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Government size: Don't buy the hype

They were catchy sound bites.

"Big government has been reborn and reinvented in this budget," said Republican Sen. Pete Domenici of New Mexico last week about President Clinton's new budget.

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It's "a blueprint for the biggest expansion of the federal government in our history," said Sen. Rod Grams (R) of South Dakota.

Depending on political tastes, the federal government may be too big or too little. But beware such sound bites. They often aren't precise.

True, the federal government under Mr. Clinton's new budget will spend more money in the next fiscal year than ever before - $1.883 trillion dollars.

But that figure has to be related to the bustling growth of the US economy.

"It's not big government's return," says Iris Lav, an economist with the Center on Budget and Policy Priorities (CBPP). "It is government holding steady."

Actually, federal spending has shrunk relative to the size of the American economy and will shrink further in the next several years, assuming Clinton's proposals are implemented by Congress.

Federal revenues have grown, but should diminish a little in relation to the economy in the next five years.

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Here are some numbers from the budget and Ms. Lav's research center:

In fiscal 1998, federal spending equaled 19.7 percent of the gross domestic product, the nation's total output of goods and services. This is the smallest share of GDP in the past quarter century.

Meanwhile, revenues came to 20.5 percent of GDP, up from 20.1 percent the year before and 17.8 percent in 1992.

Taxes on handsome stock market capital gains and on fancy executive pay and Wall Street bonuses are to a degree responsible for this bubbling revenue growth. The 1993 tax bill also helped.

Those changes turned a budget deficit into a surplus of $70 billion last year.

By 2004, the Clinton budget projects that revenues as a share of GDP will slip a little to 20 percent. while outlays will gradually fall off to 18.1 percent. - the lowest level since 1966.

The result? A surplus of $208 billion, if today's happy economic trends continue well into the future.

These numbers, by the way, agree closely with those of the politically neutral Congressional Budget Office (CBO).

With this in mind, Clinton's long list of spending and revenue proposals, won't change the federal government's size by much.

The trend toward smaller government also stands if interest payments on the federal debt are excluded. These payments service debts accumulated in the past. They don't fund any federal programs or pay federal workers, notes Ms. Lav's think tank.

Further, nondefense spending as a share of GDP has fallen, a CBPP analysis finds. The end of the cold war isn't the entire story.

Here's another shaky sound bite.

In her response to the State of the Union address, Rep. Jennifer Dunn (R) of Washington held that "a typical mother and father who both work paid nearly 40 percent of their income in taxes."

Many may regard taxes as too high. But 40 percent is a major exaggeration.

Rep. Dunn got that figure by rounding up a Tax Foundation claim that the typical two-earner family pays 36.7 percent in federal, state, and local taxes combined. Of this, federal taxes were 26.1 percent in 1997, the conservative research group figured.

But this foundation defines the median two-earner family as having an income of nearly $55,000. That's actually about 50 percent higher than the median income for all families, says Lav.

More accurate, she says, is analysis by the CBO and the Joint Committee on Taxation, the two estimating arms of Congress. They find that typical families will pay between 16 percent and 19 percent of their incomes for federal taxes in 1999.

Total federal, state, and local taxes have risen in recent years as the well-to-do paid capital gains taxes. But for most Americans, Lav reckons, the tax burden has fallen.

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