The debate about how countries should address their fiscal imbalances is likely to occupy
policymakers and the public for years to come. Unfortunately, much of this debate will assume that
countries should resist expenditure cuts because existing spending is essential for a productive economy.
In fact, large chunks of current expenditure are counterproductive and fail to accomplish
reasonable policy goals. Determining the ideal level of government expenditure is difficult, but just a few
decades ago the U.S. was a productive economy with far lower expenditure. In the 1960s, for example,
federal government expenditure was below 20 percent of GDP, and state and local expenditure was below
12 percent; this contrasts with roughly 25 percent and 15 percent now. The discussion here suggests
returning expenditure to at least its pre-1970 level.