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The phrase “big government” is bandied about by people along the political spectrum. But how “big” is government, and in comparison to what and when? One useful benchmark that may be used is around a hundred years ago, not much more than three generations of Americans ago, and when the size of government was much more in line with its original prescribed responsibilities under the Constitution.
In 1902, for example, government spending at all levels (local, state, and federal) represented 7.5 percent of Gross Domestic Product (GDP). Out of that amount 66 percent occurred at the local and state levels. Local government spent 55 percent, state government spent 11 percent, and the federal government spent the remaining 34 percent.
In 2007, all levels of government spending combined absorbed over 35.2 percent of GDP; the federal government spent 47 percent of that combined amount, with 29 percent at the local level, and 24 percent at the state level of government. In 1900 welfare-state spending by the federal government was virtually nonexistent. In 2007, over 63 percent of federal spending was on welfare and income-redistributive activities.
In 1902 all levels of government took in taxes equivalent to about 6.5 percent of GDP, with more than 60 percent of those taxes collected by state and local governments. Until 1913 there was no federal income tax. Forty-five percent of federal tax revenues came from customs duties, 35 percent from alcohol excise taxes, 11 percent from a tobacco excise tax, one percent from gift and estate taxes, and eight percent from other revenue sources. In 2007 all levels of government took in taxes equivalent to about 30.4 percent of GDP. In contrast to 1902, over 45 percent of the federal government’s revenue came from personal income taxes, 34 percent from social insurance taxes, 14 percent from corporate income taxes (up from 11 percent a decade ago), three percent from excise taxes of various sorts, three percent from customs duties an other taxes, and one percent from gift and estate taxes.
 In 1900 federal public debt equaled seven percent of GDP, while by the end of the century that debt burden had increased to 66.5 percent of GDP. One hundred years ago, only about four percent of the total American labor force was directly employed by the various levels of government. Today, over 15 percent of all those employed directly work for government. Not only have all levels of government dramatically grown over the last one hundred years or so – now taking over 35 percent of GDP in comparison to that 7.5 percent in 1902 – but the Federal government has grown in size and significance in comparison to state and local governments in terms of both taxing and spending. 
In addition, at the beginning of the 20th century, the Federal government obtained practically all its tax revenues from “indirect" sources in the form of customs duties, excise taxes, and land sales. Today, that burden falls far more “directly” on each and everyone of us in the form of personal and corporate income taxes. The question each of us has to ask ourselves is how much “bigger” can we afford for government to get? And perhaps, instead, a reduction in the size and significance of government might be healthy for the country in the long run.
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