There is no question that the federal government has aggressively inserted itself into the middle of the COVID-19 recession. In March and April alone, the announced economic support and rescue programs exceeded $5.6 trillion—26% of gross domestic product (GDP).¹ This does not include the Federal Reserve’s reinstatement of massive quantitative easing.

The chart in the document linked below tracks federal government spending as a share of GDP since the end of World War II. There are two important takeaways illustrated. First, government’s share of the economy has grown significantly over time. Second, this upward slope is driven by responses to crises, both because spending goes up and GDP falters. The result of this reaction function has been a secular increase in government as a share of the economy. It is reminiscent of the mantra offered by many politicians over the years: “You never want a serious crisis to go to waste.”²

This is the second in a multi-part series: "After COVID-19: Adapting to a changed landscape".

Part 1: An accelleration in de-globalization
Part 3: Debt and deficits

Dave Donabedian is chief investment officer of CIBC Private Wealth Management, serving in that capacity since 2009. His responsibilities include chairing the Asset Allocation Committee, as well as providing oversight of internal investment strategies and the external manager selection platform.

1 Evercore ISI, IMF, CBO as of 05.04.2020.
2 Rahm Emanuel, The Wall Street Journal, November 19, 2008; similar quote attributed to Winston Churchill.