FSO Editorials

The Federal Government Spending Report Update 2007

by Michael W. Hodges, Author. Grandfather Economic Report. October 9, 2007

(The Grandfather Economic Report is a series of reports examining economic conditions facing families and youth, compared to prior generations. This is the summary page of the chapter on Federal Government Spending. State & Local Government Spending is covered in a separate chapter)

FY 2006 Federal Govt. Spending of $2.8 Trillion Consumed 26% of the Economy, or $9,223 per man, woman and child,or 36% of the economy counting regulatory compliance
The Social Spending portion consumed 56% of total spending, and has increased 14 Times Faster Than The Economy and - individual incomes pay 82% of all federal revenue compared to a 51% share in 1950

federal ratios-1929 vs Current Here are a few sample color graphics from the Full Federal Government Spending Report

Today's economy is 8 TIMES more federal government spending dependent, compared to prior generations.

The left chart shows total federal spending as a share of the economy - growing from 3% of the economic pie prior to the New Deal, to 26% of today's economy.

Had total federal spending been reduced following World War II, equivalent to reductions of the defense spending ratio, the current federal spending ratio would be about 13% of the economy - - instead of today's 26% ratio - - resulting in 50% less spending and taxes.

Political leaders chose, instead, to eat up all defense reductions PLUS much more via massive social spending - - much financed by debt.

Who was it that said we are a nation of small government with a predominant free-private sector? Well, we used to be - - but, no longer. Does this impact the future economics and freedom of our younger generation. You bet.

Summarizing: The federal share of the economic pie increased 800%. federal component trends


Question: What has caused the explosive growth of federal spending faster than the economy?

Answer: look for the line in this chart that has risen the most over that period.

The BIG CULPRIT (rising red line) is SOCIAL SPENDING, which grew 14 times faster than the economy - - to a new high - - more than eating up the long-term decline of defense spending ratios shown by the black line in the chart. The full report (link below) shows once the social spending ratio rose above 5% of national income in the late 1960s, citizen trust in government plummeted to half prior levels - - and inflation-adjusted median family incomes stagnated for all families and fell for single wage-earner families. Note social spending (red line) stopped rising in the early 1980s as if it hit a brick wall, and then fell - - and other data show trust in government surged, only to fall back later as social spending ratios again climbed. This is a powerful finding that deserves more attention. (the full report contains a link to a special report and chart on citizen trust polling data).

This trend (red line) is unique in U.S. history.

National security was the prime reason our founding forefathers formed a federal government. The declining black trend line is defense spending, which in 2001 had dropped to 3.7% of the economy's national income, below where it started - following a 5-decade downward slope. The black defense line for 2003-06 increased to 4.9% of national income as shown in the graphic. This multi-decade declining defense ratio camouflaged a new direction for government - - surging social programs and spending.

This trend calls into question our nation's focus and readiness to detect and deter major national security challenges - - compared to the priority focus outlined by our nation's founding fathers.


Following is a pie chart showing the major spending components of a Federal Budget - and its huge red cloud.

Federal Budget Pie - where it goes The Government Spending Report and the Government Growth Report show the federal government increased its spending at a rate much faster than growth of the economy (nearly twice as fast) since the end of World War II). Where does the spending go?

Last fiscal year the federal government spent $2.8 Trillion - - or about $9,223 for each man, woman and child in America, up 6% over the prior year.

The left chart displays this $2.5 Trillion as a pie, with each major spending component shown as a percent of the total.

The BIGGIE is that HUGE RED CLOUD in the chart called SOCIAL PROGRAM Spending, which consumes 56% of the budget. (To place this in perspective, in 1948 social spending was but 10% of the federal budget - - prior to the New Deal it was near zero).

This graphic is reviewed in more detail in the full Federal Spending Report - - next link.

Suggest you read the full Federal Government Spending Report with easy to understand eye-opening pictures

© 2007 Michael W. Hodges

Web note: The above editorial is a recent summary of an updated chapter from Michael Hodges series, Grandfather Economic Report. Read the full article: Federal Government Spending Report on G.E.R. State & Local Government Spending is covered in a separate chapter. The Grandfather Economic Report is a series of reports examining economic conditions facing families and youth, compared to prior generations.

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Michael W. Hodges | Grandfather Economic Report | Email

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