Although federal spending is projected to decline from 22.8 percent of the gross domestic product recorded last year to 21.5 percent by 2017, it still will exceed the 40-year-average of 21.0 percent, according to the nonpartisan Congressional Budget Office. Spending peaked at 25.2 percent of GDP in 2009.
The budget office also said the economy is roughly 5.5 percent smaller than it would have been had there been no recession.
The Defense Department already has made deep spending cuts, and outgoing Defense Secretary Leon Panetta said 800,000 civilian Pentagon employees were notified this week they likely are to be placed on periods of unpaid leave due to lawmakers' failure to act.
The recent downsizing in government is most pronounced at the state and local levels. Most states have constitutional or statutory requirements for balanced budgets.That means nearly all states are prohibited from running budget deficits, while the federal government is not. Not only can the federal government run deficits, but it can print money â¿¿ through actions by the Federal Reserve â¿¿ something states are prohibited from doing. Those calling for a smaller government mostly don't take notice of the wave of recent cutbacks. Their clarion call remains Ronald Reagan's mantra: Government doesn't solve problems, it is the problem. "This spending issue is the biggest issue that threatens our future," House Speaker John Boehner, R-Ohio, says. "When are we going to get serious about our long-term spending problem?" And Florida Sen. Marco Rubio of Florida, delivering the GOP response to Obama's State of the Union address, said "a major cause of our recent downturn was a housing crisis created by reckless government policies." Soaring recent government deficits are partially a side effect of the worst recession since the 1930s, which took a huge bite out of tax revenues at the same time spending increased on recession-fighting programs like unemployment compensation and stimulus measures under both Presidents George W. Bush and Obama.