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government spending as a percentage of GDP?

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swalsh81 posted on Thu, May 31 2012 2:27 PM

I have a question. spending as a percentage of GDP is used by politicians to described the amount of GDP CONSUMED by the government. However, If C+I+G=Y in the keynesian model they seem to love, , then is it not a logical fallacy to say talk about spending levels in terms of G/(C+I+G) because you are forcing the percentage down by dividing government spending by a number that includes government spending?

Am I looking at something wrong here? is the number they actually report something more like G/(C+I)

and yes I know I am leaving off exports-imports

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And what happens when government spending > GDP?

 

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It's a good question. A very good one.

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You should realize that the 'G' number in GDP (although what you're using is GNP) does not include transfer payments (welfare, SS, etc.).  That is, it doesn't include the money they just dole out without getting anything in return (except for subservience).  That would cause some severe double counting.  But the spending/GDP ratio is (G+transfer payments)/(C+I+G+NX).  And this number is usually either given for federal government or for all levels of government.

This website gives a summary of all U.S. government spending.

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And what happens when government spending > GDP?

Well by definition, if GDP = Consumption + Investment + Government Spending, then I suppose it can never be.

 

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First off, to say a line of reasoning is logically fallacious implies that an assertion is being made.  What assertion is being made here? What is "Government spending as a percentage of GDP"   given that GDP = C + I + G + (X - M)?    If you can't figure that out, I weep for the state of public education in America.

 

 

 

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Oh please piss off you tedious pedant. The point he is making is that the use of this measure, as a sign of the state's fiscal health, may be misleading. He might have used the term 'logical fallacy' incorrectly, but the meaning of his question was fairly clear. I bet you're the sort that corrects people on their grammar too. angry

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I had noticed that too (probably many have). I think that if you cut out G, the percent becomes something like 60%.

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G is only 19.5% of GDP at the present time.  It's not as high as the commonly cited measures for Gov./GDP for the reason I mentioned above (transfer payments).

In Q1 of 2012, GDP was $15,454.0 billion.  Government consumption expenditures and gross investment was $3,018.2 billion, with $808.3 billion spent on national defense, $410.5 billion on federal nondefense spending, and $1,799.4 billion on state and local spending.  If you take out imports and exports,  government spending accounts for 18.8% of this number (GNP).  A lot of what the government does is just income redistribution, and this is not counted as government spending.

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This may help.

(not that it necessarily gives a direct answer (it may, I don't remember for sure) but it may help)

 

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