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A Project of The Annenberg Public Policy Center

Geithner’s GDP Whopper

Treasury Secretary Timothy Geithner made a false claim about the size of government spending being proposed by the Obama administration.

On NBC’s "Meet the Press" July 25, he said the president is proposing spending "as a share of our economy" that is "lower" than it was during the Bush administration and "comparable" to what it was under Ronald Reagan. Neither claim is true.

The administration’s own estimates project spending next year that is higher as a percentage of the economy than in any year since the end of World War II. The average projected by Obama’s budget officials is significantly higher than the average under Reagan or Bush (father or son).

Here’s what Geithner said:

Geithner: [The president has] proposed to freeze discretionary spending, to keep the overall size of the government at a very modest level as a share of our economy. If you look again at what the president’s proposing, he keeps the overall size of government at a very modest level comparable to–lower than what was in the Bush administration, comparable to what President Reagan presided over. That’s very important.

That’s not true, as a glance at this chart shows. It reflects official historical spending figures as a share of the nation’s economic output, as measured by gross domestic product (or GDP), plus the very latest estimates of current and future spending produced by Obama’s own Office of Management and Budget.

According to the Mid Session Review released by the OMB on July 23 — two days before Geithner spoke — the Obama administration is proposing federal spending for next fiscal year equal to 25.1 percent of GDP. That would be the highest since 1945, the last year of World War II, when it was 41.9 percent. (See table 1.2, page 24).

The administration’s budget experts predict their spending will constitute a lesser share of the economy in the following years — assuming a healthy economic recovery — but still will average 23.8 percent of GDP for Obama’s four years.

That’s 3.4 percentage points higher than the average for all of President George W. Bush’s eight years. (Geithner said Obama’s proposed spending is "lower.") And it’s 1.5 percentage points higher than the eight-year average under Reagan. (Geithner said Obama’s is "comparable.")

What Was He Thinking?

We asked a Treasury spokesman to explain. Gene Sperling, counselor to Geithner, responded, saying: "The Secretary was referring to … non-defense discretionary spending," a narrow slice of total federal spending. No, he wasn’t.

Perhaps that’s what Geithner meant to refer to — he did mention a proposal to "freeze discretionary spending." But he then went on to speak of the "overall size of government" — not once, but twice. He said: Obama "keeps the overall size of government at a very modest level comparable to–lower than what was in the Bush administration, comparable to what President Reagan presided over."

Geithner isn’t the first official to foul up this fiscal sleight-of-hand trick. In 2004, President George W. Bush claimed in an interview with NBC News that he had slowed the growth of "discretionary spending," when in fact it was growing far faster than it had under President Clinton. That time, a White House spokesman said Bush had meant to refer not to discretionary spending overall, but only to the portion of it not attributable to military spending or homeland security. See "Defending Spending? Bush’s Blooper," Feb. 9, 2004.

Technical note: Federal fiscal years begin Oct. 1, so the first fiscal year for which Obama issued a budget and signed spending bills was FY2010, the current fiscal year. By the same token, Reagan’s years were FY1982-1989, George H.W. Bush’s years were FY1990-1993, Clinton’s were FY1994-2001, and George W. Bush’s were FY2002-2009.