Reynolds on a “Shameful Spending Spree”

Neil Reynolds has issued yet another diatribe in the Globe, “A Shameful Spending Spree”  He argues that  inflation adjusted government spending per person has  grown by about 50% over the past 30 years. He uses 1982 as the base year.

Was all this inflation-plus spending really necessary? Yes, it includes health costs and education costs but does every man, every woman and every child in this country really require $15,000 a year in government support? A few years from now, will every Canadian require $30,000 a year in government support? Was life so intolerable in the 1980s (and since) that federal and provincial governments were compelled, year after year, to ramp spending by inflation-plus margins? It is preposterous and fiscally perilous to think so.

I’m not clear on where Reynolds gets his per capita spending numbers from, but there is no evidence of government spending growth in excess of income (GDP) growth per person over the past 30 years or so

If we look at the period from Reynolds base year of 1982 to 2009, real per capita GDP grew by 52%. So if Reynolds numbers are correct, government spending growth lagged growth in GDP per capita.

Moreover, Statistics Canada data show that, between 1982 and 2009, total current spending by all levels of government in Canada fell from 47.7% to 42.1% of nominal GDP. (Calculated from data in Tables 1 and Table 3 of the Historical Statistical Supplement to the Canadian Economic Observer.)

Government spending has been falling rather than rising relative to income over the period chosen by Reynolds, and this would show up in even more dramatic form if we took the early 1990s (when government spending topped 50% of GDP) as the base.

The fact of the matter is that Canadian governments spend a lower share of  national income on public services and social programs than they did 30 yearsago.

Some “shameful spending spree”

4 comments

  • I hope this is a letter to the editor Andrew.

  • The fact of the matter is that Canadians spend a higher share of income on on all goods/services programs, etc than they did 30 yearsago.

    “The average cost of living for familiy was non existent in past decades, that one bread winner could clothe, feed, and educate up to 8 children on very little wealth. Which was directly related to our purchasing power, that we have lost over 10, 20, 30 years [decades at intervals]. Spending time with their kids [was possible with a stronger dollar/cheaper prices] as opossed as the [present] parents allways gone[which I grew up with because parents needed to work more to buy the same ammount of services/goods then compared to their parents], and kids always uptown etc, that we seem to accept now as normal. That feat is seemingly impossible now.” (http://www.progressive-economics.ca/2010/06/08/maxime-bernier-jumps-the-shark/,June 12, 2010, 10:51 am)

    Inflation is the best known cause to require more hours of work per household to live, to just survive the increase in the cost of living, which no can deny, which is diffrent from prices themselves

    My wages today, are greater then that of my grandfather nominally, or any of his employees, and Im worse off, as my grandfathers wages could purchase more good/services, then I can.

    It kinda of saddens this young canadian when workers in the past who made less then present minimum wage could afford more goods/services then I, who makes more then minimum wage. Particularly EDUCATION which I cannot afford with accumalting debtloads, that Im not sure are worth the job.

    The stero typical situation one perent could provide for 3-5 children, with food, clothing, education, and a copule decades later, which and Inflation has made it impossible for two perents to work one average job to feed, clothe and educate families greater then 1 or two; in many cases not even afford a 1kid. Or even afford the same ammount of goods/services of past generations.

    Can someone tell, me how we can get nominal increase in wages accompanied with a stable or uptick in purchasing power. That would benefit everyone.

  • Reynolds would probably argue that spending only need keep up with inflation and not relative to GDP. His whole rant was a rehash of the kinds of austerity hysterics coming out of the US. Reynolds is back stopping the dash to austerity in Canada: from the same he writes:

    “The fact is that these deficits could be ended by simple, slight decreases in spending. The problem arises only because governments perversely and illogically insist on trying to decrease them later by increasing them now.”

    This is an argument which Krugman has been countering on an almost daily basis.

  • It is very important that we get on top of this stuff right away. The last thing we need is to start arguing the anti-austerity in the midst of increasing unemployment that other countries have to.

    I just finished a Radio Labour segment on global employment and made use much of the same anti-austerity logic.

    Have a listen at radiolabour.

    Just got my new iPad- I must say this is so unwindows non bill gates like- it surely does change the idea of desk top or even laptop culture. I think the term is human computer interaction- HCI . Plus it is so low power oriented that I can see some co2 savings. Just wish apple was not so proprietor like. Not even a USB port. Hmmmmmmmm not impressed with that- time to jailbreak it- ie hack this baby.

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