Bigger Government = More Prosperous Country?

The Harvard economist Greg Mankiw reprints a chart, from his economics textbook, that shows how much bigger the U.S. government became as a result of the Great Depression and the Second World War. In the early nineteen-thirties, federal government revenue was less than five per cent of U.S. G.D.P. By the mid nineteen-forties, it was nearly twenty per cent of G.D.P., and has essentially stayed between fifteen and twenty per cent ever since. Mankiw’s point is that while the Great Depression and the Second World War were short-term crises, the increase in government spending (which was a response to those crises) was permanent.