We pointed out in “Election ’08: Back to the Future?” that:
A trend toward bigger government has already begun. [Figure 4] illustrates
that, in the aftermath of 9/11, federal expenditures as a percentage of GDP
have risen materially.
Figure 4. Federal Government Expenditures as a Percentage of GDP
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Source Bureau of Economic Analysis
We also noted that:
The presumptive candidates are tapping into a secular shift in opinion about
the desired level of government involvement in the economy. In recent
years, there has been a steady increase in the percentage of Americans
saying “government should do more.”
While the most recent data reveal that there is still a majority saying
“government should do more,” that percentage has declined in recent months,
although it remains above the levels of the 1990s — see Figure 5.
Figure 5. Desired Level of Government in the Economy (With Trend Lines)
Dec-1995 Dec-1997 Jan-2002 Mar-2007 Sep-2007 Jul-2008 Sep-2008 Oct-2008
Government should do more Government is doing too many things
Source: The Wall Street Journal / NBC News Poll
A trend toward bigger government has
In recent years, there has been a steady
increase in the percentage of Americans
saying “government should do more.”
One possible factor at work behind the recent drop in the percentage in favor
of “more government” might be a popular perception that the federal
government is using taxpayers' money to "bail out" highly paid Wall Street
bankers by way of the TARP. Importantly, the trend of “big government” will
continue. Indeed, The Wall Street Journal observed4 that:
The housing and financial crisis convulsing the U.S. is powering a new wave
of government regulation of business and the economy. Federal and state
governments alike are increasingly hands-on in their effort to deal with
failing businesses, plunging house prices, worthless mortgages and soaring
energy prices. The steps add up to a major challenge to the movement
toward deregulation that has defined American governance for much of the
past quarter-century since the "Reagan Revolution" of the early 1980s
In addition to the increased regulation associated with the multi-billion dollar
rescue packages for various portions of the financial sector, some other
examples of the shift away from deregulation cited by the Journal’s July article
State utility commissions are re-establishing control over power companies
that they ceded during earlier waves of deregulation…California regulators
clawed back as much control as they could of the state's electricity market
after a failed experiment in deregulation that started in 1998.
The Education Department is taking a step toward nationalizing the market
for student loans, after private lenders abandoned that business.
Drug makers are being pressed by congressional Republicans and
Democrats alike, who want stricter oversight by the Food and Drug
Administration, and new regulations that would mandate tougher safety
standards and import controls.
In the case of the food industry, the food processors and other companies —
fearing a public backlash — have been urging Washington to ratchet up its
oversight of imported foods and ingredients, reversing the industry's usual
The 2001 terror attacks led to the nationalization of airport workers and the
creation of the elephantine Homeland Security Agency, bucking decades of
privatization of government functions.
The corporate-accounting scandals early this decade, that leveled energy
trader Enron and communications giant WorldCom, led to the Sarbanes-
Oxley law in 2002, which reversed the pattern of the prior two decades of
easing regulation of U.S. companies.
Both major-party candidates are endorsing proposals to create new, Federal
Reserve-style commissions to limit greenhouse gas emissions and decide
how to spend billions of dollars on energy-efficient technology.
Then, too, Obama (like his defeated rival) has endorsed major healthcare
reforms, and a greater role for government, reflecting the fact that the number
of Americans receiving healthcare coverage through an employer continues to
decline (see Figure 6), so that the percentage without health coverage stood at
15.3% in 2007.