US Government Spending History from 1900. Teddy Roosevelt To Biden.

Nobody, in 1900, speculating on the future of government, could have imagined the astonishing growth and scope of government in the 20th century. Nor wou they have imagined that, for many people, this gigantic government would seem the very essence of efficiency, compassion, and modernity. But the reason that government has got so big is not, as many claim, the weight of armaments and wars. Instead the money goes for health care, education, pensions, and welfare programs. You can see how it all happened in the United States. ----------------------------------------------------------------------------------- A Century of Government Spending ,

Government spending in the United States has steadily increased from seven percent of GDP in 1902 to almost 40 percent today. Government Spending started out at the beginning of the 20th century at 6.9 percent of Gross Domestic Product (GDP). As you can see from Chart 2.21, the federal share of that spending was modest. But spending got a big kick in World War I and ended up at about 12 percent of GDP in the 1920s. Then came the Great Depression, in which President Roosevelt and the New Deal cranked up federal spending, and total government spending rose up to 20 percent of GDP. World War II really showed how the United States could commandeer its national resources for all out war. Government spending peaked at just under 52 percent of GDP in 1945. --------------------------------------------------------------------------------------------------------------------------------------------------------------

President Clinton said, in 1995, that the era of big government was over. But he was wrong. The post World War II era has been a golden age of government spending, and it shows no sign of ending. Although spending dropped back to 21 percent of GDP immediately after WWII, it steadily climbed thereafter until it hit a peak of 35 percent of GDP in the bottom of the recession of 1980-82. Thereafter government spending chugged along in the mid 30s until the mortgage meltdown of 2008. In the aftermath of bank and auto bailouts, government spending surged to wartime levels at 41 percent of GDP but then moderated to about 36 percent of GDP. In the COVID crisis of 2020 spending surged to just over 50 percent GDP. --------------------------------------------------------------------------------------------------------------------------------------------------------------Spending since 1900 by Function How has government spending increased, by function?

20th Century Spending by Function Back in 1900 government spending was a modest affair. Government pensions were almost non-existent, health care was 0.26 percent of GDP, education was 1.1 percent of GDP, defense was 1.6 percent of GDP and welfare was 0.11 percent of GDP. Over a century later in 2018 the five major functions dominate government spending in the United States. Government pensions: 6.70% GDP; health care: 7.77% GDP; education 5.32% GDP; defense: 4.20% GDP; welfare (other than health care): 2.16% GDP. That is 26 percent of GDP out of the total government spending of 34.9 percent GDP. Back in 1900 all government programs other than pensions, health care, education, defense, and welfare amounted to 4.6 percent of GDP. Today, police, fire, infrastructure, and all the rest take 9.1 percent of GDP. ------------------------------------------------------------------------------- Defense Spending since 1900. Defense spending in the United States has fluctuated in the last century, rising from one percent of GDP, peaking at 41 percent in World War II, declining from 10 percent in the Cold War to five percent today. 20th Century Defense Spending

The defense establishment that sent the White Fleet around the world before World War I was tiny, compared to the defense establishment of mid century. It was about 1.25 percent of GDP. Yet this tiny establishment was expanded into an expeditionary army in World War I that consumed over 20 percent of GDP and turned the tide of the war in France. After the war the armed forces were rapidly demobilized and defense spending returned to about 1.25 percent of GDP.

Then in World War II the United States achieved an unprecedented mobilization of resources, and defense spending rose to 41 percent of GDP in 1945. But after the war it never returned to previous levels. From a low of 7.2 percent of GDP in 1948 it doubled to 15 percent at the height of the Korean War in 1953,

and was maintained at about 10 percent during the peak of the Cold War through

the height of the Vietnam War.

Against this the defense buildup during the Reagan era, from 5.5 percent of GDP in 1979 to 6.9 percent of GDP in 1986 was modest,

and the Bush buildup from 3.5 percent in 1999 to 5.7 percent in 2010 to fight the first battles against Islamist extremism equally restrained.

In the Obama administration, defense spending eased back to 4.5 percent of GDP by 2015.

Trump years brought defense spending back up to 4.8 percent GDP in 2020. The Growth of Government Pensions,Government did not start funding pensions (except for veterans) until well into the 20th century. Since then government health care has increased to around 7 percent of GDP. At the beginning of the 20th century, government spent little on pensions (except for veterans of the Civil War). Although the principal pension program of the federal government started in 1935 federal pensions spending did not really take off until 1950, ramping up to 2 percent of GDP by 1960. Another pensions ramp-up started in 1970, so that by 1980, federal pension spending was 4.6 percent GDP and state and local pensions (principally for government employees) amounted to nearly 0.5 percent GDP. From 1980 to 2006 federal pension spending slowly reduced to 4.3 percent of GDP, but state pension spending has steadily increased to 1.03 percent GDP and local government pensions have increased to 0.2 percent GDP.

Starting with the Great Recession, pensions have resumed an increase, with federal pensions hitting 5.5 percent GDP, state pensions hitting 1.34 percent GDP and local pensions hitting 0.27 percent GDP in the COVID crisis year of 2020. --------------------------------------------------------------------------------------------------------------------------------------------------------------

The Growth of Government Education,Government spending on education has expanded from about one percent of GDP in 1900 to peak at 6 percent in the second decade of the 21st century. Education in North America began as local and individual. But the common schools movement initiated in Massachusetts in the 1840s began a process of centralization and bureaucratization that came into its full flowering in the 20th century. Education spending began the century at one percent of GDP, primarily at the local level. In the early decades, from 1910 to 1940, spending increased to accommodate the build out of high schools. After World War II, spending increased due to an expansion in higher education and the increases in teacher pay. Allowing for a dip during World War II and a bulge in the 1970s, government spending for education has steadily increased year on year, reaching 6 percent of GDP in 2008. Education spending is declining as a percent of GDP in the 2010s. -------------------------------------------------------------------------------------------------------------------------------------------------------------

The Growth of Government Healthcare,Government did not intervene significantly in the provision of health care until the passage of Medicare and Medicaid in the mid 1960s. Since then government health care has steadily increased to around 9 percent of GDP.At the beginning of the 20th century, government spent little on health care. The platform of the Progressive Party in 1912 called merely for a reorganization of public health services into a single national health service. As the chart shows, government health care did not exceed one percent of GDP until the 1960s. It was about 0.25 percent of GDP in the early decades, 0.5 percent in the 1920s, and peaked at about one percent of GDP in the depression year of 1932. Then, in 1965, Congress passed the Great Society legislation at the behest of President Johnson, featuring Medicare, a health subsidy program for older Americans, and Medicaid, a health care provision for the poor. Ever since, government health care expenditures have trended steadily higher. Government health spending breached two percent of GDP in 1970, three percent of GDP in 1980, and four percent of GDP in 1991. Spending breached five percent of GDP in 1995, six percent in 2007, and seven percent of GDP in 2009.

After a peak of 7.6 percent GDP in 2011, health care spending receded for a year, but resumed its growth,

Then it hit 8 percent GDP in 2016 and 9 percent of GDP in the COVID year of 2020.

The Biden Administration Has Approved $4.8 Trillion of New Borrowing, Prior to the pandemic, the U.S. national debt was on an unsustainable path. In 2020, policymakers appropriately enacted $3.4 trillion of additional borrowing to help fight the pandemic and stabilize the economy. Once the economy was strong enough, Congress and the White House should have stopped engaging in new borrowing and pivoted to focusing on implementing reforms to slow the growth of the national debt. Instead, policymakers have added to the deficit, and borrowing has continued and at a very high level. We estimate the Biden Administration has enacted policies through legislation and executive actions that will add more than $4.8 trillion to deficits between 2021 and 2031, or nearly $2.5 trillion when excluding the effects of the American Rescue Plan. This is on top of the trillions of dollars we were projected to borrow before President Biden took office. Excessive borrowing will lead to continued inflationary pressures, drive the national debt to a new record as soon as 2030, and triple federal interest payments over the next decade – or even sooner if interest rates go up faster or by more than expected. The $4.8 trillion of borrowing approved by the Biden Administration is less than the roughly $7.5 trillion.

President Trump added to the deficit over his term ($4 trillion excluding COVID relief), but much more than the $2.5 trillion President Trump had enacted at this point in his term.

This $4.8 trillion is the net result of roughly $4.6 trillion of new spending, roughly $500 billion of tax cuts and breaks, and $700 billion in additional interest costs, partially offset by $400 billion of spending cuts and $600 billion of revenue-increasing policies. Of the non-interest deficit increases, about $3 trillion is from legislation – including a net $1.6 trillion passed on a partisan basis and $1.4 trillion passed on a bipartisan basis. Another $1.1 trillion comes from executive actions.

Then specific policies that have impacted deficits include: 1.American Rescue Plan ($1.85 trillion) – The American Rescue Plan Act of 2021 was largely a COVID relief bill, which included funding to state and local governments, $1,400 payments to individuals, an extension of expanded unemployment benefits, new money to combat the pandemic, and other spending. It was regarded by many as larger than necessary given the state of the economy. ------------------------------------------------------------------------------------------------------------------------------------------------------------- 2.FY 2022 Omnibus Bill ($625 billion) – In March of 2022, Congress agreed to fund the discretionary budget for Fiscal Year (FY) 2022 at 6 percent above 2021 levels. Assuming discretionary spending continues to keep pace with inflation going forward, the Congressional Budget Office has estimated spending will be roughly $625 billion higher than in its prior baseline as a result. Importantly, much of this increase is consistent with keeping pace with inflation. ------------------------------------------------------------------------------------------------------------------------------------------------------------- 3.Bipartisan Infrastructure Law ($370 billion) – The Infrastructure Investment and Jobs Act of 2021 was a bipartisan package of new spending on transportation infrastructure like roads and bridges as well as on other infrastructure like power, water, and broadband. The package also included several offsets including repurposing of unspent COVID relief funds, delaying implementation of a drug rebate rule, and improving information reporting for digital currencies. However, the bill still added $370 billion to deficits after accounting for those offsets. ------------------------------------------------------------------------------------------------------------------------------------------------------------- 4.Honoring our PACT Act ($280 billion) – The Honoring our PACT Act of 2022 expanded veterans’ health and disability benefits to veterans who have (or are presumed to have) been exposed to toxic substances while on active duty and have been diagnosed with certain health ailments that could be connected to this exposure. The law was estimated to cost $280 billion and includes no offsets. It would also allow up to $390 billion of discretionary funding to be reclassified mandatory, though that effect is not included in our estimates.1 ------------------------------------------------------------------------------------------------------------------------------------------------------------- 5.SNAP (Food Stamps) Increase ($185 billion) – In August 2021, the U.S. Department of Agriculture announced that it would be revising the Thrifty Food Plan, used for the calculation of Supplemental Nutrition Assistance Program (SNAP) benefits, otherwise known as “food stamps.” The revision increases the reference food plan’s cost by 21 percent. ------------------------------------------------------------------------------------------------------------------------------------------------------------- 6.Health-Related Executive Orders ($175 billion) – The Biden Administration has announced several executive orders relating to health care that have a combined deficit impact of $175 billion over ten years, assuming all rules are finalized. Early in the Biden Administration, they delayed implementation of a Trump Administration rule regarding prescription drug rebates for a year, saving nearly $15 billion in 2021. They later implemented a different rule requiring pharmacy benefit managers to apply negotiated discounts they receive from pharmacies to the price paid by consumers for drugs under Medicare Part D at a cost of $40 billion. Additionally, President Biden's proposed rule fixing the "family glitch" in Affordable Care Act subsidies will add another $30 billion to deficits, assuming it becomes finalized later this year. Most recently, the Administration proposed a rule overhauling the enrollment process for Medicaid, which we estimate would cost $120 billion over ten years. ------------------------------------------------------------------------------------------------------------------------------------------------------------- 7.CHIPS and Science Act ($80 billion) – The CHIPS and Science Act of 2022 included more than $50 billion for incentivizing the expansion of the semiconductor manufacturing industry in the U.S. It also increased funding for the Advanced Manufacturing Investment Tax Credit by nearly $25 billion and provided nearly $5 billion for research and innovation. In addition, it included new authorizations not counted in our cost estimate because they would require future appropriations. ------------------------------------------------------------------------------------------------------------------------------------------------------------- 8.Ukraine Supplementals ($55 billion) – Since Russia invaded Ukraine in February 2022, Congress has approved a total of $55 billion in military, foreign, and humanitarian aid to Ukraine through two supplemental appropriations bills. The first bill passed in March provided $13 billion, while the second bill passed in May provided nearly $42 billion. ------------------------------------------------------------------------------------------------------------------------------------------------------------- 9.Inflation Reduction Act (-$240 billion) – In August 2022, President Biden signed the Inflation Reduction Act of 2022, a reconciliation bill allowed by the FY 2022 budget. The legislation included spending and tax credits for energy and climate as well as new health spending, but it was more than offset through tax increases, improved tax enforcement, and prescription drug savings, resulting in $240 billion of deficit reduction through 2031. ------------------------------------------------------------------------------------------------------------------------------------------------------------- 10.Student Debt Relief, Repayment Pauses, and Cancellation ($750 billion) – Over the first 18 months of his Presidency, President Biden extended a pandemic era pause on student debt repayments four times at a cost of roughly $85 billion while also implementing a number of targeted student debt changes that we estimate will cost another $165 billion. More recently, he announced a final pause extension, a cancellation of up to $10,000 to $20,000 per student loan borrower, and a new income-driven repayment plan that we estimate will cost a combined $500 billion.2 Net Interest ($700 billion) – Increased borrowing results in higher debt and increased federal interest payments. We estimate the legislative and executive actions approved by the President will increase interest costs by $700 billion, with the largest share coming from the American Rescue Plan. This does not account for any interest effects associated with student loan changes, which are generally measured on an accrual basis.In total, the Biden Administration has added $4.8 trillion to deficits over the 2021-2031 period as a result of legislative and executive actions. With inflation at a 40-year high and debt headed for record levels, substantial deficit reduction will be needed to put the country on a sustainable fiscal course. https://www.crfb.org/blogs/biden-administration-has-approved-48-trillion-new-borrowing