Is Wagner’s Law Bounded?

I said the other day that I thought the focus of progressive politics is now set to shift away from expansions in the size of the welfare state. Julian Sanchez raised some doubts about this:

It seems at least as likely that, consistent with the historical pattern, the new status quo will simply be redefined as the “center,” and proposals to further augment the welfare state will move from the fringe to the mainstream of opinion on the left.

Similarly, Eddy Elfenbein writes:

Matthew is basically taking on Wagner’s Law which says that the size of government in a modern industrial state will continue to grow as a share of the economy. Perhaps there’s a Scandinavian upper limit of around 60%. If so, then we’ve still got a long way to go.

So for starters, I think it’s important to see that there does seem to be a limit to Wagner’s Law, as evidenced by the highest tax countries in the developed world. Here’s the OECD numbers on tax revenue as a percent of GDP in Sweden, Finland, France, Denmark, and Belgium, the most-taxed countries in the world:


Basically, it seems to me that jurisdictions that, unlike the United States, don’t have a lot of ideological taboos about taxes and big government already explored this landscape for us. Taxes can be higher than they were under George W Bush. They can be higher than they were under Bill Clinton. But they do reach a point where the impact of growth is a problem, and even tax-friendly political cultures turn around and level off even though these countries are coping with aging populations and rising health care costs. US tax levels are well below what we’re looking at here. But via Medicare, Medicaid, and Social Security, we have a bunch of tax hikes implicitly programmed into our existing social welfare programs. At the same time, as is frequently noted the Scandinavian countries have a different and probably more efficient tax system than what we use in the United States.

So, again, I think that when the dust clears of this health care fight we’ll find that progressives have important causes that aren’t about the size of the welfare state (climate change, marriage equality, etc.) and also that we’ll see more fighting over the design of existing programs and the share of tax revenue allocated to different constituencies.