Revised, October 23, 2000

The Presidential Candidates' Budget Plans and The Size of Government
by James Horney

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There is some confusion about what would happen to the "size of government" under the budget plans put forward by the two major-party presidential candidates. Using different measures of the size of government — and competing estimates of the cost of various of the candidates' proposals — it is possible to come to varying conclusions about the effects of the two plans(1).

Based, however, on a traditional measure of the size of the government — the level of federal spending relative to the size of the economy — it is possible to reach a clear conclusion: whether one uses the budget estimates that each campaign has provided of its own proposals or alternative estimates that assume that some of the claims of each campaign are too optimistic, the size of the government would decline over the next decade, reaching the lowest level in at least 35 years, under either candidate's budget plan. The decline would be larger under the Bush plan than under the Gore plan.

SIZE OF GOVERNMENT UNDER THE
BUSH AND GORE BUDGET PROPOSALS

Total Federal Spending as a
Percentage of Gross Domestic Product (GDP)

  Bush Gore
Fiscal Year 2000 (CBO July 2000 estimate) 18.2% 18.2%
Fiscal Year 2010    
CBO baseline projection 15.6% 15.6%
Proposed (based on campaign estimates) 16.4% 17.2%
Proposed (adjusted, less-optimistic estimates) 17.0% 17.4%
 

The two candidates' budget proposals would not be the cause of this decline in the size of government. According to the Congressional Budget Office, total federal spending as a percentage of the gross domestic product (GDP) will decline under current policies — from 18.2 percent of GDP in fiscal year 2000 to 15.6 percent of GDP in 2010. (This is based on CBO's July 2000 baseline projections that assume no changes in laws governing taxes and entitlement programs and that discretionary spending will remain at the fiscal year 2000 appropriated level, adjusted for inflation.) The budget plans that both candidates have proposed would increase spending relative to the levels in CBO's baseline projections. But under either candidate's plan, those increases would slow the decline in spending relative to the economy, rather than reverse that decline.

Under Vice President Gore's budget plan, total federal spending would decline from 18.2 percent of GDP in 2000 to 17.2 percent of GDP in 2010, based on Center on Budget and Policy Priorities estimates that are consistent with Gore campaign budget documents that show the Gore plan will cost $1.4 trillion over the next 10 years. (2) (Because the campaign has not released year-by-year estimates of its plan or a breakdown of estimated costs by traditional budget categories, the Center had to make assumptions about certain factors that affect the calculations in this analysis. These assumptions are discussed in the appendix to this paper.) Under alternative estimates that assume the Gore campaign has been too optimistic about achieving various savings proposed in its budget, as well as about the cost of the Gore tax cuts, federal spending would decline to 17.4 percent of GDP by 2010, rather than 17.2 percent. If spending declines to either 17.2 percent or 17.4 percent of GDP by 2010, that would represent a lower level of spending relative to the size of the economy than in any year since 1965, when federal spending equaled 17.2 percent of GDP.

Largest Increase in Spending Since the Great Society?

A number of news reports and the Bush campaign have quoted a statement in a Committee for a Responsible Federal Budget report to the effect that the Gore plan "contains the largest spending increases since LBJ's Great Society." These news reports and the Bush campaign overlook the fact that the calculations that support this statement — calculations that compare proposed increases in spending with increases that occurred in the decades after the Great Society increases ebbed and the nation labored under large budget deficits — also support the conclusion that the spending increases proposed in the Bush budget plan, although significantly smaller than those proposed in the Gore budget plan, would also represent the largest spending increases since the end of the Great Society. The Committee for a Responsible Federal Budget has acknowledged this point.

More importantly, any statement that invites comparison of the spending proposed in either candidate's plan with the growth of government during the Great Society era needs to be considered in historical context. From 1965 to 1975, which can be considered the period of Great Society spending increases, total federal spending increased substantially relative to the size of the economy — from 17.2 percent of GDP to 21.3 percent of GDP. By contrast, under the Gore budget proposals, total federal spending would decrease relative to the size of the economy — from the fiscal year 2000 level of 18.2 percent of GDP to 17.4 percent of GDP or less in 2010. Similarly, under the Bush budget proposals, spending relative to the size of the economy would decrease to 17.0 percent of GDP or less in 2010.

With the end of the large deficits that have plagued the federal government for more than two decades, it is not surprising that both major-party presidential candidates are proposing some increases in federal spending relative to CBO's baseline projections. There is no comparison, however, between what either of this year's major presidential candidates is proposing and the substantial increases in the government's role in society that resulted from enactment of such Great Society initiatives as Medicare and Medicaid.

Under Governor Bush's budget plan, total federal spending would decline from 18.2 percent of GDP in 2000 to16.4 percent of GDP in 2010, based on Center on Budget and Policy Priorities projections that are consistent with Bush campaign budget documents showing that the Bush plan would cost $1.9 trillion over the next 10 years. (As with the estimates related to the Gore plan, the Center had to make assumptions about certain factors that affect these calculations, because the Bush campaign has not released year-by-year estimates of the Bush plan or a breakdown of estimated costs by traditional budget categories.) Under alternative estimates that assume the Bush campaign has been too optimistic about achieving savings it has proposed in discretionary programs and about the cost of the Bush tax cut, spending would decline to 17.0 percent of GDP by 2010. If spending declines to 17.0 percent of GDP by 2010, that would represent the lowest level of federal spending relative to the size of the economy since 1957 (when spending equaled 17.0 percent of GDP). If spending declines to 16.4 percent of GDP by 2010, that would represent the lowest level of spending relative to the economy since 1951 (when spending stood at 14.2 percent of GDP).


Appendix:
Assumptions Used in Calculating Spending Relative to Size of the Economy

As noted above, neither the Gore nor the Bush campaign has provided either year-by-year estimates of its proposals or a breakdown of the costs of those proposals into standard budget categories. As a result, to calculate the amount of federal spending that would occur under the two plans in 2010, we must make certain assumptions about the incidence of year-by-year costs and whether certain costs should be counted as spending increases or reductions in revenues.

The first set of estimates presented here of what federal spending would equal in 2010 under the two budget plans as a percentage of GDP — the figures that produce the lower estimates of spending as a percentage of GDP — were designed to maintain consistency with the estimates that each campaign has issued of the cumulative (10-year) costs of its plan. These estimates were constructed as follows:

We also produced a second, less-optimistic set of estimates concerning the two budgets that use the assumptions outlined above but include adjustments to the estimates the campaigns have issued of the costs of certain parts of their budgets. These less-optimistic estimates assume, for example, that proposed savings in both plans from "offsets" or "government reform" are unlikely to be achieved because of opposition in Congress and from significant interest groups or constituencies. These adjusted estimates are intended to provide a more-conservative estimate (that is, a higher estimate) of the spending that would result under the two plans. In making those adjustments, we assumed that:


End Notes:

1. For an analysis of the cost of the Gore and Bush budget plans, see James Horney and Robert Greenstein, "The Cost of the Bush and Gore Budget Proposals," /cms/index.cfm?fa=view&id=750, Center on Budget and Policy Priorities, October 19, 2000.

2. These and other estimates in the rest of this analysis take into account only the non-Social Security proposals included in the two budget plans.  They exclude the effects of the Bush proposal to establish private accounts as part of a Social Security reform effort and the Gore proposal for increases in the Social Security benefits for elderly women.

3. See James Horney and Robert Greenstein, How Much of the Enlarged Surplus is Available for Tax and Program Initiatives?, /cms/index.cfm?fa=view&id=439, Center on Budget and Policy Priorities, July 7, 2000.

4. Both the Bush and Gore plans propose to ameliorate the effect of the AMT on the ability of taxpayers to take full advantage of one or a few specified tax credits (and include the costs of these proposals in their estimates), but neither proposes comprehensive reforms that would keep the number of taxpayers affected by the AMT from growing significantly in the coming years.