How Much Does the Federal Government Really Spend?

October 3, 2011

The size of government is of particular interest these days, with many Americans believing that rising government spending is crowding out the ability of individuals and businesses to control their own well-being and improve the economy.  Indeed, Gallup reported last week that, on average, Americans think the federal government wastes 50 cents of each dollar it spends.  But how much does the federal government really spend, asks Andrew G. Biggs, a resident scholar at the American Enterprise Institute.

  • On paper, the Congressional Budget Office reports that in 2010, the federal government spent $3.456 trillion, an amount that is equal to 23.8 percent of gross domestic product (GDP).
  • That's one-quarter higher than the historical norm of around 19 percent of GDP.

But direct spending isn't the only spending Washington does.

  • As Lori Montgomery reports in the Washington Post, last year the federal government spent an additional $1.08 trillion on tax expenditures, which are tax breaks that for all intents and purposes are spending.
  • That $1.08 trillion in tax expenditures is 24 percent of all federal spending, and is all off the books, allowing a much bigger government than official statistics tell -- and much bigger than people might be willing to tolerate if they knew.

Put it all together and the federal government spends an amount equal to 31.2 percent of GDP -- that is, almost one-third of everything produced in the economy.  Add regulations to the mix and the total sway of the federal government over the private sector equals roughly 39 percent of the economy, a larger portion than in prior decades, says Biggs.

Source: Andrew G. Biggs, "How Much Does the Federal Government Really Spend?" The American, September 29, 2011.

For text:

http://www.american.com/archive/2011/september/how-much-does-the-federal-government-really-spend

 

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