How the Federal Government Has Grown

The Hoover Commissions of 1947 and 1953 recommended reorganizations, and in 1981 President Reagan declared that government is not the solution but the problem, cutting regulations and some domestic programs while increasing defense spending. The 1990s brought deficit deals, welfare reform, and the reinventing government initiative, which cut the federal workforce. In 2025 the administration launched a government efficiency effort, dismantled several agencies, cut the civilian workforce by about 10 percent, and pursued deregulation, while spending on entitlements, defense, and interest continued to grow.

The Interstate Commerce Commission in 1887 began federal regulation of industry, and the Progressive Era added food and drug laws, the Federal Reserve, the Federal Trade Commission, and the 16th Amendment's income tax. The New Deal of the 1930s created Social Security, banking and securities regulation, labor law, and public works agencies. World War II drove federal spending to more than 40 percent of the economy and federal civilian employment to more than 3 million, and withholding of income taxes from paychecks became permanent.

Supporters of a larger federal role say national problems such as economic crises, pandemics, retirement security, civil rights, and pollution require national solutions and that government growth reflects public demand. Supporters of limited government argue that federal expansion crowds out private initiative and state experimentation, creates unsustainable debt, concentrates power in unaccountable agencies, and strays from the enumerated powers of the Constitution. Most Americans tell pollsters they want smaller government in general but oppose cuts to specific large programs.

The 1960s and 1970s added Medicare and Medicaid, federal aid to education, the War on Poverty, the Environmental Protection Agency, workplace safety and consumer regulation, and new departments for housing, transportation, energy, and education. Entitlement spending grew from about a quarter of the budget in the 1960s to more than half today. After 9/11 Congress created the Homeland Security Department, and the 2008 financial crisis and the pandemic brought trillions in emergency spending.

In 1789 Congress created the Departments of State, Treasury, and War and the office of Attorney General, and the Post Office soon became the largest federal employer. For most of the nineteenth century the federal government delivered mail, collected tariffs, ran the military, and managed public lands, and federal spending was a few percent of the economy. The Civil War brought the first income tax, a national currency, and huge armies, though much of the wartime government was dismantled afterward.

Federal spending is now roughly 23 percent of gross domestic product, compared with about 3 percent in 1929. Yet the civilian workforce has stayed between about 2 million and 2.4 million since the 1960s, so the share of Americans working for the federal government has fallen. Growth has come through payments to individuals, grants to states, and contracts with private companies and nonprofits. The Code of Federal Regulations has grown to more than 180,000 pages, and the number of agencies depends on how they are counted, with estimates ranging from about 250 to more than 400.