The federal government is now shrinking as a percentage of GDP

This chart illustrates some interesting facts.

First, note how federal spending has flat-lined and has even started to dip slightly since Republicans took control of Congress in 2010.

Second, note federal tax revenue has been increasingly steadily since we’ve started to see some economic growth — tepid though this growth is.  Tax revenues are spiking up sharply without substantial tax increase.  Yes, some ObamaCare taxes are starting to kick in.  But this is not substantially affecting the revenue picture.

What does this prove?

It proves that Ronald Reagan and Jack Kemp were right.  If you really want to increase tax revenue to the government , grow the economy. That’s “supply side” economics.

Economic growth produces more revenue for the government because people and businesses pay more taxes when they have more income and bigger profits.

Now, we could and should be doing much better than this.

The so-called economic recovery we are in now is slogging along at half the growth rate of the average economic recovery in America following a recession.  The Reagan economic recovery was three times as robust as the sluggish growth we are seeing now.  The U.S. economy was growing at a 6 percent annualized rate during the Reagan recovery compared to less than 2 percent for this so-called recovery.

The big reason this recovery is so sluggish is ObamaCare.  Businesses have no idea what ObamaCare will cost them, have no idea how much it will cost to add a new employee.  So businesses are setting up their factories overseas where the labor is cheap, or they are waiting to see what the implications of ObamaCare really are.

Third, look at how much federal spending went up under President George W. Bush.  Spending under Bush was increasing at almost the same rate as spending increased during the first two years of the Obama Administration, when Democrats controlled both champers of Congress.  So Bush, it turns out, was one of the biggest spenders in history.

In other words, George W. Bush was a disaster in just about every conceivable way.

He was a rampant spender.  He spent about $2 trillion on the Iraq War, a war we never should have gotten into.  We found no weapons of mass-destruction (which was the supposed reason we went to war).  Saddam Hussein, though certainly a very bad guy, was a bulwark against the even-worse Iran.  He also hated al Qaeda and the radical Islamic terrorist groups.  He killed a lot of terrorists.

So we spent $2 trillion on Iraq to get rid of this guy, and we’re worse off for it.

The result of Bush’s Presidency is that we now have eight years of Barack Obama and a $17 trillion debt, plus a lot of dead and wounded American soldiers.

Wouldn’t you like to have that $2 trillion back?

But the good news is the Republican leaders in the House have managed to control spending.    I’d certainly like to see much more substantial spending cuts — not just hold the line against more spending, which is what’s happening now.

But even if all we do is hold the line against future spending increases, the increased tax revenues produced by economic growth will eliminate the annual budget deficit in a few years.  Of course, then we’ll have to start paying down the $17 trillion (soon to be $20 trillion) national debt.  At least we’ll be heading in the right direction.

Here’s another interesting chart — federal spending as a percent of GDP:

What’s interesting about this chart is that federal spending as a share of GDP is now going down sharply — thanks to a growing economy, sluggish though it is.  After federal spending hit a high of 25 percent of GDP in late 2009, it’s been heading down steadily and now stands at 22 percent of GDP, just one percent higher than the 21 percent of GDP the federal government was spending at the end of the President Reagan’s eight years. (Of course, the cost of ObamaCare hasn’t kicked in yet).

Government spending as a share of GDP reached its low point in modern history of 18 percent under the Presidency of Bill Clinton.

The economy was booming under Clinton and the Republican-controlled Congress — which curbed Bill Clinton’s desire to spend.

Reagan likely would have brought federal spending down to the 18 percent it was at the end of the Clinton Presidency, but Reagan had a Cold War against the Soviets to win.

So what’s the lesson here?

It could be that the formula for success is for Republicans to control the Congress and Democrats to control the Presidency.

Why might this be the case?

Because Congress spends the money, not the President. As long as Republicans control Congress (the purse strings), we should be able to keep spending in check and grow our way out of the deficit.

That’s what happened during the Clinton years. And it’s happening again now.

Democrat Presidents also like to take credit for bringing spending under control, even when they have nothing to do with spending.  Even Obama is touting himself as a fiscal conservative and similar to Reagan.  Of course, that’s a laugh.  There’s no limit to what Obama would spend if he could.

But the Republican House won’t let Obama spend more. So Obama is happy to take the credit for bringing spending under control, just as Bill Clinton took credit when he was forced by Congress to rein in spending.

But when Republicans win the Presidency, their tendency is to want to spend like Democrats . . . because they want to please the media and get along with the ruling class. This was certainly the case with both George H.W. Bush (remember “compassionate conservatism”), when spending spiked up dramatically, and George W. Bush, when spending spiked up even more.

I can’t remember which Bush said he wanted to be the “Education President.”  I think both Bushes said that, both misunderstanding the role of the federal government.

Now the Republican Establishment is falling in love with electing a third Bush to the Presidency, Jeb Bush.

No thanks.  Frankly, I’d rather just continue with what we have now.