.

Why must we look for Brazil to be the US of the 1950s? Why can’t the US be like the US of the 50s? Let’s examine some changes that have occurred to the US in the last 50-60 years.

In the 1950s, government spending at all levels averaged 27.0 percent of GDP. Non-defense spending averaged 15.5 percent of GDP. Today, government spending is 43.9 percent of GDP and non-defense government spending is 37.7 percent of GDP. So government spending as a percentage of GDP has risen 62.6 percent in the last 50 years and non-defense government spending has risen 143 percent in that time. (You don’t hear these number reported to you on the news, do you?) Click here to see a chart of non-defense government spending.

The government now confiscates more of your money through taxes to pay for this largess. In the 1950s, government at all levels took in 26.6 percent of GDP. Now, government takes 30.4 percent of our money, a 14.3 percent increase.

But that’s not all. In the last fifty years, regulation has increased dramatically. Back in 1950, there was no Department of Transportation, Federal Highway Administration, Federal Railroad Administration, National Highway Traffic Safety Administration, National Credit Union Administration, Consumer Product Safety Commission, Environmental Protection Agency, Occupational Safety and Health Administration, Federal Energy Administration, Farm Service Agency, Food and Consumer Service, Agricultural Marketing Service, Federal Grain Inspection Service, Animal and Plant Health Inspection Service, Foreign Agricultural Service, Food Safety and Inspection Service, Rural Development Administration, to name just a few. Not only do these agencies cost money, they put an added burden on consumers, businesses, and employees which costs the United States $1.5 trillion each year. That’s like an added hidden 10% tax on the economy, which would bring the real rate of taxation up to 40.4 percent.

In the 1950s, government welfare spending accounted for 1.57 percent of GDP. Today, it accounts for 5.21 percent, a 231% increase. Wikipedia explains how LBJ’s Great Society caused this massive increase:

After the Great Society legislation of the 1960s, for the first time a person who was not elderly or disabled could receive a living from the American government. This could include general welfare payments, health care through Medicaid, food stamps, special payments for pregnant women and young mothers, and federal and state housing benefits. In 1968, 4.1% of families were headed by a woman on welfare; by 1980, this increased to 10%.

Lastly, the United States government has actively pursued a policy of limited oil production. Back in 1950, the US produced 5.9 million barrels a day of oil and had net imports of 545 thousand barrels, 8.4 percent of the total consumptions. In 2009, US production had risen only 21.8 percent over the previous 59 years to 7.2 million barrels a day. But consumption had risen 162 percent to 16.9 million barrels. As a result, imports increased 1,680 percent to 9.7 million barrels a day. At a current price around $70 a barrel, that adds up to $248 billion a year sent overseas, about 1.6 percent of GDP. Thus, over the last 60 years, trillions of dollars have left this country, to be spent primarily by unfree societies overseas. See oil data here.

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6 responses to “Why can’t the US be like the US of the 1950s?

  1. Here are some other relevant charts courtesy of the Heritage Foundation.

    Federal Spending Per Household, Inflation Adjusted
    http://www.heritage.org/budgetchartbook/federal-spending-per-household

    Federal Spending Grew Faster than Revenues
    http://www.heritage.org/budgetchartbook/growth-federal-spending-revenue

    Federal Mandatory Spending (Social Security, Medicare, Medicaid) Grew Five Times Faster than Discretionary Spending
    http://www.heritage.org/budgetchartbook/mandatory-discretionary-spending

    • Those are great links and charts. I still prefer looking at things as a percentage of GDP rather than inflation adjusted terms.

      • Michael, I agree with you. Using an inflation-adjusted figure corrects only for extraneous economic factors, which are not directly (and many would say not even indirectly) managed by the Federal government. Using % GDP as the basis is more effective in exposing the impact of the policies pursued by successive administrations.

      • Unfortunately, the beautiful Heritage charts don’t show spending as a % of GDP.

        Here’s another good site showing federal spending as a percentage of GDP. You can adjust the time period

        US Government Spending As Percent Of GDP
        http://www.usgovernmentspending.com/downchart_gs.php?year=1930_2010&view=1&expand=&units=p&fy=fy11&chart=F0-total&bar=0&stack=1&size=l&title=US Government Spending As Percent Of GDP&state=US&color=c&local=s

        You can even change to the view to see the data in per capita, inflation-adjusted terms. This chart is somewhat shocking.
        http://www.usgovernmentspending.com/downchart_gs.php?year=1930_2010&view=1&expand=&units=d&fy=fy11&chart=F0-total&bar=0&stack=1&size=l&title=US Government Spending As Percent Of GDP&state=US&color=c&local=s

        The only reason that I like per household or per capita, inflation-adjusted numbers is that people can more readily relate to something that costs them ever more but seemingly provides less service or value over time.

        You can also further subdivide the totals by spending type. Not suprisingly, much of the increase is pensions, healthcare, welfare.

        • I used that site a lot to get statistics for my book. The chart I posted at http://bit.ly/d3d6rY is based on data from that site. However, it won’t display non-defense spending, but it is easy enough to download the data and create my own chart using Excel.

          The only problem I have is that the numbers are constantly getting revised. GDP figures will be revised years after the fact, so any statistics or charts need constant updating.

          I think looking at non-defense spending is most important because defense spending is notoriously volatile depending on whether there is a war being fought. I can’t necessarily blame FDR for huge spending when it was used to fight the Nazis or Japanese.

          And I like looking at a % of GDP because that tells how intrusive the government is, how much of our lives it controls, at the minimum. From a person standpoint, per capita inflation adjusted may be best. But from an political-economy view, the view of liberty versus tyranny, percentage of GDP is most important. I mean, just look at the chart I linked to above. That tells us exactly how much the government has grown and how it now interferes in our lives more than any time in our past for no cause.

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