As the nation grapples with an increasing national debt in a world where rapid economic growth is no longer guaranteed to help us manage it, the cost of running the federal government is often called into question. Although many politicians have sought to cut spending by eliminating federal agencies and specific programs, few have succeeded in any significant way. This is because many agencies and their programs continue to perform the vital functions for which they were created.

To understand the size and scope of today’s federal government and the responsibilities it has undertaken, it might be best to think about American democracy as a grand, collective do-it-yourself project. The founding fathers had no blueprints for constructing the government we have today, nor was there an idiot’s guide to governance for them to reference. Instead, when they declared independence from England and realized that thirteen colonies acting as one would be more effective than if they acted separately, they drafted the Articles of Confederation and Perpetual Union to create, in a sense, the operating system of a new nation. The Articles of Confederation, as they were known, named the new nation the United States of America.

Unfortunately, the United States Version 1.0 didn’t work very well. While many of the nation’s founders saw the practicality of uniting to make war in defense of independence and liberty, they were reluctant to give up the autonomy of their states for a strong central government. As a result, the new federal government had little ability to enforce the few limitations it put on the states. And though the nation emerged from the Revolutionary War burdened with substantial debt the states had accumulated in order to fund the war effort, the government lacked the power to tax the states to pay it off.

Shays’ Rebellion in 1786-87 brought these problems to a head and led to the Constitutional Convention that replaced the Articles of Confederation with our current Constitution. The Constitution was the Version 2.0 upgrade that the United States needed to “form a more perfect union” – one that has lasted more than two centuries.

That willingness to adapt and improve our system of governance in the face of a changing social landscape, often in the face of stubborn and sometimes violent opposition, is a persistent and distinguishing feature of American democracy.

In one of the most profound decisions in the nation’s history, one of the first acts of the new Congress in 1789 was to create a Department of the Treasury to manage the nation’s debt and strengthen the economy. This expansion of government authority stabilized the country and paved the way for successive administrations and congresses to address problems and opportunities with maximum financial flexibility. Yet, it was not a decision that was wholeheartedly embraced by all. In fact, it set the political forces of the country on a divided path that still resonates today – those who look to the government for solutions to systemic problems, and those who resist the primacy of federal authority over states’ rights. It is a frequent tension that has defined the country. Nevertheless, more often than not when confronted by the problems of the day, Congress has chosen to act in an ongoing effort to build that more perfect union.

Only a few weeks after creating the Treasury, Congress acted again to upgrade the nation’s system of government, creating the Bill of Rights. The nation’s first 10 amendments to the Constitution were ratified within two years. The United States of America, version 2.10.

The growth of the federal government is largely the story of how, at different times in our history, different systemic problems emerged that could not be fixed by market forces or state and local governments alone. Operating within the framework of the Constitution, the federal government often responded, and particularly in the late 1800s, began to accelerate the establishment of federal agencies to resolve those problems and move the nation forward.

Growth of Government

  • Department of the Treasury

    Treasury grew out of early efforts to ensure proper and efficient handling of the national debt in the face of weak economic and political ties between the colonies. Over time, functions newly taken on by the federal government were often housed in Treasury initially and for long periods of time before being launched as independent organizations.
  • Department of Agriculture

    The US Department of Agriculture started as the Agriculture Division of the US Patent Office in 1839. It was established to address the diminishing productivity of America's farmland. The division researched and eventually produced seeds that were more resilient and easier to grow in harsh conditions.
  • Interstate Commerce Commission

    As they spread westward in the mid-1800s, railroads often acquired monopolies that led to abusive market practices, including discrimination, collusion, and rate shifting that negatively affected farmers in the west and businessmen in the east. These two groups eventually lobbied the federal government for help. The Interstate Commerce Commission became the first regulatory agency in the US and was a model for those that came later.
  • Sherman Antitrust Act

    The Sherman Antitrust Act was passed to end anti-competitive or monopolistic conduct by individuals or corporations. It was the first in a series of legislation passed over the next 24 years to address anti-competitive practices in business.
  • Income Tax (16th Amendment)

    By the late 19th century, the expanding role of the federal government necessitated a new and stable source of revenue. After several attempts, the permanent income tax was instituted with passage of the 16th Amendment to the Constitution.
  • Department of Labor

    The Department of Labor was created in response to the massive amount of economic and political power that large corporations had accumulated by the turn of the 20th century. This period of unchecked corporate wealth and power is known as the Gilded Age. Feeling that this power inherently threatened the rights and representation of workers, the American labor movement had repeatedly called for the voice of organized labor to be represented in the President’s executive Cabinet.
  • The Federal Reserve

    Repeated and dramatic economic panics in the preceding decades led to the creation of The Federal Reserve, designed to be a central authority equipped to manage and stabilize the national economy. In particular, the Panic of 1907 caused many to recognize the need for an independent and reliable organization to support greater economic stability.
  • Federal Trade Commission

    Despite passage of the Sherman Antitrust Act in 1890, anti-competitive activities persisted, including monopolistic mergers, price-fixing, bid rigging, and false and deceptive advertising. Creation of the FTC culminated a steady demand by the public and business for protection from the anti-competitive practices of a few large companies in several prominent industries.
  • Food and Drug Administration

    Congress created the Food and Drug Administration to prevent the sale and distribution of consumable products deemed so harmful as to be a public health hazard. These included foods processed in unsanitary conditions and substances sold as medicines or drugs that were either ineffective or actively dangerous.
  • Securities and Exchange Commission

    The Securities and Exchange Commission was created to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The initial laws granting it authority over publicly held companies helped restore the public's trust in the economy.
  • Federal Communications Commission

    As radio and telephone technologies spread across the economy, Congress created the Federal Communications Commissions (FCC) to manage the complexities of these new communications technologies.
  • Social Security Administration

    Congress created the Social Security Administration (SSA) to help elderly Americans meet basic living expenses as their earning power declined with age and to provide unemployment insurance to the unemployed.
  • Centers for Disease Control and Prevention

    The CDC was initially created to eliminate malaria in the US. Today, it's mission is to save lives, protect people from health threats, and increase the health security of the nation.
  • Environmental Protection Agency

    The industrial age brought great advances in standard of living, but also produced downsides that Congress tried to address over decades. Finally, under President Nixon, Congress established the Environmental Protection Agency to consolidate an array of long-standing and new federal environmental responsibilities under one organization in order to more efficiently and effectively coordinate federal activity.
  • Federal Election Commission

    Creation of the Federal Election Commission culminated a history of efforts to limit the influence of money and power on elections.
  • Consumer Financial Protection Bureau

    The Consumer Financial Protection Bureau (CFPB) was established to protect consumers in the financial markets from unfair, deceptive, or abusive practices and to take action against companies that break the law.


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Related Problems: Climate Change, National Debt

Contributors: George LinzerForrest Stewart

Published: November 5, 2019

Updates: July 31, 2020; December 17, 2021

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