NCPA - National Center for Policy Analysis

Government Gobbling Up Less U.S. Output

January 14, 2000

Several months ago, the Commerce Department put out a report showing that the nation has been a lot more productive in the past decade than had been previously thought. New categories of data were included that boosted gross domestic product figures.

When these new figures are compared to federal spending, the results show that government's share of gross domestic product (GDP) has been declining steadily since the early 1990s -- even though total spending has been rising.

  • In 1991, federal spending as a share of GDP hit 23 percent.
  • In 1999, it fell to 19.5 percent -- which was the first time since 1974 that it had fallen below 20 percent.
  • Economists suggest federal spending may fall below 19 percent of GDP this year -- the lowest level since President Lyndon Johnson launched his Great Society spending spree in 1965.
  • Yet over the past four years, the federal budget has expanded by more than $200 billion and President Clinton's last budget had more than $150 billion in new spending requests over five years.

Advocates of spending restraint remind us that federal spending was less than 5 percent of GDP at the start of the last century. Economist Stephen Moore estimates that the historical average federal share of the economy has been about 8 percent to 10 percent. So despite the encouraging figures, Moore concludes, the federal government is still about twice as big as it should be.

Source: Stephen Moore (Cato Institute), "Freedom's Assets," Washington Times, January 14, 2000.

 

Browse more articles on Tax and Spending Issues