Gdp as a Percent of Government Spending

Luke Ubertalli

EC 137

Assignment 11

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First, we start by looking at the federal government spending as a percentage of gross domestic product.   As you can see the overall trend is flat as it sees major peaks and valleys throughout the past 65 years.  The average since 1970 was around 18% which is relatively high compared to the most previous years shown.  We can see just following the recession government spending dipped down to a low 14.3%.  Although it dropped significantly trends show it will go back to original levels.  Currently we are nearly back at 18% of total GDP and will most likely look similar to the 2000 spike of 20%.  

Although there will likely continue to be increase this should be considered normal behaviors of a growing government and country.  With an increase of tax income, we should continue to see more and more government spending on necessary programs.  Another notable characteristic is the rapid increase following WWII.  Going from 14% to over 18% in one year showed how government was making drastic changes to the allocation of government spending.  

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This graph was extremely informative and really gave me a firm grasp on where specifically government was spending this money.  First, I noted the huge expenditures in military defense.  At nearly 50% of total government spending it was obviously a serious focus for our country.  Coming out of WWII the government needed to replace supplies for war in the event of another disagreement.  As we can see following the 1960’s defense spending as a percent of GDP continued to fall most likely due to excess materials not being used for war.  

Medicare also was seen a steady positive trend throughout time.  At 0% in the 60’s its grown to nearly 16% of all government spending.  This makes sense as time and health influences has shifted the importance of keeping citizens healthy while reducing spending in other areas such as military and net interest.  

Within the other sectors we see slight growth but an overall flat trend which also makes sense as a balanced allocation of resources is ideal for growing a country while increasing standard of living.  

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Now we take a look at US federal deficit as a percent of GDP.  Although most years we ran a deficit some where actually running a surplus including a major spike from 1996-2000.  We see that just following the 2000s we began to climb back up out of the deficit but was immediately reversed when the 2008 recession increased out deficit to nearly 10%!  Now we are seeing a return to the average of about 3% deficit.  

We can see that during unsure economic times such as the recession or the 2000 bubble, the deficit is significantly affected.  However, debt is increasing each year and will likely increased by about 1 trillion which is about 250 billion more than the official “deficit”