National Income Accounts Bask
OK kids here’s one for you (since the BEA keeps sending me to voicemail): If you look at the FRED data for current (i.e. nominal) expenditures, unless I’m doing the math wrong it shows that for a few years (particularly in the 1940s) total government consumption and gross investment is higher than total government expenditures. For example, in 1942 nominal government C&I is $62.7 billion, while nominal federal spending is $31 billion and nominal state & local spending is $8.5 billion. I am pretty sure I’m doing apples to apples (i.e. nominal and government at all levels) in the various categories.
So, does this make theoretical sense or is something wrong with the numbers?
The motivation for this was that I was trying to back out government transfer payments. I thought for a given year I could look at how much the government spent on consumption and investment, and subtract this amount from total government spending. The remainder I thought would be transfer payments (and maybe debt payments? what else?). So I was surprised that this approach gave me negative numbers for some years.
Anyone?
The fiscal year for the US budget starts in October 1. I believe the 31 million Current Expenditures is taken from the budget numbers. On the other hand, Federal Government Consumption & Gross Investment is probably taken from the GDP data which start in January.
31 billion*
oops, didn’t mean to add “Federal” in Government Consumption Expenditures & Gross Investment. Just “Government Consumption Expenditures & Gross Investment” by itself.
DJ okay that might be one of the issues involved, but does that really explain the humongous discrepancies? Maybe it does, I guess I have to check more carefully…
But anyway DJ you agree with me that if the time periods were synchronized, then at best government C&I could equal total government expenditures?
“But anyway DJ you agree with me that if the time periods were synchronized, then at best government C&I could equal total government expenditures?”
I would.
My guess is that there was a giant boost is defense spending in the last quarter of 1942 that was missed in the 1942 budget since the fiscal year ends in September. No clue if this really happened though. The BEA unfortunately does not seem to have quarterly data for that year.
Nevermind. My guess is wrong. I didn’t lhave time to look closely enough. Current expenditures continues to be too small after 1942.
Could it be because “government consumption expenditures and gross investment” includes war spending overseas, whereas “current government expenditures” includes only spending in the US?
The reason why I say this is because if you look at this chart, you will notice that “government consumption expenditures and gross investment” grew substantially larger than “current government expenditures” during WW2, and the Korean war, whereas from 1946-1950, when the US was in “peacetime”, the two statistics more or less matched up perfectly.
Yeah MF it is obviously being driven by war expenditures (which are either C or I, not sure how they classify it) but it still doesn’t make any sense to me. I suppose in theory you could be right, since it’s GDP not GNP. In fact maybe I should check the GNP stats to see if it works there…
since it’s GDP not GNP
Hmmm, that might just be it!
Bob:
Could it have anything to do with the price controls that were in effect during the war? Bob Higgs talks about it at length in his Journal of Economic History article (reprinted in a couple of his books). He points out quite effectively that the GNP data for that period don’t really mean much, so I can’t imagine the detail mean anything either.
BEA must have a document (on line?) that defines terms for the NIPA in the 1940s? If not a government depository library will have it.