• Spending rising faster than production
    June 17,2013

    Vermont state spending closely tracked growth in state production in the 1990s, but spending outpaced production for the first decade of the new century according to data compiled by Christopher Chantrill for usgovernmentspending.com.

    The data set for Vermont state spending begins with 1992. By 1999, the state’s population had risen just six percent. The state’s gross domestic product (GDP) was up 35 percent and state spending had risen at a slightly lower rate.

    By 2000, spending was up 49 percent from 1992, but production had increased only 44 percent. Between 2000 and 2010 (the most recent numbers available) spending increases markedly outpaced production. By 2010, production was twice what it had been 1992, but state spending had climbed a full 175 percent, nearly tripling.

    These numbers are often expressed in terms of government spending as a percentage of GDP. Vermont state government spending hovered around 12 percent of GDP throughout the 1990s, but climbed steadily over the next decade to become nearly 17 percent of GDP by 2010.

    Unlike the federal government, Vermont can’t print money so increases in spending must be matched by increased revenues. If the revenue doesn’t come from greater production, it comes from increases in taxation — higher taxes on same things or taxing additional things.

    The Central Vermont Chamber of Commerce believes that residents and businesses spend their money more effectively than government bureaucracies do, and directors see the increase in government spending as a significant cause for concern.

    The money government takes from businesses reduces the amount available to hire employees, increase inventory or expand facilities. The money taken from individuals and families reduces their buying power. Both contribute to slowing production.

    Usgovernmentspending.com offers a wealth of data for comparison over time or from one state to another.

    The Chamber’s public policy committee looks forward to reviewing additional data for the most recent past years in hopes that the trendlines are changing.

    Health spending increases are based on increased production. They track a combination of inflation and population increases.

    When spending bolts ahead of productivity or inflation and population growth, the economy eventually pays a price that hurts both residents and commerce.

    George Malek is executive director of the Central Vermont Chamber of Commerce

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