US Welfare Spending Since 1965

Welfare spending, particularly on Medicaid, has surged since the War on Poverty of the 1960s.

Welfare was already nearly 2 percent of GDP when Medicaid, a federal and state program to deliver health care to the poor, was created as part of the War on Poverty in 1965. But while spending on Medicaid rose modestly, from 0.12 percent of GDP in 1965 to 0.5 percent of GDP by 1975, Other Welfare increased rapidly, with peaks of 2.8 percent GDP in recessionary 1971, 4.4 percent GDP in the wake of the 1974-75 recession, and 4.0 percent GDP in the 1980-82 recession.

After the 1980s recession Other Welfare declined, with a minor upward blip for the 1990-91 recession declining to 2.2 percent GDP in 2000. But Medicaid spending surged, from 0.7 percent GDP in 1988, blowing past 1 percent GDP in 1991 to peak at 1.76 percent GDP in 1995.

Other Welfare surged to 2.8 percent GDP in 2003 due to recession and then slipped back to 2.34 percent GDP in 2006. But the Great Recession caused a huge increase in Other Welfare, peaking at 4.5 percent GDP in 2010 before declining to an estimated 2.3 percent GDP in 2017.

In the COVID crisis of 2020, Other Welfare bumped up to 5.75 percent of GDP. In 2024 Other Welfare was 1.7 percent of GDP.

Medicaid began a consistent year-on-year expansion starting in 2000, hitting 2 percent GDP in 2002, 2.5 percent GDP in 2009, and reaching 3 percent GDP in 2015. In 2024 Medicaid spending was 2.9 percent of GDP.