By the end of the twentieth century, the federal government was an active participant in the American economy on several different key levels. The government regulates many industries with regard to safety, wages and even where the industries can operate (such as oil drilling rights), and offers protection to other industries through international trade practices. The federal government is responsible for approximately two-thirds of all government revenues and expenditures, and total government revenues and expenditures (including state and local government) amounts to approximately one-third of the nation's gross domestic product (Sylla, R., Wallis, J. J., & Legler, 1995).
During the nineteenth century, most government spending took place at the state and local levels, and the federal government only began participating in the economy in a significant way toward the end of the nineteenth century. Infrastructure projects, such as the interstate highway system, were taken on by either private companies (such as the railroads, with federal assistance), or by state and local governments. In addition, there was far less federal regulation of the banking system or the fledgling securities markets, which again, were largely state and local concerns (Sylla, Wallis & Legler, 1995).
As transportation and communications brought the nation together in the twentieth century, the federal government has assumed a significant role in the nation's economy to the point where it is now both a major participant as well as a guiding influence.
Sylla, R., Wallis, J. J., & Legler, J. B. (1995, Spring). Historical economics. NBER Reporter, pp. 14-16.
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