The Growth of American Government

THE GROWTH OF AMERICAN GOVERNMENT: A MORPHOLOGY OF THE WELFARE STATE, by Roger A. Freeman, Stanford: Hoover Institution Press, 1975, 228 pp., $8.95/$5.95.

It would be a shame to discourage the public and the press when they have finally recognized the trend of modern government: increasing taxes, expenditures, bureaucracy, prices, and arbitrary authority. Whether we applaud or abhor the trend, each of us must admit that the scope of government's control of our major—and increasingly, minor—personal decisions has grown considerably within our own memories.

Now comes Roger A. Freeman of the Hoover Institution to place the discussion into perspective by offering quantitative information and pointed interpretation. Freeman's book traces the growth of the public sector from the turn of the century to the early 1970's, with particular emphasis on the past 20 years. His conclusion:

Between 1952 and 1972—contrary to what is widely believed—governmental costs climbed only moderately faster than the Gross National Product (GNP), that is 296 versus 234 percent. But this seeming slowdown and apparent stability hide two sharply conflicting trends: a cut to less than half of the share allotted to national security and a more than doubling in the slice given over to domestic programs.

Freeman's data indicate that most of the growth in government's share of GNP occurred during the 1932-52 period; the relative growth since 1952 is accounted for by state and local governments.

His interpretations are backed up with 26 tables of data. For example, from 1952 to 1972, total government expenditures as a percentage of GNP rose from 29.6 to 36.1 percent—an annual compounded rate of one percent per year over the period. Expenditures on domestic services rose at an annual rate of 3.8 percent, and its share of GNP rose from 12.2 percent in 1952 to 25.7 percent in 1972. At the same time, the share of national defense and international relations fell from 14.3 to 7.1 percent over the period. Other categories of government expenditure, such as interest on the general debt and veterans benefits, have remained a constant fraction of GNP.

Freeman has done an impressive job in finding, coordinating, and collating in an intelligible fashion data from a wide variety of sources, not all of which are consistent, let alone complete. His interpretation of the data covers topics such as government productivity, pay, pensions, and unionization. He also discusses major components of the American tax system and the government budget. And, there is a chapter devoted to Freeman's views of our future prospects.

Freeman's comments are vigorous, pithy, and provocative; and they suggest a host of research topics. Much of the discussion of these topics is too brief and speculative. Consequently, some of Freeman's conclusions (whether one shares them or not) may be challenged as prior theory rather than empirical result. When discussing the rapid rise and fall of PPSB (Planning-Programming-Budgeting System), Freeman concludes:

Thus, liberals soon became disillusioned and concluded that rhetoric and appeals to compassion and envy were still more effective tools to accomplish their aims than such cumbersome and insipid analyses.

On the subject of government aid to education:

There is now ample experience to show that differences in pupils' traits cannot be offset by any amount of money. It is the children more than the schools that determine the educational outcome.…The program's protagonists and supporters were unwilling to accept the fact that there is a law of diminishing returns in social programs and that increased input does not yield a greater output from a certain point on—a point that was reached in most American public schools long ago.

The quantitative evidence in Freeman's tables, valuable as it is, must be assessed within the appropriate analytical framework. Has government activity been growing less rapidly than the gestalt of our contemporary experience would suggest? Freeman's data suggest so if one looks at the ratio of government expenditure to GNP. But these data measure only those resources that flow through the government's official budgets. Hence, all manner of regulatory and police-power activities governing the use of private resources appear in the private sector accounts as if they were voluntary, as opposed to coerced, activities! For example, the costs of the resources used to produce and install mandatory safety devices on automobiles are classified as private rather than as government expenditure. Similarly, the activities of EPA and OSHA are buried in Freeman's tables as private rather than government expenditure.

Freeman is probably correct when he concludes that government expenditures on domestic social problems cannot continue to grow at the rate of the past 20 years. But given that the government has increasingly circumvented the budget process via its regulatory activities, financial "shares" are less relevant. The power and authority of government extends far beyond its 36.1 percent share of 1972 GNP. Government's share of GNP may be a good index of movement toward socialism; it is a flawed measure of the trend toward fascism.

M. Bruce Johnson, who has held teaching positions in economics at the University of Washington and the University of California, is currently a member of the academic staff at the University of Miami School of Law, Law and Economics Center.