Spending Steadily Increasing

Government spending in the United States has steadily increased from $3 trillion in the 2000 to over $10 trillion in the COVID crisis. As a percent of GDP hovers around 35 percent GDP except during crises.

Government spending first reached $3 trillion in the 2000, but then with the dot-com crash and the response to 9/11 reached $4 trillion in 2004 and $5 trillion in 2008. Then came the Crash of 2008 and government spending exploded to $6 trillion in 2010. After a few years of modest growth in nominal dollars, spending exploded to nearly $10 trillion in 2020 in response to the COVID crisis.

Viewed as a percent of Gross Domestic Product (GDP) government spending in recent years has remained stable except during crises. In the 2000s spending sat at about 34 percent GDP, and in the 2010s at 35 percent GDP. But in the Great Recession spending reached 41 percent GDP to bail out the banks and provide "stimulus." and in the COVID crisis spending exceeded 46 percent GDP to bail out corporations and small businesses and provide unemployment checks to workers.

Recent Spending by Government Level

Spending at all levels has been steady in recent years. But federal spending increases during crises.

In the 2000s federal spending was pretty steady at 17-18 percent of GDP. State spending was a little over 8 percent GDP and local spending was about 10 percent of GDP.

During the Great Recession federal spending increased to 24.3 percent in 2009, state spending increased to 9.3 percent GDP, and local spending increased to 11.4 percent GDP.

Chart Key:
- Local direct spending
- State direct spending
- Federal direct spending
- Transfer to state and local

In the 2010s federal spending was steady at about 20 percent GDP. State spending was steady at about 9 percent GDP and local spending was around 9.5 percent GDP.

In the COVID crisis of 2020 federal spending ballooned to 31 percent GDP, state spending is estimated at 9.4 percent GDP and local spending is estimated at 9.7 percent GDP

Recent Defense Spending

Defense spending increased in the 2000s, and declined in the 2010s.

Defense spending stood at 3.45 percent of GDP in 2001. The terrorist attack of 9/11 changed that, and defense spending began a steady increase, reaching almost 5 percent of GDP in 2008 with the “surge” in Iraq and 5.7 percent in 2011 with the stepped up effort in Afghanistan. Defense spending declined to 4.24 percent of GDP in 2017 but increased to 4.8 percent GDP by 2020.

Pensions and Health Care Spending

Pensions and health care spending have increased steadily in recent years.

In 2000 government pensions, primarily Social Security, cost about 5.43 percent of GDP. Government health care, primarily Medicare and Medicaid, cost 5 percent of GDP. Since then, pension expenditure has increased, by 2011, to 6.5 percent. But health care expenditure has increased more than 50% as a percent of GDP to 7.6 percent of GDP in 2011. In the 2010s pension spending has leveled off at about 7 percent GDP but health care has continued to increase, with a pulse to 9.5 percent GDP in the COVID crisis of 2000.

Health care is primarily a federal and state concern. In 2000 the federal government was spending 3.6 percent directly on health care and sending 1.7 percent of GDP to the states. State health care spending had doubled to 2.3 percent of GDP. Local health care spending had increased to 0.7 percent of GDP.

By 2010 health care had jumped again. Federal health care spending had increased to 5.5 percent of GDP, with an additional 2.1 percent sent to the states. States were spending 2.9 percent of GDP on health care and local governments 0.9 percent of GDP.

In the 2010s health care spending has continued to increase as a percent of GDP. Federal health care spending peaked at 7.3 percent of GDP in 2020, with state health care spending at estimated at 3.8 percent GDP and local health care spending estimated at 0.9 percent GDP.

Education Spending

Chart Key:
- Local direct spending
- State direct spending
- Federal direct spending
- Transfer to state and local

Education spending occurs primarily at the local level in the United States. In 2000 local governments were spending 3.8 percent of GDP on education, and states were spending 1.3 percent of GDP. The federal government was transferring 0.5 percent of GDP for states and local governments to spend, and directly spending 0.6 percent of GDP on education.

Ten years later, in 2010, local governments were spending 4.1 percent of GDP on education, and states were spending 1.7 percent of GDP. The federal government was transferring 0.6 percent of GDP for states and local governments to spend, and directly spending 0.9 percent of GDP on education.

In the 2010s education spending has declined as a percent of GDP. At the end of the decade federal education spending was down to 0.7 percent GDP, state spending was down to 1.5 percent GDP and local education spending was down to 3.5 percent GDP. But in the COVID crisis of 2020 federal spending hit 1.2 percent GDP, state spending is estimated at 1.6 percent GDP and local spending is estimated at 3.7 percent GDP.

Welfare Spending

Welfare spending (other than Medicaid) in the United States tracks with the business cycle. In the aftermath of the tech crash in the early 2000s, welfare spending increased, reaching over 3.1 percent of GDP by 2003, and then declined back down to 2.5 percent of GDP by 2007. In the Great Recession of 2007-09 welfare spending exploded, reaching 4.7 percent of GDP in 2010. Welfare spending is declining sharply in the recovery from the Great Recession, down to 2.5 percent GDP in 2015.

In the COVID crisis of 2020 welfare spending exploded to 5.7 percent GDP in 2020 and is expected to hit 8.2 percent GDP in 2021.