Frum: Government Spending Has Been Rising for a Decade

Written by FrumForum Editors on Thursday May 27, 2010

In commentary for Marketplace, David Frum explains how government spending has been rising and crowing out private spending for a decade:

Of course, pay drops during a recession. Of course, unemployment benefits rise. You know -- that's the way the system is supposed to work. Government benefits are what economists call "automatic stabilizers." They cushion the pain of recession, or so the theory holds.

But this time, the theory isn't working the way it should. Private-sector wages did not suddenly plunge off the cliff in 2008 when the recession hit. Wages have been steadily dropping as a share of national income for a decade. Government transfers have risen almost equally consistently. Will the shift away from private wages continue even after the economy recovers? With the baby boomers retiring, how can we avoid it?

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Category: Middle Rail