Available Soon: Request your printed copies of the Idaho Freedom Index mailed to you!
Request Your Copies
Note to Dustin: This is currently only visible to logged in users for testing.
Click Me!
video could not be found

Governor Little Should be More Humble When Describing Idaho’s Economy

Governor Little Should be More Humble When Describing Idaho’s Economy

Fred Birnbaum
August 2, 2023

Lest anyone think that we are picking on Governor Little when we rain on his Idaho economic parade, think again. We would make these points in any of the 50 states. Governor Little, to his credit, pushed back against the notions of the excess COVID monies that flooded every state. But he quickly sidestepped those concerns with many ways to spend the federal money. When we weigh Idaho’s overall economic performance and balance sheet, it rates highly based on data from the Tax Foundation and websites such as Truth in Accounting and Rich States, Poor States.

The overarching issue is that the economic performance of every state has been inflated by federal largesse — increasingly money borrowed from our grandchildren — as noted in Idaho code section 67-3533 with the adoption of Senate Bill 1204 in the 2021 session. That bill, signed by Gov. Little, openly accepted federal American Rescue Plan Act dollars.

Simply put, the economic performance of our economy in Idaho is better than many sister states, but it reflects a huge, decades-long shift of borrowed dollars into the state. 

If we review the long-term data, the picture becomes clear. For consistency, all data is sourced from the Federal Office of Management and Budget and is adjusted for inflation. From 1942 to 1982, the US Gross Domestic Product (GDP) grew at a compound annual growth rate (CAGR) of 3.5%. 

That equates to a total increase of 296% over 40 years; the straight average is much higher than the CAGR due to 40 years of compounding. During this same period, real federal debt increased 153%. So, real economic growth was nearly double the growth rate of federal debt. Debt was decreasing relative to the overall economy. For the period 1982 to 2022, the real GDP grew at a CAGR of only 2.7%, or 192% over these last 40 years. Alarmingly, debt increased 949%. So, economic growth was one-fifth the real rate of debt growth. 

Is this a fair comparison? We believe that it is, on a macroeconomic level. Certainly, as an economy matures, GDP growth slows. We see that historically in many nations. What is troubling is that we have piled on so much debt for a growth rate that is 23% lower, on average, over the course of the last 40 years compared to the previous 40 years.

Some might argue that tax cuts have led to the debt growth, but as we have pointed out elsewhere, federal revenues as a percentage of GDP are now close to an all-time high.

And let’s not forget a final point that state and local governments have been a huge sponge for the borrowed federal largesse — think Medicaid expansion for example. In 1942, total outlays to state and local governments were 0.6% of GDP. By 1982, this percentage was 2.7% and for 2022, it was 4.8% of GDP. Said differently, state and local governments received $525 billion more in 2022 than they would have received if the percentage of transfers in 1982 had remained at 2.7% in 2022. Instead, it was 4.8% of GDP. That difference alone is about 38% of the 2022 federal deficit.  

The point in reviewing all of these numbers is to call attention to the fact that the U.S. economy is increasingly tethered to a highly indebted federal government with administrative units formerly called states as appendages. Total government spending at all levels in 2022 is 20% larger as a share of the economy than it was in 2001, the last year the annual federal budget was balanced. And what do we have to show for all of the debt from the last 21 years, the total of which is now over $32 trillion?

So, let's tamp down the jubilation at state capitols and press for a return to federal fiscal sanity, which will require less state spending, too.

Idaho Freedom Foundation
802 W. Bannock Street, Suite 405, Boise, Idaho 83702
p 208.258.2280 | e [email protected]
COPYRIGHT © 2024 Idaho freedom Foundation
magnifiercrossmenucross-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram