BPEA | 1971 No. 3

Built-In Flexibility of Federal Expenditures

Nancy H. Teeters
Nancy H. Teeters The Brookings Institution

1971, No. 3

THE PAST DECADE HAS WITNESSED a fairly rapid growth in federal expenditures,
in both absolute and relative terms. Numerous new programs
have been introduced and existing programs expanded. As can be seen in
Table 1, federal expenditures have risen from less than 18 percent of
potential gross national product (GNP) in 1961, to about 20 percent in
1970 and are scheduled to rise even further in 1972. They have outpaced
total federal revenues, which as a percent of potential GNP also rose between
1961 and 1970, but will decline somewhat when the tax legislation of
1969 and 1971 becomes fully effective. The shift in the percentages reflects
the disappearance of the large full employment surplus that prevailed in the
early 1960s and the prospective emergence of a full employment deficit.