Magazine article The International Economy

Big Spenders

Magazine article The International Economy

Big Spenders

Article excerpt

Interest in Ronald Reagan's legacy as president has been much in the news since his passing. Besides his role in ending the Cold War, many pundits have praised him for championing small government.

Yet the facts are just the opposite: Reagan presided over the largest federal government since the end of World War II. Federal spending as a share of GDP hit 23.5 percent in fiscal 1983, the highest since 1946. Reagan's rapid buildup of military spending explains only part of the growth of government on his watch. The fact is, he couldn't cut much domestic spending, even though fellow Republicans controlled the Senate for most of his two terms. In fairness to the Gipper, by the time he left office, spending was down to 21.2 percent of GDP, slightly less than the 21.7 percent he inherited from Jimmy Carter.

So which recent president really deserves credit for trimming Washington down to size? The man who proclaimed "the era of big government" over: Bill Clinton. In 2000, federal spending fell to 18.4 percent of GDP, the lowest since 1966, when Lyndon Johnson was pushing his Great Society and escalating the Vietnam War at the same time. Of course, Clinton had the benefit of working with a Republican-controlled Congress, which rejected his proposed spending increases.

You might ask, "Didn't Clinton benefit mostly from a "peace dividend" at the end of the Cold War?" Well, defense spending fell from a high of 6.2 percent of GDP under Reagan (1986) to a low of 4.6 percent of GDP under the first President Bush (1991), and to 3 percent under Clinton. …

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