CBO revises major budget yardsticks

On July 31, the Commerce department’s Bureau of Economic Analysis revised the way it calculates gross domestic product. 

The technical GDP change counted new types of spending, such as on research, and new types of investment, such as artistic product. The changes increased the estimated size of economic growth for the last 84 years.

The CBO typically calculates budget figures as a percentage of GDP, so the Commerce department changes necessitated revising the CBO’s historical yardstick.

This means that over the last 40 years, the government on average took in 17.4 percent of GDP in revenue. That is down fro 17.9 percent prior to the GDP change.

Over the same period, spending was 20.4 percent of GDP and the deficit was 3 percent of GDP.

For 2012, which saw GDP figures increased by 3.5 percent or $500 billion using the new method, the CBO numbers show a much wider than average deficit as well as tax revenue that was historically low and spending that was historically high.

Revenue was 15.2 percent of GDP in 2012, spending was 22 percent and the deficit was 6.8 percent of GDP.

This yielded a debt held by the public ratio that stood at 70 percent of GDP compared to the historical average of 38 percent.