A progressive philosophical shift in federal spending began under President Woodrow Wilson. The First World War masked the fiscal effect of Wilson’s policies, but a clear change had occurred between pre- and post-war federal spending. Whether viewed as total spending or isolated to non-interest spending, federal spending as a percentage of the economy had notably increased. For the 10 years prior to Wilson (1902 – 1912), non-interest federal spending averaged 1.95 percent of the economy; for the 10 years after Wilson (1921 – 1931), it averaged 2.77 percent.* Yet due to the Great War’s effect on spending, it is better to study the effects of the philosophical shift with the enactment of the 1921 Budget Act, rather than with the inauguration of Wilson.
From the nation’s founding through 1920, total federal spending as a percentage of the economy (including the Civil War) averaged 2.80 percent; but since then (1921 – 2014), total federal spending has risen to an average of 17.27 percent. George Will—writing on Wilson’s underlying philosophy—succinctly contrasted Wilson with James Madison by noting, “Wilsonian government, meaning (in Wilson’s words) government with‘unstinted power,’ is hostile to Madison’s Constitution, which, Madison said, obliges government ‘to control itself.’”24
The combination of philosophical change, along with the new budget process—which gave the President a more prominent role in directing federal spending, as well as expanding “the President’s control over budgetary information by establishing the Bureau of the Budget,”25—were two of the notable forces at work as federal spending began to deviate from the historical average rate.
* From 1844 through 1976, U.S. government fiscal years ran from July through June, so the 1941 fiscal year ended nearly six months prior to the U.S. entering World War II.
24 George Will, “The Danger of a Government with Unlimited Power,” The Washington Post, June 3, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/06/02/AR2010060203278.html. 25 “Our Founding,” Congressional Budget Office, accessed July 20, 2015, http://www.cbo.gov/about/our-founding.