How Big is Uncle Sam? A Century of Government Spending in the U.S.

 

Have you ever wondered how much money the government spends on various programs, services, and activities? Have you ever thought about how the government spending affects the economy, society, and politics of the country? Have you ever questioned how the government spending reflects the priorities, values, and goals of the government and the people?

I will compare the government spending in the United States over the last 10 years (2013-2023) with the government spending 10 years after the income tax was first established in 1913 (1923-1933). I will use data from various sources, such as the U.S. Treasury Fiscal Data, USAspending.gov, the Tax Foundation, and FRASER. I will also draw some insights and form an ethical opinion about how the government is spending now versus what the priorities should be.

The main question that I will address is: How has the government spending in the United States changed over time, and what are the implications for the economy and society?

The Growth of Government Spending in the Last 10 Years

According to the U.S. Treasury Fiscal Data, the federal government spent $4.16 trillion in fiscal year 2023, which was 16.5 percent of the gross domestic product (GDP). The major categories of spending were Social Security ($1.15 trillion), Medicare ($0.83 trillion), Defense ($0.75 trillion), Net Interest ($0.47 trillion), and Veterans Benefits ($0.18 trillion). The federal government also collected $3.45 trillion in revenue, mainly from individual income taxes ($1.85 trillion), payroll taxes ($1.23 trillion), and corporate income taxes ($0.24 trillion). The difference between spending and revenue resulted in a deficit of $0.71 trillion, which added to the gross public debt of $29.6 trillion (117 percent of GDP).

According to USAspending.gov, state and local governments spent $2.21 trillion in fiscal year 2022, which was 8.8 percent of GDP. The major categories of spending were Education ($0.67 trillion), Health Care ($0.54 trillion), Transportation ($0.22 trillion), Public Safety ($0.19 trillion), and General Government ($0.14 trillion). State and local governments also collected $2.05 trillion in revenue, mainly from sales taxes ($0.54 trillion), property taxes ($0.53 trillion), individual income taxes ($0.37 trillion), and intergovernmental transfers ($0.36 trillion). The difference between spending and revenue resulted in a deficit of $0.16 trillion.

The total government spending (federal, state, and local) in fiscal year 2022 was $6.37 trillion, which was 25.3 percent of GDP. The total government revenue was $5.5 trillion, which was 21.9 percent of GDP. The total government deficit was $0.87 trillion, which was 3.4 percent of GDP.

These numbers show that the government spending in the United States has increased significantly over the last 10 years, both in absolute terms and as a share of the economy. The federal government has grown more than the state and local governments, and has taken on more responsibilities and functions, such as social security, health care, and national defense. The government spending has also become more diverse and complex, involving various programs, agencies, and categories.

The main factors that have contributed to the growth of government spending in the last 10 years are:

1. The COVID-19 pandemic, which triggered a massive fiscal stimulus package to support individuals, businesses, health care systems, and state and local governments.
2. The aging population, which increased the demand for social security and Medicare benefits.
3. The rising health care costs, which drove up the spending on Medicare and Medicaid.
4. The ongoing military operations and commitments around the world, which required a large defense budget.
5. The low interest rates, which reduced the cost of borrowing but also increased the debt burden.

The Size and Scope of Government Spending 10 Years After the Income Tax

According to FRASER, the federal government spent $3 billion in fiscal year 1923, which was 2.7 percent of GNP (the predecessor of GDP). The major categories of spending were War Department ($1 billion), Veterans Bureau ($0.6 billion), Interest on Public Debt ($0.4 billion), Navy Department ($0.3 billion), and Post Office Department ($0.2 billion). The federal government also collected $4 billion in revenue, mainly from income taxes ($1 billion), customs duties ($0.7 billion), internal revenue taxes ($0.6 billion), estate taxes ($0.5 billion), and miscellaneous receipts ($1 billion). The difference between spending and revenue resulted in a surplus of $1 billion, which reduced the gross public debt to $22 billion (19 percent of GNP).

According to USgovernmentspending.com, state and local governments spent $8 billion in fiscal year 1923, which was 7 percent of GNP. The major categories of spending were Education ($2 billion), Transportation ($1 billion), Protection ($0.5 billion), General Government ($0.5 billion), Other Spending ($2 billion), Pensions ($0 billion), Health Care ($0 billion), Defense ($0 billion), Welfare ($0 billion), and Interest ($0 billion). State and local governments also collected $8 billion in revenue, mainly from property taxes ($4 billion), sales taxes ($1 billion), intergovernmental transfers ($1 billion), individual income taxes ($1 billion), and other sources ($1 billion). The difference between spending and revenue resulted in a balanced budget.

The total government spending (federal, state, and local) in fiscal year 1923 was $11 billion, which was 9.7 percent of GNP. The total government revenue was $12 billion, which was 10.6 percent of GNP. The total government surplus was $1 billion, which was 0.9 percent of GNP.

These numbers show that the government spending in the United States was much smaller and simpler 100 years ago than it is today, both in absolute terms and as a share of the economy. The federal government had a limited role and scope, mainly focused on war-related spending, veterans benefits, interest payments, and postal services. The state and local governments had a larger role and scope, mainly focused on education, transportation, protection, and general government. The government spending was also more balanced and sustainable, resulting in surpluses and debt reduction. The main factors that influenced the size and scope of government spending 10 years after the income tax are: 1. The World War I, which increased the federal spending on defense and veterans benefits, as well as the federal revenue from income taxes and other sources. 2. The Progressive Era, which introduced social reforms and regulations at the federal and state levels, such as antitrust laws, labor laws, consumer protection laws, environmental laws, and women's suffrage. 3. The Roaring Twenties, which boosted the economic growth and prosperity of the country, as well as the demand for public goods and services at the state and local levels. 4. The Federal Reserve System, which was established in 1913 to provide a stable monetary system and to regulate the banking system.

Conclusion

In conclusion, we can see that the government spending in the United States has changed dramatically over time, both in terms of size, scope, and composition. The government spending has increased significantly over the last 10 years, mainly due to the COVID-19 pandemic, the aging population, the rising health care costs, ongoing military operations, and low interest rates. The effects of government spending on the economy and society are mixed and debated, with both positive and negative consequences.

The government should prioritize fiscal responsibility and ensure that spending is sustainable to avoid burdening future generations with excessive debt.

Overall, government spending plays a crucial role in shaping the economy, society, and politics of the country. It reflects the priorities, values, and goals of the government and the people. Understanding the patterns and implications of government spending is essential for informed discussions and decision-making regarding the direction and impact of public policies.