How Government Spending Skyrocketed

Our analysis shows where spending has soared over the last four decades—and not just on healthcare.

By SHARE

Everybody's a budget-cutter these days, with competing plans in Washington for how to slash government spending and some websites even giving you the chance to balance the budget yourself, with nothing more than a few mouse clicks and a bit of resolve.

[See how to survive tax hikes and spending cuts.]

Hack away. But it might first be worth considering how government spending ballooned in the first place—and how that reflects the changing role of our government, along with what we expect from it.

The federal government spent about $196 billion in 1970, which was 19 percent of GDP. This year, it will spend about $3.8 trillion, or 25 percent of GDP. Government spending has increased by 1,860 percent in 41 years. Inflation over that time has been a mere 462 percent or so. So Washington's spending has gone up about four times as much as overall inflation.

Most people aware of the government's rush toward insolvency know that soaring healthcare costs are the biggest budget-buster. But spending has gone up on lots of other things too, and deconstructing those changes reveals how American society itself has changed. To analyze the different ways the government spends money today, I downloaded Table 3.2 from the Office of Management and Budget—"Outlays by Function and Subfunction: 1962-2015"—then computed the differences between 1970 and today. Here's a breakdown of major categories of federal spending, with changes over time:

                                     Spending increase since 1970    Percent of federal spending

                                                                                      1970         2011

Medicare                                     7,905%                            3.2%         13.0%

Health                                         6,683                              3.0            10.5

Justice                                        5,873                              0.5            1.5

Food stamps/income security          3,701                              8.0            15.5

Energy                                        2,394                              0.5             0.6

Social Security                             2,332                              15.5           19.2

Total government spending          1,860                    

Interest on the national debt          1,643                               7.3            6.5

Transportation                             1,387                               3.6            2.7

Education                                   1,364                               4.4            3.3

Veterans benefits                         1,337                               4.4            3.2

Natural resources/environment        1,288                               1.6            1.1

Community development                1,237                               1.2            0.8

International affairs                      1,152                               2.2            1.4

Running the government                1,093                               1.2            0.7

Commerce and housing                    948                               1.1            0.6

National defense                             818                              41.8          19.6

Science, space, technology              599                               2.3           0.8

Agriculture                                     395                               2.6           0.7

(Note: Percentages add to more than 100 because some government revenue is counted as "negative" spending. Only in Washington.)

Spending swings on some smaller categories have been even more dramatic. Federal spending on housing aid, food stamps, prisons, and disaster assistance have all risen by more than 5,800 percent since 1970—more than three times the overall rate of federal spending, and at least 13 times the rate of inflation. Spending on farm subsidies, social services, foreign aid, and veterans' benefits, by contrast, takes up a much smaller portion of the budget than it used to. The evolution of the government's mission doesn't seem to reflect any particular ideological trend: Some liberal priorities, like aid to the poor, have gotten proportionately more funding over time, while others, like air and water protection, have gotten less. The same goes for conservative priorities like prisons (more) and defense (less).

[See more things we might have to give up.]

What's clear, however, is that the government spends way more money than it used to taking care of American citizens directly, through Medicare and other healthcare programs, Social Security, food stamps, jobless aid, and housing assistance. Core functions of government, meanwhile—things like mustering the nation's defense, building infrastructure, doing basic scientific research, and encouraging education—command a much lower portion of overall spending these days.

Some conservatives decry this drift as the rise of the "nanny state," but most Americans don't care: The core conundrum of budget-cutting is that the programs that cost the most are also the most popular, and therefore extremely tough to cut—or even mention. The government spends more on people because they want it to. We've grown accustomed to a rich government, and when it runs a little short, well, we expect it to borrow so it can keep spending on us.

[See 3 ways to spot small-government phonies.]

With huge annual deficits and a national debt of $14 trillion, it can't continue, of course. But the things that are easy to cut have already been getting a smaller share of the pie. So the real question is whether we're ready to pay more—through tax hikes—to keep the government we've got. Or find somebody else to take care of us.

Twitter: @rickjnewman