Economy in Government [UPDATED]

November 9, 2010 at 12:43 pm (By Randy)

Thought now was an appropriate time to pass along this clip of Calvin Coolidge, said to be the first ever film & sound recording of a sitting President. [Yes, I know, Coolidge is standing while speaking ;-)] Coolidge talks about the cost of government in 1924. Total expenditures of all governments within the United States were $7.5 billion, of which the federal government share was $700 million $2.9 billion or less than 10% 39%.

Obviously, times have changed. According to Wikipedia, as of 2006, total spending by all governments within the United States was $4.704 trillion dollars, about half of which was spent by the federal government.

According to the website Measuring Worth, in 2006, the relative worth of $700,000,000 $2.9 billion from 1924 is:

$34,200,000,000.00 using the Consumer Price Index
$28,500,000,000.00 using the GDP deflator
$77,900,000,000.00 using the value of consumer bundle
$113,000,000,000.00 using the unskilled wage
$139,000,000,000.00 using the Production Worker Compensation
$171,000,000,000.00 using the nominal GDP per capita
$447,000,000,000.00 using the relative share of GDP
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5 Comments

  1. Maxwell James said,

    Interesting post. I’m most struck by the ratio of state to federal spending. Of course, that could be considered something of a blip itself, sandwiched as it was during the bubble between WWI and the Depression.

  2. Randy said,

    Maxwell, all in all, it was probably pretty close to the norm when the nation was not at war. FWIW, the federal income tax was still relatively new then and quite low (something like 2%?). Prior to that, the income sources of the federal government were extremely limited. At that time, the United States was rapidly disarming, so the defense budget probably was pretty small, but likely a much greater percentage of the federal budget than it is now. It wasn’t until over decade later that a series of Supreme Court decisions allowed lawmakers to begin nationalizing what were up-to-then viewed as state and regional problems and responsibilities. Congress was not in perpetual session as it seems to be now. Most of the executive branch, including the President, were somewhere cooler for the entire summer. I imagine that real day-to-day political power was still largely diffused among the then-48 state capitols.

  3. Randy said,

    Maxwell: Ran across some census bureau data that draws a different picture of 1924: says federal outlays were $2.9 billion. The surplus was another $963 million.

  4. Maxwell James said,

    Thanks for the perspective, and the update.

  5. Randy said,

    [UPDATE:] I corrected the numbers to reflect those recorded by the U.S. Census Bureau. A glitch in the sound at the precise moment that Coolidge mentions the size of the federal government’s share of expenses caused me to report an inaccurate amount. In fact, as he was speaking at some unknown time in 1924, Coolidge was probably using figures from 1923. The federal government had a surplus of $713 million in ’23 and $963 million in 1924.

    Total executive branch civilian employment in 1924 was 532,000, of which 86,000 (16%) were employed by the War and Navy Departments. In 2002 (the most recent year available from the census bureau), total executive branch employment stood at 1,818,000, of which 645,000 (35%) were employed by the Defense Department. With that in mind, I think I was wrong about defense being a bigger percentage of the federal budget in 1924 than it is today.

    Another interesting bit of information: according to the census bureau, personal and corporate taxes made up only 14% and 12.3% of federal revenue in 1934, the earliest year for which records are available. In 2003, personal income taxes and social security taxes made up 85% of federal government receipts, while corporate taxes added up to 8%.

    FWIW: There just over 114,000,000 people in the United States in 1924.

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