The United States experienced a rapid economic growth during the period 1890 to 1910. The growth was over 4 percent and was linked to rapid population growth in the country and the country was enjoying its flourishing economic advancement. It had the highest output per capita in the world as it produced agricultural products on large scale and exporting farm products such as wheat and cotton (Rogers, 2007). The United States also had the largest industrial sector in the world with its manufactured output equal to that of the United Kingdom, Germany, and France combined. Consequently, the country experienced technological advancements and the cities were characterized with light streets and new pavements, automobiles, water supply, and sewerage systems, sky scrappers, centralized electrical supply systems, subways, streetcars, and frequent train service that connected the cities.
The fifty years before 1913 was characterised with growth in the income per capita to about 2 percent per annum while the average of the output was about 4 percent. The unemployment rate in 1913 was about 4.3 percent while the price level was approximately equivalent to its average in the 19th century.
The introduction of the federal income tax in 1913 was characterized by a tax rate of 7 percent for any income above $ 20,000 (Saez & Zucman, 2016). The demand for spending due to war led to a taxation rate of 77 percent for income of $4,000 and above. The government spending significantly increased after 1913. In the 1920s, the federal spending declined slightly based on the inflation-adjusted dollars per individual. For instance, in 1916, the United States had a federal spending per individual was $83.60 and rose to $1,329.
77 by 1919. The reduction in the war-related spending saw federal spending fall to $180.57 which was the lowest in the decade from 1919. However, the non-war spending significantly increased during the period.
