The WSJ posts a very informative description of the government spending effects of the stimulus package today. The overall size of the stimulative effect … virtually, nada, nothing!

Allow me to elaborate by offering a few additional stats from BEA’s NIPA data.

Between 2008 Q3 and 2010 Q3 (in annualized levels)

Total Gov Consumption (Fed + State & Local) rose $75 billion
Fed Gov Consumption rose $107 billion while S&L consumption fell by $32 billion!

Over the same period, the total Govt. deficit rose by $605 billion to $1.529 trillion
The Fed Gov Deficit rose $749 billion while the S&L deficit fell by $144 billion to reach an overall S&L deficit of only $32 billion.

The obvious question from the data is what accounts for the extra $530 billion deficit increase if it isn’t from more government spending. The answer of course is in reduced tax revenues and increases in transfers.

Total Gov Revenues (Fed + State & Local) fell just $62 billion over the period.
Fed Gov Revenues fell $84 billion while S&L revenues actually rose by $167 billion!
(167-84 should equal -62; I can’t explain why it doesn’t but this is what BEA reports!)

Transfers, Interest payments and a few other things accounted for the remainder.

Total Gov Transfers (Fed + State & Local) rose $530 billion over the period.
Fed Gov Transfers rose $642 billion while S&L transfers fell by $112 billion!

The net result as reported in the article is that most of the increase in the deficit has comes from an increase in transfer payments and interest and very little in the form of increased consumption. Furthermore, borrowing to finance these growing deficits have been shifted from the States to the Federal government. In other words the States have been bailed out by the Feds with the repayment burden being shifted from the American taxpayer to the American taxpayer.

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