John Humphreys

The twentieth century has been the century of the state. Not only did the world have to deal with two militant statist philosophies (fascism & socialism) but the “free” world also slowly drifted further and further towards a statist outcome. Our methods have been fairer and our behaviour more humane, but ultimately the western world seems to be tip-toeing towards a situation where the state has significant control over our lives. Jonah Goldberg has described this shift to benevolent big-government as “liberal fascism” which might be a bit harsh… but also might be a bit fair.

Strangely though, as the government grows, so do the calls on the left that we are becoming more “right wing” and/or too “free-market”. Somehow, this is taken seriously. The source of all this evil free-market right-wing ideology is the super-capitalist super-power — the USA. So I thought it might be worth having a look at the size of the American government over the last 80 years.

In 1930, the federal American government spend 3.4% of GDP and had a budget surplus of 0.8% of GDP. That sounds pretty good to me. While some libertarians would want to shrink the federal government even more, most would admit to being fairly happy with a federal government that made up less than 4% of the economy.

Then what happened?

Herbert Hoover increased government spending to 8% of GDP by 1933, and then F.D. Roosevelt increased government spending to nearly 10% of GDP by 1940… just before America joined World War Two. During the war federal government spending rose to over 40%, before winding down to a low of 12% in 1948. In less than two decades, American federal government spending had more than tripled.

Of course, since America is a free-market right-wing country, they then slashed government spending back to under 5% of GDP, right?

Wait. No. That’s the wrong story.

The actual history is that Harry Truman then increased federal government spending up to over 20% of GDP by 1953. At that point Dwight Eisenhower came to power and kept government spending under control, bringing it back to about 18% of GDP. The next batch didn’t do so well. JFK and LBJ brought government spending up to 19%, then Nixon & Ford brought it up to 21%, and then Carter took government spending to 22%. The trend seems pretty clear to me.

But then we have the dramatic free-market reforms of Reagan. After eight years, Reagan managed to “slash and burn” the federal government all the way down from 22% to 21% of GDP. Wow.

The government did actually shrink in the late 1990s. Under Bill Clinton (with a Republican congress) American government spending dropped from 21% down to 18% of GDP. But that reform was short lived and George W. Bush managed to increase the size of the federal government up to 25% of GDP before he left office. And just for fun, that includes a budget deficit of 10% of GDP.

Now there are many things that can be said about this story. But the one conclusion that no honest person can draw is that America is a bastion of “right-wing free-market ideology”. Since 1930, in every decade except the 1990s, government spending has increased in America. The American government is now bigger than ever in peace-time history, and with a record high budget deficit.

Personally, I prefer the statistics from 1930.