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War: Spending spikes and new steady states

Historical data on how conflict has changed U.S. government expenditures

History books are full of wars, and economic data are even categorized by their timing before and after wars. In this post, FRED taps into the NBER Macrohistory Database to track the expenditures of the U.S. federal government from 1879 to 1947—which includes plenty of conflict.

Obviously, these expenditures have grown tremendously because the U.S. has grown tremendously since its Civil War, in both population and per capita terms. But this growth hasn’t been uniform. Indeed, the major spikes are tied to the World Wars. The U.S. began its involvement in WWI in 1917, and its expenditures shot up until they peaked in December 1918. It took until the end of 1919 to reach a new steady state, but notice that the new steady state is at a significantly higher level than before the war. This pattern happened again with WWII: The major build-up started in 1941 as the U.S. became involved, peaked in 1945, then declined to a new steady state, which again is higher than the previous one. Note that there’s a comparatively small step-up in the 1930s. That’s the New Deal associated with the Great Depression. Not a war, but still a harrowing episode.

NOTE: You probably noticed the different colors along what looks like one continuous line. That’s because the graph was built with five different series that bear the same title. The NBER Macrohistory Database compiles data from multiple sources, and they don’t always agree and there are some overlapping observations. Hence, the different series are kept separate. But if you look carefully, the numbers are pretty close.

How this graph was created: Search for federal expenditures. The set of series should be grouped together among the choices (although maybe not at the top of the list). Check each of the series, then scroll back up and click “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: M1505AUSM144NNBR, M1505BUSM144NNBR, M1505CUSM144NNBR, M1505DUSM144NNBR, M1505EUSM144NNBR

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