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Fri May 24 2002 10:45:04 ET From the farm bill to increases in defense spending, Democrats and Republicans seem to be vying to see who can spend the most, BUSINESS WEEK reports in fresh editions. " Nevertheless, federal outlays as a share of gross domestic product are still relatively modest in historic terms." MORE Even including the farm bill and the Mar. 9 stimulus package, federal spending will likely total just 19.2% of GDP in the current fiscal year, according to estimates from Lehman Brothers Inc. That's still well below the 20.2% of GDP the federal government averaged from 1950 to 2000. And Lehman's chief economist, Ethan Harris, projects the federal share of GDP could stay at 19.2% in fiscal year 2003 as well. Moreover, political resistance to higher spending may increase if the federal government's share climbs much above 20%. Historically, that has been the level that triggers a public reaction. For example, when the federal share of GDP rose above 20% in the second half of the 1970s, that helped build popular opposition to government taxes and spending." But that "doesn't make the current spending trends harmless. What's worrying economists is that both defense and homeland security have been added to Social Security and Medicare as nonnegotiable spending categories. That means that the public outcry against big federal spending may be more muted than in the past." END |
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