GOVERNMENT

Government Spending

Federal, state, and local governments expanded their activities.

Federal spending first peaked during World War I. Between 1930 and 1940, annual federal expenditures more than doubled. During World War II they quadrupled, reaching 44 percent of the Gross Domestic Product by the end of the war. Federal expenditures plummeted after the war, but not to prewar levels. During the last four decades of the century, federal expenditures held at about 20 percent of GDP. 

A great expansion in federal activity occurred in the first Roosevelt administration (1933–1937) with the creation of the Social Security retirement system, unemployment insurance, government guarantees of bank deposits and home mortgages, income support for families with dependent children, low-rent public housing, direct subsidies to farmers, work relief projects, and regional development programs. Another wave of expansion occurred during the Johnson and Nixon administrations (1963–1974) with the introduction of Medicare and Medicaid, and the growing involvement of the federal government in education, urban development, environmental protection, occupational safety, emergency food distribution, and dozens of other functions. 

More than 60,000 state and local governments have taxing power in the United States: fifty states, about 3,000 counties, 20,000 municipalities, 17,000 townships, 14,000 independent school districts, and more than 10,000 special districts. Before World War II, state and local governments combined spent a good deal more than the federal government during peacetime. From 1942 through the last decade of the century, however, Washington’s annual expenditures exceeded those of all state and local governments.

Source Notes
Source Abbreviations

HS series F 1 and Y 457; SA 1974, table 398; SA 1977, table 456; SA 1980, table 481; SA 1987, table 428; SA 1998, table 499; and SA 1999, tables 503 and 698.

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