Regardless of Who Wins, Government Percentage of GDP Likely to Grow

by: The Prudent Investor

Presuming that all investors in the world are playing it cool until after the US presidential election, here is one area in which both candidates are as likely to fail in as their predecessors. Despite all the lip service for free markets and as little intervention as possible, the US government's share of US GDP has grown continually since 1930. 

This chart series pasted from the Grandfather Economic Report is as dramatic as the ballooning US public debt. When George W. Bush leaves office on January 20, he will have run up more debt alone than all US presidents before him combined. When he came into office, US debt stood at $5.7 trillion.

Now the debt ceiling, which gets raised by Congress as necessary, is $11 trillion. Bush spent the new debt mostly on wars and a fast growing government share in the US economy.
"Starving the government beast to death" was always a popular slogan with politicians from all camps. But reality is a stark contrast to policymakers actual behavior. As the first chart shows, only 12% of the US economy depended on the government. This left 88% of the economy to the productive private sector in the pre-1930 era.

Some 3 decades later in 1947, government's share of GDP had almost doubled to 22%. That 10 point swing was mostly attributed to government getting into the 'socialized spending business', starting with the 'New Deal'.

Another 60 years later, paradoxically in the 'capitalist' era, big government has gotten even bigger. Its share of US GDP has again almost doubled to 43%, leaving only 57% to the private sector. There was a time when big government was called by its correct name: Socialism.