Federal spending in Cleveland Fed’s region returns to prepandemic levels

After an increase in 2020, federal spending in the region served by the Federal Reserve Bank of Cleveland has come back down to prepandemic levels, relative to the region’s gross domestic product.

A new report from the Cleveland Fed estimates that federal spending’s share of the region’s GDP will be about 1 percent higher in fiscal year 2023 compared to fiscal year 2019.

That share rose sharply in 2020 and remained elevated in 2021, largely because of COVID-19 relief programs, but those programs are winding down. Plus, most federal programs are not indexed for inflation, so they have not kept pace with the region’s GDP growth.  The region served by the Cleveland Fed includes Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Three large federal spending bills have been passed since November 2021, but the dollar figures tied to those bills in headlines “must be taken with a grain of salt,” policy economist Stephan Whitaker notes in the report.

“The multi-trillion-dollar totals conflate new authorizations with reauthorizations and spending this year with spending over the next decade,” Whitaker writes.

Read the District Data Brief: The Impact of the Additional Appropriations on Federal Spending in the Fourth District