The Spending Debate

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"The Spending Debate"

Richard Stevenson writes that “What is under way now is the most fundamental reassessment of the size and role of government — of the balance between personal responsibility and private markets on the one hand and public responsibility and social welfare on the other — at least since Ronald Reagan and perhaps since F.D.R.”

I sort of doubt this on a number of levels, including the fact that there’s a lot of mismatch between our historical memory of these events and their reality. Consider the actual federal spending trends of the past forty years:

Nothing about this exactly screams “Reagan Revolution” to me. Federal spending was consistently above the long-term average in the Reagan years, in stark contrast to the small government agenda of Jimmy Carter and Bill Clinton. Of course a lot of this is national defense. But spending is spending, and traditionally the defense channel is one of the main ways we do social welfare policy in the United States. See, for example, the GI Bill. And even though we remember Social Security as a key element of the New Deal welfare state, the program as we know it was really created in the 1950s rather than the 1930s.

I think the right way to think about the current debate is this. We have a fairly settled view in the United States that one important function of the government is taking care of elderly people. We also have a fairly settled view in the United States that one important function of the government is ensuring that people have health insurance. We also have a fairly settled view in the United States that we like being an unusually low tax country. We also also have a fairly settled view in the United States that we want to maintain a uniquely expensive posture of global military hegemony. These are straightforwardly incompatible goals. Large, regionally significant states such as China, India, Brazil, and Nigeria are growing faster than we are putting pressure on military hegemonism. The share of the population composed of elderly people is rising. And the productivity of the health care sector is increasing more slowly than the productivity of the economy as a whole. This leaves us with a lot of adjusting to do.

The essence of the problem is that what people want is the status quo, but the status quo is untenable. In a healthy political system featuring bipartisanship by alternation, both parties would put forward visions of fairly small deviations from the status quo and they would take turns implementing those deviations. The net impact over the course of the years would be quite large, and the weighting of the changes would depend on what proves workable, what proves popular, and the vicissitudes of electoral politics. Instead, we have a political system that counts on this problem being solved via some form of “grand bargain.” That turns various proposals into game theoretical exercises and creates a strange bargaining dynamic that empowers extreme voices.

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