Home > Economics, International > Growth in government

Growth in government

November 2, 2010

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.

Categories: Economics, International
  1. TerjeP
    November 2, 2010 at 5:10 pm

    Sure they have a big government. But it’s a big right wing free trade government. The evil sort that doesn’t spend enough on it’s people.

  2. Ben
    November 4, 2010 at 11:00 pm

    LOL: Not sure if one can separate the words fascism from socialism (but left-wingers seem to be experts at it). I thought they were conjoined twins.

    People who’ve read Liberal Fascism by Jonah Goldberg will come away with a better understanding of how America and the world changed last century. The chapter headings say it all: “Adolf Hitler: Man of the Left” and “Liberal Racism: The Eugenic Ghost in the Fascist Machine.” My cup of tea!

    In any case, your concerns about expanding government are hard to dismiss. I like what Calvin Coolidge said too: “Perhaps one of the most important accomplishments of my administration has been minding my own business.”

  1. No trackbacks yet.
Comments are closed.
%d bloggers like this: