Obamanomics, RIP

[Geee]

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Washington is experiencing one of the biggest fiscal retrenchments in modern history, and almost no one is paying attention. In the wake of the Bush-Pelosi-Obama spending splurge from 2008-11, federal spending has fallen by 3.1 percentage points of GDP. In the second quarter of 2009, according to National Income Products Account data, federal spending hit 26.5 percent of GDP, thanks to the Obama stimulus and the Bush recession. As of the second quarter of 2013, just as the sequester was beginning to take effect, federal spending as a share of GDP is down to 23.5 percent and, barring some unforeseen emergency, is on track to fall to around 23 percent by the end of this year. The turning point in spending from the binge years of 2009 and 2010 came when the Republicans took control of the House in 2011.

State and local government spending as a share of GDP has also fallen by more than one percentage point over the same period that federal government spending fell by 3.1 percentage points. If Republicans in the House stick to the sequester and future caps already built into current budget law, federal spending will stay at this low level for years to come, and state and local government spending will follow suit.

Not since the economic boom following World War II have we seen such a rapid decline in the federal government’s claim on the nation’s resources. Amazingly, federal spending was $3.92 trillion in 2011 and is now down to $3.80 trillion on an annual basis in the second quarter of this year. This is the first time in 50 years we’ve had two straight years of declining spending.