Fiscal Policy and Business Cycles

THE major developments which peculiarly characterize the economic life of the twentieth century, particularly after 1914, are to a large extent merely continuations of trends which were already present in the nineteenth century and which differentiate the industrial-capitalist era from the old regime. But the differential rate of change in the various areas of economic life is itself sufficient to yield us a new kind of world qualitatively different from that of the last century. And, in this respect, the rapidly growing role of government throughout the Western world above all challenges attention.

The growing activities of government could not fail to result in a great increase in governmental expenditures. And the changing character of expenditures is equally significant. In this connection some illuminating contrasts are evident between the prewar decade, the decade of the twenties, and the decade of the thirties.

In the United States there are three levels of government: federal, state, and local. The changing fiscal importance of each of these levels of government, as indicated in the size of expenditures, is stated in the table on page 119.

From this table it is evident that some significant changes have occurred. In 1929 state expenditures had increased relatively more than federal or local, compared with 1913. In 1937increases of federal and state expenditures over 1913 were not significantly different. but both had far outstripped

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