US Local Government Spending Since 1900

Local government began the 20th century as the largest sector of government, spending 4 percent of GDP. It continued this growth in the next three decades, reaching 8 percent of GDP in 1940. World War II cut a big hole in local government budgets and local spending did not exceed 8 percent of GDP again until the 1960s. Since the 1960s local government spending has steadily increased, reaching almost 11 percent of GDP in the Great Recession before declining in the subsequent recovery to 10 percent of GDP. In the 2020s local spending decreased below 9.5 percent of GDP.

Federal, State, Local Spending in 20th Century

At the start of the 20th century, government spending was principally local government spending. Out of a total of 7 percent of GDP, a full 4 percent was spent at the local level. Federal spending spiked in World War I, but in the 1920s, local government still represented about half of all government spending. In the 1930s this changed, and federal spending surged to about half of all government spending. After the spike of World War II the federal share increased again and state government spending also began to increase as a percent of GDP, so that by the mid 2010s federal spending checked in at over 20 percent of GDP, state spending amounted to about 9 percent of GDP and local spending was declining towards 9.5 percent of GDP.

State-by-State Comparison of State and Local Spending

The bubble chart shows total state and local spending for the latest year reported for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. The chart shows that the overwhelming number of states show a correlation between state and local spending and GSP. Notable outliers are New York, California, Wyoming, and Alaska, on the high spending side.