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Social Sciences Fact Check: Romney’s Debate Dig at Spain

• October 04, 2012 • 8:43 AM

Lavish Spanish spending. Feeds six.

Here’s a quick fact-check on Mitt Romney’s mid-debate comment last night, that the US doesn’t want to go down the same economic road as faltering Spain:

Specifically, he was talking about government expenditures equalling 42% of GNP, which the Republican candidate claimed to be similar in the European case and in the US under Obama. True?

Yes. Not in the way Romney implied, however: that US economic policy was a copy of a failed policy in Spain.

This chart by USgovernmentspending.com, which tracks a broad range of such statistics, shows current US government spending roughly consistent with a rise of public investment over the past century, regardless of which party held power. Public spending has risen from just over 6% of GNP in 1903 to just over 40% now. Two spikes occurred during the two World Wars; in 1943 the rate reached 53%, a high.

Looking at the past 20 years, spending has followed the century’s trend. Public spending as a percentage of GNP fell from 37% to 32.5% from 1992 – 2000 (Clinton) then rose from 32.5% to 37% from 2000 – 2008 (Bush II). It leapt to nearly 43% in 2009 (Obama) — reflecting the financial crisis bailout. In the subsequent three years of the current term it has fallen to just over 40%.

The trend line has been an increase of about 5% every twenty years, a line to which the current level of expense appears to coincide.

Still, what about Romney’s fear — that this trend is the road to Spanish-style ruin? Yes and no. Spain’s expenditure as a percent of GNP is tough to compare to the US’s because Spain is not a federal system. Social security mechanisms similar to American programs like Medicare, Medicaid and Social Security are funded and administered on the local level with a drastically different mix of local and national budgets. Even national defense, one of the largest US expenses, represents barely 1% of GNP in Spain.

Two autonomous regions, the Basque country and Navarra, do not pay significant taxes to the central government at all, through deals negotiated in the late 1970s, part of Constitutional debates that followed the end of the Franco dictatorship. This would be like Minnesota and Ohio just deciding not to participate in American federalism any more. It’s a tough comparison. By the numbers, Romney’s assertion that the two matching numbers suggests two matching stories looks like the sort of associative leap only a presidential candidate could love.

The other missing part of Romney’s comparison is that the road to ruin in Spain didn’t pass through the treasury. Most analysis of Spain’s financial crisis has found that it was not the result of inflated public spending, but a mix of local and notably foreign-driven real estate speculation, provoking a lack of diversity in the Spanish labor market, which went all-in on the construction sector. Were the US to be on the road Spain took, it would not go via a larger public sector, but a larger private one. It would look, say, like California’s irrational housing market of the early 2000s, more than it would like a bloated government budget.

Even amid the current downturn, Spaniards continue to enjoy a country that scores high on many standard measures of a society’s success. Spanish life expectancy surpassed America’s in 1964 and continues to increase at a greater rate than American life spans. The chart is here. Its infant mortality rate is among the lowest in the world, better than the OECD average, and — unpleasant as it is to say — better than America’s.

 

Marc Herman

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