Second post
The Trouble With Limited Government
Why even Reagan couldn't stop spending from skyrocketing--and what to do about it.
BY WILLIAM VOEGELI
Wednesday, November 7, 2007 12:01 a.m. EST A quarter century ago president Ronald Reagan declared in his first inaugural address: "In this present crisis, government is not the solution to our problem; government is the problem. . . . It is my intention to curb the size and influence of the federal establishment and to demand recognition of the distinction between the powers granted to the federal government and those reserved to the states or to the people." In 1981, the year of that speech, the federal government spent $678 billion; in 2006, it spent $2,655 billion. Adjust that 292% increase for inflation, and the federal government is still spending 84% more than it did when Reagan became president--in a country whose population has grown by only 30%.
To put the point another way, if per capita spending after 1980 had grown at the rate of inflation, federal outlays would have been $1,883 billion in 2006 instead of $2,655 billion. The 41% increase from 1981 to 2006 is considerably lower than the 94% increase in real per capita spending in the previous 25 years, from 1956 to 1981. In the past two decades, the federal establishment grew steadily, rather than dramatically. Nonetheless, Reagan's pledge to curb the government's size and influence has hardly been fulfilled. Inflation-adjusted federal spending increased in every year but two over the past 26 years.
Military spending is a minor factor in the overall growth of government. It was 23.2% of federal spending and 5.2% of gross domestic product in 1981.
Those percentages peaked in 1987 at 28.1% and 6.1%, respectively. Defense spending fell steadily thereafter, and was just over 16% of the federal budget and 3% of GDP from 1999 through 2001. Since September 11, defense spending has climbed to 20% of the federal budget and 4% of GDP. Despite the wars in Iraq and Afghanistan, both figures are lower than they were at any point during Jimmy Carter's presidency.
The engine driving the growth of government has been "human resources"--the Office of Management and Budget's category that includes Social Security, Medicare and Medicaid, along with other programs for health, education, veterans and income security. Spending on human resources in 1981 was $362 billion, slightly more than half (53.4%) of all federal outlays. That proportion declined to slightly less than half (49.7%) by the time Reagan left office in 1989. But it turns out there was a peace dividend after the fall of the Berlin Wall: National defense spending dropped from 26.5% of federal outlays in 1989 to 16.1% in 1999. That savings--a tenth of the budget--migrated to human resources, where spending climbed to 60% of outlays by 1995. The category has stayed above that level ever since, reaching almost two-thirds of federal spending (65.6%) and 13.1% of GDP in 2003.
The numbers confirm what every despondent conservative already knows. Since Reagan's stunning victory in 1980, conservative journals have annihilated forests to print articles about excessive government spending. Conservative think tanks have produced sweeping plans for reducing the welfare state. Republicans occupied the White House for 18 of the 26 years after 1980, and held a Senate majority for 16 1/2 years and a House majority for 12 years. Yet the result is a federal establishment bigger and more influential today than in 1980.
Reagan was elected president 25 years after the first issue of National Review declared its intention to "stand athwart history, yelling Stop." This was an amazing ascent for a political movement that started out, in the words of NR's first editorial, "superfluous" and "out of place." In the 25 years since Reagan's election, however, conservatives determined to scale back the welfare state might as well have been standing a respectful distance behind history, whispering "Please slow down."
If conservatism has a future, those who want to fashion it need to acknowledge and understand this stunning defeat. In National Review last year Ramesh Ponnuru said the "real crisis" is that, while a conservatism whose "central mission" does not emphasize the fight against Big Government is inconceivable, a "political coalition in America capable of sustaining a majority" for that mission is unimaginable. Conservatism, in other words, can have a purpose or it can have a prospect. It cannot, apparently, have both.
This political problem will only become more acute as the challenges of governance become more severe. One yardstick may help conservatives feel a little better about themselves. In 1981 federal spending was 22.2% of GDP; last year it was 20.3%. This measure hovered in a very narrow band for the whole era, never exceeding 23.5% or falling below 18.4%. Adding expenditures by states and localities confirms the picture of a rugby match between liberals and conservatives that is one interminable scrum in the middle of the field. Spending by all levels of government in America amounted to 31.6% of GDP in 1981, and 31.8% in 2006.
Conservatives, though, can't take much solace from fighting Big Government to a draw. Looking back, the dynamic growth of the American economy after 1982--real per capita GDP was two-thirds higher in 2006 than in 1981--offered a great opportunity to reduce the relative size of the public sector. This economic vigor meant that more people had more money to spend on their own health, education and welfare, presumably enabling the government to spend less for such purposes. It also meant that government spending could have grown robustly and still expanded more slowly than the economy, leaving the public sector to absorb a significantly smaller portion of GDP in 2006 than it did in 1981. Even this modest achievement eluded conservatives.
Republicans abandoned their promises to abolish the departments of Energy and Education. Efforts to zero out smaller and supposedly vulnerable agencies like the National Endowment for the Arts accomplished nothing. The only important victory here was the 1996 law abolishing Aid to Families with Dependent Children, a victory that may turn out to be hollow. The New Republic celebrated rather than lamented the 10th anniversary of AFDC's demise, arguing that because of the law, "welfare-bashing has lost its political resonance . . . [and] welfare reform has expanded the constituency for activist government. Democrats now have more political room to fight Republican austerity--and to propose, in its place, a stronger safety net."
Looking forward, government spending as a percentage of GDP is about to rise dramatically. The oldest baby boomers, born in 1946, will be eligible for Social Security's early retirement benefits in 2008 when they turn 62, and become Medicare beneficiaries when they turn 65 in 2011. These two programs, along with Medicaid, accounted for 41% of federal spending in 2006, even before the baby boom cohort had started collecting benefits. All three will increase relentlessly due to the longevity and sheer numbers of Americans born between 1946 and 1964. The columnist Bruce Bartlett estimates that the magnitude of this growth will be "on the order of 10% of the gross domestic product over the next generation even if no new government programs are enacted or current ones expanded." This is the Swedenization of America on autopilot.
Many conservative commentators, in their assessments of these ominous prospects and past opportunities lost, have resorted to finger-pointing. The title of Mr. Bartlett's book, "Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy" (2006), hints at the villain he identifies. "Leviathan on the Right" (2007), by Michael D. Tanner of the Cato Institute, makes "big-government conservatives" and their ideas the culprit.
Though these books were published in the past two years, the blame game has been going on since Reagan was elected. Newt Gingrich famously derided Bob Dole as the "tax collector for the welfare state." Dick Armey said that what "killed us" during the 1995 government shutdown was that Mr. Gingrich and his House deputies were "full of themselves," boasting about the shutdown in advance. President George H.W. Bush was savaged by conservatives for his 1990 tax increase.
In "Dead Right," published in 1994, David Frum carried the assignment of blame to its logical conclusion. He argued that capitulating to the welfare state is not a betrayal of the Reagan legacy; it is the Reagan legacy:
There was no arithmetic reason that the Reagan program could not have succeeded. Reagan's budgets were wrecked by the inability and unwillingness of the most conservative administration since Coolidge's to resist the rise of social welfare spending. . . . The doctrine was that the welfare state should be allowed to hurtle forward whenever the political cost of halting it was likely to be inconvenient in the shortest of short runs.
There would be many more harsh judgments about how this or that faction betrayed the conservative campaign against Big Government. All such explanations, however, agree on one dubious premise: But for the weakness or hubris of some key player, the conservative project could have succeeded.
That premise disregards the central fact--cutting back the welfare state is very, very difficult. Paul Pierson, a political scientist at Berkeley, showed in "Dismantling the Welfare State?" (1994) that Margaret Thatcher had no more success in curtailing Britain's social programs than our conservatives had in undoing ours. As prime minister for 11 years, Mrs. Thatcher had more leverage to change policy than President Reagan or Speaker Gingrich ever possessed. Mr. Pierson concludes, however, that her government "had only modest success" in cutting back individual welfare state programs, while her record in modifying the context of future struggles over the welfare state "was if anything less impressive."
Lacking an appreciation of the challenges they would face, conservatives never developed a political strategy adequate to the task. There was no systematic effort to pare back the welfare state, no disciplined preparation for the inevitable and aggressive counterattacks by interest groups and liberal journalists. Instead, conservatives time and again were shocked to discover that the people who built the welfare state were so unhelpful about dismantling it. Right-wingers fell into long periods of sullen, stupefied resentment, punctuated by frontal assaults that were brief, furious and futile. Think of David Stockman's crusade to cut spending in 1981; or the
1995 government shutdown, the Pickett's Charge of the Gingrich rebels.
Early on, in the wilderness years, conservatives had a surer sense of what they were up against. The first issue of National Review described conservatism as "a position . . . unattenuated by a thousand vulgar promises to a thousand different pressure groups." Unattenuated in theory, conservatism in practice has been hemmed in constantly by the fact that the people insist that promises made to them, vulgar or not, must be kept.
Robert Samuelson recently wrote, "Most Americans . . . think that they automatically deserve whatever they've been promised simply because the promises were made."
As a result, it is much harder for conservatives to dismantle the welfare state than for liberals to build it. The main impediment to the New Deal was the "legitimacy barrier," the prelapsarian conviction held by many jurists and citizens that government had no rightful business undertaking a whole range of social improvements, no matter how gratifying the beneficiaries might find them. The New Deal overcame--demolished, really--that barrier, and with it the constitutional and political impediments to building the welfare state. That victory, according to James Q. Wilson, guaranteed not only the permanent existence but the permanent growth of Big Government:
New programs need not await the advent of a crisis or an extraordinary majority, because no program is any longer "new"--it is seen, rather, as an extension, a modification, or an enlargement of something the government is already doing. . . . Since there is virtually nothing the government has not tried to do, there is little it cannot be asked to do.
After the legitimacy barrier is overwhelmed, the political calculus of how benefits and burdens are apportioned and, crucially, perceived strengthens liberals "seeking to extend benefits to large numbers of people" against conservatives "seeking to take those benefits away," according to Mr. Pierson. Liberals must worry only about a "diffuse concern about tax rates," a problem they can usually finesse "through reliance on indirect taxes and social insurance 'contributions.' " The conservative project, on the other hand, requires "the imposition of concrete losses on a concentrated group of voters in return for diffuse and uncertain gains." Every cutback necessitates "a delicate effort to transform programmatic change into an electorally attractive proposition," an effort that is in constant danger of being negated by "a substantial public outcry," such as the one against President Bush's Social Security proposals in 2005.
Conservatives have always had to negotiate the trade-offs, inherent in Mr. Ponnuru's dilemma, between adhering to the mission and assembling a majority. It hardly suffices to say that Barry Goldwater, the first National Review-era conservative hero, favored the mission. "I do not undertake to promote welfare," he announced in "The Conscience of a Conservative" (1960), "for I propose to extend freedom. My aim is not to pass laws, but to repeal them. It is not to inaugurate new programs, but to cancel old ones that do violence to the Constitution, or that have failed in their purpose, or that impose on the people an unwarranted financial burden." Rather than compromise his mission to gain political victory, Goldwater in 1964 went out of his way to tell voters what they didn't want to hear.
At the other end of the spectrum, House Republicans kept their majority for eight years after Newt Gingrich resigned in 1998, but the revolutionaries who came to Washington in 1994 to do big things wound up staying around just to be big shots. After the 1995 government shutdown, the mission of the congressional Republican Party shrank steadily, and finally amounted to nothing more than clinging to its majority. In the end, the meagerness of that aspiration negated it. Voters connected the unprincipled personal behavior of thieves and frauds like Duke Cunningham and Mark Foley with the unprincipled political behavior of a congressional majority that spent millions on a bridge to nowhere and billions on a Medicare drug plan to the moon. After the House majority leader, Tom DeLay, declared in 2005 that there was really nothing left to cut in the federal budget, voters concluded, plausibly, that if we're going to have Big Government we might as well entrust it to politicians who don't pretend they oppose it.
Supply-side economics was, in political terms, an effort to break out of Mr. Ponnuru's dilemma, to secure a majority without sacrificing the mission. In 1963, Sen. Goldwater had voted against the Kennedy tax cuts, saying the dangers of inflation and deficits required "firm, principled decisions" about spending prior to any tax reductions. The "Reagan gambit," as Mr. Frum called supply-side economics, was an attempt to reverse the political equation. Liberalism had flourished by making government spending the independent variable and taxes the dependent one: Give the people a cluster of attractive and successful social welfare programs, the logic went, and voters will gladly pay the taxes required to support them. Supply-side conservatives tried to make taxes the independent variable and spending the dependent one: Give the people a cluster of appealing tax cuts and count on their attachment to them to set spending at the level defined by the resulting revenue stream. To the extent that lower taxes, along with smarter regulatory and monetary policies, strengthened the economy, they would also increase government revenues and make the attainment of revenue-defined spending levels that much easier.
The experience of a quarter century shows that tax cuts have served important purposes, but the cause of scaling back Big Government is not one of them. Fiscal policy-making is an ongoing political science experiment, testing the relative strength of the aversion to taxes, the appetite for government programs, and the feasibility of large-scale borrowing. The results are in, and they're not ambiguous: Under every set of circumstances, the levels of taxing and borrowing increase to accommodate government spending, to a far greater extent than government spending decreases in order to avoid excessive taxation or deficits.
In David Stockman's bitter but compelling memoir about his embattled years as President Reagan's OMB director, he describes his own reckoning with Mr.
Ponnuru's dilemma: "The politics of American democracy made a shambles of my anti-welfare state theory . . . [which] rested on the illusion that the will of the people was at drastic variance with the actions of the politicians."
In reality, "congressmen and senators ultimately deliver what their constituencies demand. The notion that Washington . . . [is] divorced from the genuine desires of the voters . . . constitutes more myth than truth."
