Government's share of the economy grows

Dec. 11, 2008 at 1:45 PM
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WASHINGTON, Dec. 11 (UPI) -- The U.S. government's share of the country's economy could rise to the highest level since 1944, spending projections show.

With government spending accelerating with financial bailout funds and a possible economic stimulus package on the way, government's share of the economy is projected to exceed 25 percent of the nation's $14.4 trillion economy in 2009, USA Today reported Thursday.

The previous record in the post-World War II era was 23.5 percent, set in 1983. In 1943 and 1944, government spending hit 44 percent of the total economy.

An increase in government's share of the economy could mean spending cuts or increased taxes are likely, the newspaper said.

It could also slow the economy, an economic analyst said.

"Excess government spending has been shown to reduce economic growth," Brian Riedl of the Heritage Foundation said. "The more money spent by politicians in government, the less spending is available for the private sector, which is the sector that usually creates more productivity."

The rise in government spending is "the opposite of what we're trying to do to the economy," Maya MacGuineas, president of the Committee for a Responsible Federal Budget told the newspaper.

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