Big Government and Lower Economic Growth: An American History

Between 1800 and 1916, total government expenditures in the United States generally ranged between 2% and 3% of GDP.  There were higher peaks for the War of 1812 (5.1%) and the Civil War (13.8%), but in both cases pre-war government spending levels were re-established within about a decade after the end of the conflict.  Even after WWI, the wartime peak of government spending (24.2% of GDP) declined rapidly to a slightly higher than historical spending base (3%) by the mid-1920s. And then in 1930, it began: the long, unrelenting rise in government expenditures up to the current levels of >40% of GDP.  Nearly half of the entire American economy has been effectively nationalized.  As recently as the early 1950s, government expenditures as a percentage of GDP were more than threefold lower than at present.  The effect of the Korean War is barely noticeable in this climb.  WWII saw a rapid mobilization/demobilization of...(Read Full Article)

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