Nothing Succeeds Like Gridlock

Federal spending drops to 20 percent of GDP

The federal budget is shrinking as a percentage of gross domestic product, falling just below 20 percent in the third quarter of 2014. That's down four points from its peak of 24 percent in 2011, according to market analysis firm Strategas' survey of recent Treasury Department data.
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The drop puts current federal spending close to the norm for the last half-century. While the budget has grown in absolute numbers — the omnibus spending bill passed earlier this month totaled more than $1 trillion — federal spending has averaged just over 19 percent of GDP since 1963.

The decline is due to a combination of factors, the main one being the restraints that were put on federal spending in 2011 as a result of the debt ceiling standoff in Congress.

"While the debt-ceiling [fight] got a lot of negative headlines, it actually kept discretionary spending down. Those caps are still in place. They put in additional cuts with the budget sequestration [in 2013]," Clifton said. "There are other drivers too, such as low interest rates."

Twenty percent of GDP still seems like a lot, when you consider that roughly half of the population is consuming it rather than producing it, forcing the remainder to pony up the rest, or have China float us a loan.

Also note this column by David Harsanyi: Why Aren’t We Thanking ‘Gridlock’ For Saving The Economy?

. . .Axelrod isn’t alone is claiming political credit for economic success, and the Obama administration certainly isn’t the first to try and take the glory. But if activist policies really had as big an impact on our economic fortunes as DC operatives claim, I only have one question: Which policy did Barack Obama enact that initiated this astonishing turnaround? We should definitely replicate it.

Because those who’ve been paying attention these past few years may have noticed that the predominant agenda of Washington was doing nothing. It was only when the tinkering and superfluous stimulus spending wound down that fortunes began to turn around. So it’s perplexing how the same pundits who cautioned us about gridlock’s traumatizing effects now ignore its existence. . .

Quick! Don't do anything!

The quick answer to the question posed in the title is that we are predisposed to credit action taken for the vagaries of the economy. That's certainly a stretch under most circumstances, and diametrically opposite of the truth a good deal of the time.

The truth is that the economy is slowly but surely adapting to the current sort of stable conditions, as it will.

Linked at Pirate's Cove in If All You See… December 31, 2014. Thanks Teach!