The on-again, off-again federal budget compromise is currently being described as “the largest one-time reduction in U.S. history.” That’s no surprise. Pundits, politicians and journalists love the superlative.
The fact is—in nominal terms—the economy is almost always expanding. Inflation, population growth, and real economic growth all conspire to make this a fact of life. In the midst of the Great Recession, nominal GDP fell 2 percent in 2009 and that was the first time in 73 years that nominal GDP had ever fallen (by 2010, it was back up above pre-recession levels).
But if the economy is always growing, then things like government revenue and government expenditures are also always growing. Thus, changes in revenue and changes in expenditure are always going to appear to be THE LARGEST EVER!! (cue ominous music).
Was the Clinton tax increase the largest in U.S. history? As I noted yesterday, he raised the top rate 8.6 percentage points. But there were five other instances in history in which the top marginal income tax rate jumped more, including a whopping 52 percentage point hike in 1917 and a 38 percentage point hike by President Hoover in 1932 (!).
Was the Bush tax cut the largest in history? Well he lowered the top rate 4.6 percentage points over three years. But Reagan lowered it 42 percentage points over 7 years (and 19 points in 1981).
If enacted, would $33 billion in cuts be the largest in U.S. history? In percentage terms, this is less than 1 percent of total outlays. In 1946, spending fell by over 40 percent. The next year, it was 38 percnet. And then 14 percent. In the 50s, spending fell again by 7 percent and 4 percent.
Keep this in mind the next time you hear someone breathlessly claims that some policy will be the largest _____ ever.