Aug. 20, 2014 SIGN IN | REGISTER

Historical Averages Are Irrelevant to Budget Debate

If military spending during the past 50 years averaged 4 percent of the federal budget, is a proposal to double the amount spent because the United States needs to increase its activities after being attacked out of line? Does the 4 percent annual average from the previous half-century really say anything meaningful about what the Pentagon should do now?

Should an average deficit of 3 percent of gross domestic product be a reason not to push for a balanced budget if that’s the correct fiscal policy, or does what has happened in the past mean that a deficit of that size is always acceptable?

If total federal revenues have averaged 18 percent to 19 percent of GDP over the previous 50 years but have fallen to 14 percent now because of current economic conditions, is a tax increase justified or required?

These three examples tell you almost everything you need to know about why the back-to-historical-averages reason for supporting the Ryan budget plan — or any budget plan — is so misleading. In almost all cases, the only average that’s used is the one that supports the proposal being offered. Enthusiasts of the Ryan plan talk fervently about decreasing spending to historical averages, but nothing about the changes from that same standard the plan will establish in other areas.

Most important, however, is that the argument about getting back to average spending and revenues ignores the fact that the United States is not the same today as it was in the past. The economy, population, military situation, demand on the federal government, tax code and everything else today are in an online environment that 50 years ago was dominated by 45 rpm records and 8-track tapes. That makes it difficult to see how a previous period in American history provides any guidance for what federal spending and revenues should be.

What we need today on the federal budget is thinking that’s smart, innovative and extraordinary. Unfortunately, what came out during last week’s budget debate was the same tired, worn-out and discredited discussion of the past. In a word, it was just average.

Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of “The Guide to the Federal Budget.”

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