State and Local Spending vs. Private GDP
Posted by Todd Davidson on Friday, June 15, 2012

It doesn't seem unreasonable to call this unsustainable

From Matt Mitchell at the Mercatus Center:

em>State and local governments depend on the private sector for their survival. Almost every dollar that these governments spend is either borrowed or taxed from the private economy. Yet, for more than half a century, these governments have continuously outpaced the growth of the private sector on which they depend.

In the chart below, Mercatus Center senior research fellow Matthew Mitchell uses inflation-adjusted data from the Bureau of Economic Analysis to illustrate the unsustainable growth of [US state and local] governments. The blue line shows the size of the private sector as a multiple of its 1950 value and the red line shows the size of state and local government spending as a multiple of its 1950 value.