Budget Debate, Part 6, More spending is not sustainable

In a previous post I document how Minnesota closed the income gap with the rest of America in the years before the "Minnesota Miracle" of 1971.  In more recent decades, the state has continued to improve its position, relative to the rest of the country, but at a lesser rate than pre-1970.  Actually looking at the data suggests that the big "investment" in state government spending did not accelerate economic growth.

Instead, the growth had already happened, and the 1971 sea change is more accurately described as a collective decision to spend more of our new-found wealth on government, rather than having government spending as a vehicle for creating more wealth.

Digging deeper, in this post I document the relationship between state government spending (represented by the "General Fund") and state personal income.  The following table shows, year-by-year, the percentage of state personal income taken up by state government general fund spending.

Year	%
1960	3.4%
1961	3.6%
1962	3.7%
1963	3.9%
1964	4.2%
1965	4.0%
1966	4.3%
1967	4.3%
1968	5.4%
1969	5.1%
1970	6.3%
1971	6.5%
1972	7.4%
1973	7.2%
1974	7.3%
1975	7.6%
1976	8.5%
1977	8.9%
1978	8.8%
1979	8.6%
1980	8.5%
1981	7.8%
1982	9.1%
1983	7.1%
1984	8.0%
1985	8.0%
1986	7.5%
1987	7.5%
1988	7.4%
1989	7.4%
1990	7.7%
1991	7.8%
1992	7.5%
1993	7.4%
1994	7.7%
1995	7.6%
1996	7.4%
1997	7.4%
1998	7.2%
1999	7.4%
2000	7.1%
2001	7.6%
2002	7.5%
2003	7.8%
2004	7.2%
2005	7.5%
2006	7.6%
2007	7.4%
2008	7.5%
2009	7.6%
2010	6.4%

The the early 1960's, we were spending about 3.5% of state personal income on state government.  By the end of the decade, that had jumped up to more than 5 percent.  With the "Miracle" of 1971 through the early 1980's, that share accelerated past 9 percent, clearly overshooting the mark.  For the past 25 years, we have scaled back spending, relative to the size of the economy, and have held steady between 7 and 8 percent of income.  Last year marks the first year since 1970 that state general fund spending fell below 6.5%.

What is at stake in the current budget debate is this question, "What is the proper/sustainable size of state government, relative to the overall economy"?  What the Governor proposes is to return state government to the unsustainable levels of the late 70's and early 80's.  The Republicans in the state legislature are trying to hold the line.