What is the size and growth rate of the US market for patriotic
products (such as patriotic keepsakes, apparel, flags, decorations,
etc.)?

Dear Mgdixon, 

Thanks for asking this interesting, yet complex question. It is
complex, because the term "Patriotic Products" is a bit vague and
wide. This is important for you, because it means that there are no
market researches on this industry, but rather on "flags", "apparel",
etc. Moreover, it can contain products ranging from those you have
mentioned (t-shirts, flags, etc), but also, basically, choosing to
prefer a certain product because it was produced in your home country
can be conceived as a "patriotic act".

It is problematic, since except for flags, most other products are
combined with sales of "non patriotic" (i.e., regular) products.
According to The Baltimore Sun, "Stars-and-stripes T-shirts and
flag-decorated travel mugs merely scratch the surface of the patriotic
products out there. Here are some of the more off-the-wall ones:
- Paragon Trade Brand's Little Patriots disposable diapers with red,
white and blue stars
- Stainless steel tongue ring with "USA" and flag
- Topps "Enduring Freedom" trading cards featuring Colin Powell et al.
But no bubble gum
- PetSmart's Patriotic Cat Toy Value Pack, featuring a stars and
stripes catnip mouse, among other patriotic toys
- Renuzit Patriotic Candles in scents like Star-Spangled Berry
- Marshmallow Peeps. White stars with blue and red glitter
- Beretta "United We Stand" 9-mm pistol
- Frederick's of Hollywood Patriotic Panty (a cotton thong)
- Breathe Right Nasal Strips, decorated with stars and stripes USA
Flag-Shaped Stress Reliever (made of foam, it's relaxing to squeeze)".
That, without mentioning Pilsbury's star and stripes cake, "Little
Patriots Diapers", or many other products whose packages were
decorated with patriotic themes.

Apparently, Patriotic Products are a thriving industry, especially in
peak periods of national crisis (WW2, Gulf War, 9/11) and around
national holidays (4th of July, Flag Day). Since 9/11, the had been a
growth in sales of the so-called patriotic products.

Some businesses, selling variety of "patriotic products", increased
sales in 15% since the attacks (Baltimore Sun2). According to Brandi
Ricker, executive team leader of Target in San Leandro, as quoted in
the Oakland Tribune, sales of "patriotic products" have more than
tripled since 9/11. Similarly, Up Country, a company, which
manufactures pet related patriotic products, reported increase of 300%
(three-folds) since 9/11 (Providence Journal). Another business that
reported an increase is StartCollecting.com, which increased sales
five folds since 9/11.

Hallmark also reports a great increase in the sales of patriotic
products. According to their press release "Demand for Hallmark
patriotic products has increased 75 percent over sales in recent years
prior to September 11.", in numbers, "6.4 million patriotic Hallmark
cards were purchased, and Hallmark has increased the number of its
patriotic products from 53 to 181 through the end of 2002 to meet
consumer need" (Hallmark).

Flags are industry worth checking into, since most flag sales can be
classified into the patriotic products niche. Sales of flags in the
few month after 9/11 grew in more than 150% - from a "normal" annual
rate of 20 million flags sold a year to 50 million in 2001 (according
to Entrepreneur.com and the National Flag Foundation), while WalMart
reportedly "sold about 450,000 flags, a nearly 20-fold increase from
the same period last year" (Go Memphis.com). Another business owner
reports that his company sold more than 300,000 flag pins in the first
month after the tragedy compared with 1,000 in a normal month
(+30,000%) (Newsday.com). In 4th of July, it seemed "flag sales...this
year through March quadrupled, compared with the similar period in
2001" (Baltimore Sun2). Hallmark sold 10 times more flag stickers as
in usual years.

However, says an article in Entrepreneur.com, "while the nation's
attitude is ripe for new patriotic products, it's not necessarily an
easy sell. Like any "hot" trend, getting started quick is crucial—and
getting started quick requires long, long hours".


Lately, this increase had stopped, and the sales of patriotic products
have declined. Clay Timon, chairman and chief executive of Landor
Associates, a San Francisco-based market research firm, estimated to
the Philadelphia Inquirer, that the market for patritic products is
"just slowly, slowly fading away."

In other words, the 'patriotic products' market grew considerably in
the last year; the increase depends on the industry. Hallamrk sold 75%
more patriotic items, in flags an apparel the growth was bigger -
reportedly 300% and more. However, it is difficult to foresee a
continuation of this trend. Before 9/11 Hallmark participated an
increase, due to a growing interest in "American Values", but not at
this scope.

Sources: 
(The) Baltimore Sun1, SunSpot.net,
http://www.sunspot.net/features/home/bal-hf-flag0630.story?coll=bal-artslife-home
(The) baltimoer Sun2,
http://www.sunspot.net/business/bal-bz.patriotic04jul04.story?coll=bal-business-headlines
Entrepreneur.com, http://www.entrepreneur.com/Your_Business/YB_SegArticle/0,4621,295970----4-,00.html
GoMemphis.com http://www.gomemphis.com/mca/giftguide/article/0,1426,MCA_799_859191,00.html
Hallmark, "Americans Are Speaking the Language of Red, White and Blue"
http://pressroom.hallmark.com/Patriotism_02.html
Newsday, www.newsday.com/business/ny-bzcov1111.story 
(The) Oakland Tribune, "Flag fashions: America is red, white and blue
is all over" http://www.oaklandtribune.com/Stories/0,1413,82%257E1804%257E715035,00.html
(The) Philadelphia Inquirer,
http://www.philly.com/mld/philly/entertainment/movies/3522140.htm
(The) Providence Journal,
http://www.projo.com/cgi-bin/include.pl/extra/terror/content/06301581.htm


Patriotic Products online shops: 
http://www.realpatrioticproducts.com/ - "real" Patriotic Products
http://www.patrioticproducts.net/ - "Patriotic Products" shop. 
http://shop.store.yahoo.com/bells/patriotic.html 
http://webclipart.miningco.com/cs/msub53aa/tp/memorial.htm -
"patriotic gifts"
www.reclaimamerica.org/TemporaryPages/ PatrioticStuff.asp  - Center
for Reclaiming America (Christian-conservative).
http://www.atlaspen.com/specials/patriotic/index1.php - pencils and
pens
http://www.forteachersonly.com/patriotism/ - For teachers Only 
http://www.sparklingearth.com/products.asp?category=cc16 - head bands
http://www.actionbag.com/patriot.html - gift wraps and bags
http://www.mytexasstore.com/categories/patriotic.html - My Texas Store
http://www.peaceflags.org/ - Peace Flags 

I think that answered your question, as much as a question such as
this could be answered. If you need any clarifications please ask
before you rate the answer, and I'll be happy to provide some. I also
left my search terms, that may assist you in further research on the
subject:
"patriotic products" market 
"patriotic products" sales
"patriotic products" growth
"patriotic products" "market growth"
"patriotic products" market growth
"patriotic products" market size
"patriotic products" "market research"
"sales of patriotic products"

I had hope for more quantitative statistics on market size.  However,
with this answer, I understand that data is not readily available. 
With that caveat, I found the answer very helpful.