Romney Lies About Government Expenditures in U.S. and Spain (El Mundo, Spain)

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Romney Lies About Government Expenditures in U.S. and Spain (El Mundo, Spain)

"The United States has always spent between one and three percentage points less than Spain on the state, and that hasn’t changed ... under Obama, the U.S. is cutting government spending at a faster rate than Spain, and according to the IMF, this year the margin will again be less than it was in Bush's last budget. ... In fact, the cost of financing U.S. government debt has fallen since Standard and Poor’s downgraded America's debt rating."

By Pablo Pardo

Translated By Neus Coll Ruiz

October 5, 2012

Spain - El Semanal - Original Article (Spanish)

Republican presidential nominee Mitt Romney waves to the crowd after the first U.S. presidential debate in Denver, Oct. 4.

FINANCIAL TIMES VIDEO: 'Protesting Spain' faces tough choices, national disintegration, Oct. 4, 00:07:02

In his debate [with President Obama], Mitt Romney said that Spain dedicates 42 percent of its GDP on public expenditures and that he doesn't want the U.S. to end up like Spain.

[Editor's Note: Mitt Romney's debate comment about Spain was: "You never balance the budget by raising taxes. ... Spain - Spain spends 42 percent of their total economy on government. We're now spending 42 percent of our economy on government. ... I don't want to go down the path to Spain. I want to go down the path of growth that puts Americans to work, with more money coming in because they're working."]

The problem is that the United States has always spent between one and three percentage points less than Spain on the state, and that hasn’t changed.

This is proven by IMF statistics: In 2001 (the first year of Bush, although the budget was Clinton’s; the first year in office of President Aznar, and the first year that a number of mutual funds compared the countries), Spain’s public spending as a percentage of GDP was 38.6 percent and America's was 34.6 percent.

These figures remained more or less the same until 2007, when the crisis in the U.S. broke out. That year (President Zapatero’s third year; Bush’s seventh), the figures for Spain were 39.2 percent of GDP, while in the United States they were 36.7 percent. The gap has narrowed slightly since then, due for the most part to increased government expenditures in the United States (didn’t they say that Republicans were the money savers?)

Since then, the gap has remained nearly unchanged. In 2009 (Obama’s first year, although with George W. Bush’s budget; Zapatero’s sixth year), the U.S. government spending amounted to 44 of GDP, while Spain's stood at 46.1 percent. Therefore, the gap has narrowed significantly. For fiscal year 2012, a series of mutual funds forecast that public expenditures would entail 42 percent of GDP in the United States, and 40 percent in Spain. Both countries have carried out very tough fiscal adjustments: four points of GDP in Spain; three points in the United States.

So under Obama, the U.S. is cutting government spending at a faster rate than Spain, and according to the IMF, this year the margin will again be less than it was in Bush's last budget.

In fact, the cost of financing U.S. government debt has fallen since Standard and Poor’s downgraded America's debt rating, which says more about the lack of rigor on the part of the debt rating agency than it does about U.S. solvency.

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However, if public spending isn't a threat to the United States, should we consider a threat? Romney didn't say, but let's give him the benefit of the doubt and take a closer look.

Posted by Worldmeets.US

This is a common view, but, again, without any real basis. Kenneth Rogoff and Carmen Reinhart have shown this simply by cross-referencing databases. While they show that greater debt correlates to lesser growth, they do not clarify whether less growth is a cause or consequence of the debt. In other words: Is there more debt due to a lesser growth, or do we have a lesser growth due to growing debt?

Finally, a last reminder to Mitt Romney and the Republicans: In Spain we don’t have two state enterprises designed to buy mortgages and keep the housing market on an artificial high. In the United States, they have since the 1930s. They are called Fannie Mae and Freddie Mac. Richard Nixon privatized them and … George W. Bush renationalized them.

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