Factor 1: Increasing Labor Costs

The increasing cost of labor, including physical labor, has made investments infrastructure less attractive. Instead, focus on low labor intensive programs such as transfer payments became more attractive and thus took up a larger portion of government budgets.

Factor 2: Advanced Financial Markets

The development of financial markets has made the increase the access to capital across the board. This combined with decades of low interest rates, governments had an incentive to borrow to finance the growth of their workforce on a state/local level instead of firing workers and suffering the political consequences. Why would a politicians who serves 4-6 year terms fire workers or cut spending when they can borrow funds and leave the problem of repaying them to their successor?