The Catholic University of America
Apr 16 2010

Who’s the (TEA) Party For?

Posted by Ernest Zampelli at 12:00 PM
- Categories: Economy | Government & Civil Society

After having heard about, listened to, and pondered over the concerns of card-carrying TEA (Taxed Enough Already) Party members, I ‘d be remiss if I didn’t point out several facts regarding federal government tax receipts and spending. My reason is simple—to listen to the rants of some, one might easily get the impression that John and Jane Taxpayer’s revolt is the product of the ongoing, incessant, and irresponsible taxing and spending spree of an out-of-control federal government. So, as Popeye used to say, “That’s all I can stands and I can stands no more!”. Now, I don’t want to be the proverbial Party pooper, but let’s hold on for a moment and look at some data.

I’ve taken some data from the 2010 Economic Report of the President on federal government receipts and outlay over the 1977-2009 time period and put together some graphs illustrating what has been happening to them, as a percent of GDP, over that time frame. The first figure shows total federal government receipts as a percent of GDP. They were 17.5% of GDP in 1977, 17.5% in 2008, and 14.8% in 2009. The dropoff in 2009 is of course due to the deep recession. Not a whole lot of movement there.

The second figure shows the receipts as a percentage of GDP by major receipt category, individual income taxes, corporate income taxes, and social insurance taxes. Again, not a whole lot of change.

Individual income taxes were 7.8% and 7.9%, respectively, in 1977 and 2008, with an expected steep drop off to 6.4% in 2009.  A similar pattern holds for the corporate income tax, though at levels of around 2% except in 2009.

What about spending? Well, the next figure shows total federal outlays, on- and off-budget, as a percent of GDP. In 1977, federal spending was 20.2% of GDP; in 2008 it was 20.7%. The big uptick in 2009, again, was mainly due to the federal stimulus to combat the recession. But, overall, not a lot of movement here either.

In the last graph, I plot some data for some major categories of outlays—health, Medicare, Social Security, and income security/maintenance. No surprises here—it’s been health and Medicare expenses that have been rising as a percent of GDP over the last 33 years.

So why are we having a (TEA) Party? I suspect its largely because people are angry over their individual tax situations and that they don’t really like where the country is headed in general. But, it certainly can’t be, or at least shouldn’t be, because the federal government, for too long, has been playing fast and loose with its taxing and spending powers.

And, by the way, the last graph also shows why health care and medicare reform are so vital to solving our long run debt and deficit problems.




jessica wrote on 04/21/10 12:49 PM

Steve McKenna

Steve McKenna wrote on 04/22/10 5:55 PM

This is great stuff, Ernie. But it also demonstrates why economics as a discipline won't be up to the task of explaining why we're having a (TEA) party. The economic facts are incontrovertible, but they’re also largely beside the point where the tea partying masses are concerned. Remember the old slogan, "It's the economy, stupid"? Clinton was less than half right. There are simmering resentments that lie much deeper. Libertarian demagoguery uses economic pain as rhetorical cover. Ideological bitterness having much more do with race and gender, and especially race, finds consoling the air of legitimacy offered by the anti-government, anti-tax blandishments of those running the teabag up the flagpole. The economic facts are conclusive, but this is a flat-earth society we're talking about in more ways than one (check them out on global warming). And that makes them far more worrisome. Especially in that you won’t be able to sell your analysis to major news outlets, who have their own reasons for cheerleading against taxation and regulation.
Scott Montgomery

Scott Montgomery wrote on 04/28/10 11:42 AM

The only problem with this argument is that the "diversity" in our economy is shrinking and Keynesian policies are only going to make that even more dire in the future.

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