Federal Spending

Outlays as a Percent of GDP

No single measure can adequately capture the size or growth of government over time. One of the most common approaches is to look at federal outlays as a percentage of the gross domestic product. This measure, while imperfect, is considered to be one of the most "valid indicator[s] of the relative size of the private versus the public sector" (quoted in Higgs, 1991, p. 21).


As indicated below, government "share" of GDP spending hovered from about 8 percent in the late twenties to 10 percent during the early New Deal era. The unprecedented mobilization of the early forties produced - with no comparison until recently - the largest governmental share in US history. At its peak in 1943-1944 government expenditures accounted for more than 40% of GDP.


Between 1950 and 2019, and until the recent shock from COVID-19, that share has never risen above 25% of GDP: 

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Federal outlays

Employment share

IMF data

Power Shift


Why this measure?

A New System - out of balance?

Given the profound changes to the American federal system over time, many have wondered if we are seeing the creation and evolution of a new system of government in the United States. David B Walker, in The Rebirth of Federalism (2000), provides a compelling account of the ways in which today's intergovernmental system has become more complicated. Since 1960, there have been a number of transformational shifts, across different dimensions (attitudinal, political, representational, programatic, fiscal, and institutional). According to Walker, there is no way that a return to a simple "cooperative federalism of yesteryear will ever occur, not to mention a drive back to traditional...federalism" of the pre-New Deal era.Yet, as Walker notes himself, this does mean that we can simply ignore these transformational shifts. In the conclusion to his book, Walker suggests that younger generations will have to find ways to navigate an increasingly complicated, overloaded, unbalanced ("top heavy") system. We now live in an era of "conflicted federalism," with no neat solutions or easy answers.  


As we come to grips with this new era of "conflicted federalism," what are the most important shifts to pay attention to? Walker identifies 12 "dimensions of recent change," which merit close attention: 


  1. increases in the use of Federal aid dollars to states

  2. proliferation of grant programs

  3. collapse of federal-state partnerships

  4. shifting positions of authority between the states and Federal government

  5. expansion of Federal programs and "national activism"

  6. diversification of the forms of federal aid

  7. creeping conditionalism and "galloping social regulations"

  8. creation of new regional programs

  9. erosion of Federal-state tax comity

  10. [partial] revitalization of states

  11. centralizing tendencies of Supreme Court decisions

  12. emergence of national party politics 

The Rebirth of Federalism (2000, 1-16)

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