Spending by federal, state and local governments on payrolls, equipment, buildings, teachers, emergency workers, defense programs and other core governmental functions has been shrinking steadily since the deep 2007-2009 recession and as the anemic recovery continues.

This recent shrinkage has largely been obscured by an increase in spending on benefit payments to individuals under "entitlement" programs, including Social Security, Medicare, Medicaid and veterans benefits. Retiring baby boomers are driving much of this increase.

Another round of huge cuts — known in Washington parlance as the "sequester" — will hit beginning March 1, potentially meaning layoffs for hundreds of thousands of federal workers unless Congress and President Barack Obama can strike a deficit-reduction deal to avert them.