Which presidents spend the most? You might be surprised.

By :: November 2nd, 2012

Part of the election debate is about who can be trusted to tame the debt.  Both candidates promise to be fiscally responsible and both provide maddeningly little detail on exactly how they would accomplish that.  They argue, with some reason, that election season is not the time to get into the hard choices that the nation must confront.

There is historical evidence on the spending proclivities of the two parties, and it might surprise you. My former Urban Institute and Tax Policy Center colleague Gene Steuerle has put together a fascinating time series of spending change by presidency, measured as a share of GDP.  The chart above shows the data for domestic spending–that is, excluding defense and interest on the debt. Through the Clinton years, the top four presidents are Richard Nixon, Herbert Hoover, Dwight Eisenhower, and George H.W. Bush–all Republicans.

The most fiscally responsible president by this metric is a surprise: Franklin Delano Roosevelt.  Here is Gene’s explanation:

[T]he liberal New Dealer, Franklin D. Roosevelt, is at the bottom of the list. Domestic spending actually fell by 3.6 percentage points of GDP during his tenure. How can this be? The massive World War II defense build-up crowded out domestic spending. … Perhaps more importantly, FDR’s New Deal programs were primarily short-run or counter-cyclical in nature, and focused on unemployment compensation and jobs. Much of the spending was not intended to be permanent [and disappeared when the economy recovered from the Great Depression] … Non-cyclical programs, such as retirement and health, remained quite small. Even at the end of the Truman administration, domestic spending was 1.6 percentage points lower than it had been when FDR took office two decades earlier. Finally, much of the increase in domestic spending in response to the Depression occurred prior to Roosevelt’s presidency, under Hoover.

The only Republican true to spending-cut stereotype is Ronald Reagan, who cut domestic spending by 2 percent of GDP.  The other big post-World War II spending cutter was Bill Clinton, who cut domestic spending by 0.6 percent of GDP.

Gene also gave me data for George W. Bush and Barack Obama, whose spending records are complicated by the response to the Great Recession.  From beginning to end of President Bush’s term, spending increased by 5.6 percent of GDP. which would give him the all-time lead if included in the chart.  But even if we stopped the clock at the end of fiscal year 2007, before the recession hit, he increased domestic spending by 0.7 percent of GDP.

Through FY2011, President Obama actually cut domestic spending slightly from the very high levels at the end of the Bush administration, and spending has been cut further since then.  Given the slowness of economic recovery, that was probably a mistake, but it certainly suggests that the image some paint of the President as a fiscal profligate is not entirely deserved.

Of course, the effect on the debt depends also on defense, tax revenues, and interest. The chart above shows the debt record of presidents since Eisenhower.  (I exclude FDR, who borrowed heavily to finance World War II, and Truman, who benefited from an enormous peace dividend, because they are both outliers by a wide margin.)  Four of the five biggest borrowers were Republicans.  Ronald Reagan more than made up for his domestic spending cuts with large tax cuts, a defense build-up, and large interest payments on the debt (because interest rates were very high).  President Obama wins biggest debtor honors, by a small margin over his predecessor, because of the combination of large outlays to fight the recession and tax revenues at the lowest level since the Truman Administration.

Of course, presidents don't have full control over spending or deficits.  The economy obviously plays a big role, and actual legislation come from Congress, not the White House.  Nonetheless, the data suggest that, rhetoric notwithstanding, it may be hard to predict who will be a big spender and who will be a fiscal hawk.

 

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23Comments

  1. Vivian Darkbloom  ::  3:15 pm on November 2nd, 2012:

    ” President Obama wins biggest debtor honors, by a small margin over his predecessor, because of the combination of large outlays to fight the recession and tax revenues at the lowest level since the Truman Administration.”

    Is it at all relevant that we are comparing 4 years of an Obama presidency to 8 years for GWB and Reagan? I suggest readers double that blue line on the right side of “Change in Deficit as a Percentage of GDP” for an idea of the difference this would make. The difference becomes not a “small margin”, but a huge one over his predecessor.

  2. Michael Bindner  ::  3:29 pm on November 2nd, 2012:

    Defense spending can only be excluded if the exclusion is made on both sides of the equation – that is – if it is taken out of GDP – along with the secondary household spending that occurs as the result of defense spending as well. If that was not done, then I can’t see a rationale for excluding defense on the spending side. Additionally, the economy had wide fluctuations due to the Great Depression and several recessions. I would suggest per capita spending instead – or even per capita with per capita adjustments for GDP. Otherwise, Hoover ‘s number comes from a declining economy rather than an expanding federal response to it.

  3. Vivian Darkbloom  ::  3:31 pm on November 2nd, 2012:

    Make that “Change in Debt as a Percentage of GDP”, although change in “deficit” would not look any better.

  4. GregFromCos  ::  5:44 pm on November 2nd, 2012:

    Vivian, you do realize we don’t elect a Monarch? President Obama wins the honors because of the Bush Income Tax Cuts, Two unfunded wars, Unpaid for Medicare Part D, Bush Cap Gains tax Cuts.

  5. GregFromCos  ::  5:46 pm on November 2nd, 2012:

    This chart seems pretty pointless to me. It seems to me the only way to really do this is to look at individual policies at the point they were enacted and see their 10year and 20year impact on the debt/spending. For example Bush tax cuts? How much did they affect the debt over 10 and 20 years. How much did the ARA affect the debt over 10 and 20 years. How much did the ACA affect the debt over 10 and 20 years. How much did the Reagan tax cuts affect debt over 10 and 20 years?

    The charts above rely far to heavily on the economic picture at the time of their presidency, as opposed to the profligacy of their policies.

  6. Vivian Darkbloom  ::  4:50 am on November 3rd, 2012:

    Greg,

    Among other reasons, Obama wins the honors because he extended the “Bush” tax cuts twice, because he proposes to extend the vast majority of them permanently, because rather than cutting spending he dramatically increased it for failed stimulus measures, bailouts, extended unemployment benefits, a health care bill that will cost trillions, etc, etc. (a fact conveniently side-stepped in the first chart) because he did not end the “two unfunded wars”, because he did not undue Medicare D (or propose to “pay for it). The list is long.

    The metric for judging how much a President spends or adds to our debt that is based merely on a President’s term is imperfect, to be sure. Nevertheless, it is one that was chosen here and each President on that list suffers from the same issue of what he inherited from his predecessor(s). For example, Bush II, too, inherited a “bubble” and an ensuing recession.

    Bob Woodward, a seasoned Washington observor, who wrote a recent book on the failed “grand deal” negotiations put this quite correctly, I think: Woodward stated that this is not the Boehner era, the Cantor era or even the Bush II era. This is properly and will be known as the *Obama Era*. As President, his job is to get this fiscal problem fixed.

    He’s failed, and failed miserably, at fixing that fiscal mess and, in fact, made is considerably worse. He holds particular responsibility given the fact that he had nearly two years in which his party controlled both houses of Congress. Rather than fix the fiscal mess and the economic recession he had other priorities, the main one of which was to extend his party’s social agenda (making the fiscal problem and the economy even worse). No, he’s not Monarch, but he’s the President and with those majorities that was about as close to a Monarch as one can get in the US.

  7. GregFromCos  ::  10:35 am on November 3rd, 2012:

    Vivian, I actually don’t disagree that Obama has been weak on Fiscal Responsibility. Although there is only so much he can do in the middle of a recession. The time the fiscal ramifications of a policy should be addressed is when they are implemented. But to think Romney (the only other real choice) is better when he proposes another 20% tax cut and increasing military spending to 4% of GDP permanently, seems silly. Will the next Democrat then be responsible because they did not roll back those choices.

    And thus my issue with these charts in general. Polices should be counted by the president who allowed them to pass. Not the following presidents who inherited them, in possibly horrible economic times when the policies could not be fixed.

  8. Bruce Thompson  ::  12:36 pm on November 4th, 2012:

    The methodology used to make these calculations is not explained in the original document. When I try to reproduce it, I get quite different results. Consider the high ranking given to Herbert Hoover. Here is a calculation comparing 1928 (Coolidge’s last year and and 1932 (all numbers are in billions of $):

    Year Spending Defense Net
    1928 3.7 1.3 2.4
    1932 4.3 1.7 2.6

    Thus non-defense spending increased 8% during these years, hardly enough to put him at the top of a list of big spenders–and probably far below what was needed to compensate for the huge drop in spending by state and local governments and the private sectors.

    For example, over the next four years, non-defense spending increased 150% as the New Deal tried to fight the Depression.

    Given the lack of discussion of methodology, it is hard for me to reconcile the historical data with the numbers given in the report. Part of the discrepancy may be explained by the use of GDP. During the same period, the economy radically contracted, shrinking from $97.4 billion in 1928 to $58.7 billion in 1932. Thus as a percentage of GDP, Hoover’s spending grew by 80%, while Roosevelt’s first term spending grew by 60%, but this calculation says much more about the state of the economy than spending trends.

    Periodically I see claims from opponents of stimulus funding that Hoover tried it, proving it doesn’t work. I wondered about the origin of that claim. It would be ironic if the original source was Brookings.

  9. Vivian Darkbloom  ::  2:24 pm on November 4th, 2012:

    The Urban Institute Report dates from 1997 and you are correct that it does not explain the methodology.

    The second chart, however, appears to be Mr. Burman’s own concoction. The fine print at the end of the second chart says that “the interval for each term runs from the end of the fiscal year (e.g.2009 for Obama).”

    Normally, that would be a fair method since President assumes office in January while budgets are normally made and passed for the fiscal year ending September of that same inauguration year. So, for example, the spending through September 2009 would generally have been under the budget passed by Bush II.

    However, money allocated and spent is not always dictated by the budget passed in the prior year. And, 2009 was very, very important in this regard. For example, President Obama and the Democratically controlled Congress passed in early 2009 a major supplemental bill called the “Omnibus Appropriations Act of 2009″. That spending bill was to the tune of $410 billion and was heavily criticized as laden with pork. Mr. Burman adds that $410 billion (and other spending initiated after Obama took office) to Bush II !!

    http://www.msnbc.msn.com/id/29632177/ns/politics-white_house/t/obama-signs-massive-imperfect-spending-bill/#.UJa7Fo4ZxRk

    The other factor that works to diminish the spending allocated to the Obama administration is the repayment of TARP funds in late 2009, 2010 and 2011. Those funds were generally appropriated in the Bush II term, but the repayments of those loans and investments would have been credited to reduce Obama’s “spending”.

    If one considers these obvious adjustments and the fact that Mr. Burman has conveniently given us only 4 years of Mr. Obama’s spending, this post seems far wide of the mark.

    Mr. Burman seems to have worked overtime to dust off a 1997 report and create a new misleading addendum on the eve of the Presidential election. A quick review of his own website reveals a much more partisan headline and take on this than the report than appears here. The upper right-hand corner of this page indicates the views on this blog would be those of Mr. Burman only; however, I find it disappointing that such an obviously partisan blog post should be allowed here on the eve of a major election hosted by the “non-partisan” Tax Policy Center.

  10. Tax Roundup, 11/5/2012: Last week for the commissioner! « Roth & Company, P.C  ::  9:15 am on November 5th, 2012:

    […] Burman,  Which presidents spend the most? You might be surprised. (TaxVox)  For some reason he stops in […]

  11. Bruce Thompson  ::  4:58 pm on November 10th, 2012:

    I checked back hoping that someone would have explained how the numbers were derived. They seem totally inconsistent with the actual data to me, and therefore dangerous, because they can easily lead to misconceptions about what happened in the Great Depression (that Hoover was a big spender and Roosevelt was not) and therefore the wrong lessons about what policy is need with the Great Recession.

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