Democratic leaders in the House and Senate are hoping to pass a $1 trillion bill to fund infrastructure and a $3.5 trillion bill to fund new and expanded entitlement programs. The bills would entrench a substantial increase in the size and scope of the federal government.
The chart below shows past and projected domestic program spending if the Democratic plans pass, measured as a percent of gross domestic product. Projected spending is as proposed in the Democratic budget resolution less defense and interest outlays.
Domestic program spending almost tripled from 5 percent to 14 percent of GDP from the mid‐1950s to the mid‐1970s under Presidents Eisenhower, Kennedy, Johnson, and Nixon. Spending moderated under Reagan and Clinton, with the latter ending his tenure with four balanced budgets and spending at 12.8 percent of GDP.
Then both parties moved left on spending, with low-interest rates encouraging a free-lunch mindset and rising deficits. Spending rose after 9/11 under Bush, spiked during the Great Recession under Obama, and spiked again during the pandemic under Trump. Usually, after crises subside, spending declines but to a higher plateau than previously. Under the Democratic budget resolution, spending would settle in at a much higher level than under Trump.
If the Democratic bills are passed, domestic program spending would average 18.6 percent of GDP through this decade, which would be 43 percent higher than the average under Clinton and more than double the average in the 1960s.
Much of the growth in federal spending since the 1950s has been in activities better handled by the states or private sector. The federal government is inherently inefficient at running domestic programs, and federal intervention tends to kill diversity and democracy in state and local governance.
Supporters of new federal spending ignore the simple realities of federalism. Senator Rob Portman said, “Upgrading infrastructure is especially important for Ohio,” so then why doesn’t the Ohio legislature fund it? Senator Chuck Schumer said that spending on Albany’s airport will be a “major boon for the regional economy,” so then why doesn’t Albany’s government fund it?
Senator Bernie Sanders said that it is a “disgrace” that we don’t have a mandatory paid leave program, but Vermont and other states can enact such programs anytime their own residents want. As it turns out, Vermont’s highly popular governor Phil Scott has rejected the Sanders approach of mandatory paid leave.
Advocates who think that government should spend more on highways, airports, or paid leave should convince their own states to do it. The federal government is an overgrown, wasteful, and incompetent institution, and its spending activities are already too numerous for Congress to properly oversee.
Historical data is from CBO and OMB. The Democratic budget resolution is here.
Chris Edwards is the director of tax policy studies at Cato and editor of DownsizingGovernment.org. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.