Why nobody cares about small government anymore
Anybody seen the Tea Party?
It ought to be an epic moment for the small-government movement that grew out of government bailouts following the financial crash of 2008. Democrats who control the White House and both houses of Congress by narrow margins are working up a giant $3.5 trillion legislative package that will enlarge the social safety net and bring more government involvement in sectors such as energy, transportation, housing, manufacturing and many others. President Biden proudly describes his plans as the most extensive government agenda since the New Deal in the 1930s, and few disagree.
A decade ago, opposition would have been ferocious and passage virtually impossible. Now, however, resistance is weak and focused on sideshow issues such as the risk that more spending will cause troublesome inflation. Democrats probably won’t get the entire $3.5 trillion in new spending, but the odds are good they’ll get a lot of it in legislation that could pass by October or November.
Biden’s timing is good. The portion of Americans who want government to solve more problems hit 54% in Gallup’s latest survey on the issue—the highest level in polling that goes back to 1992. The coronavirus pandemic contributed to that, but the trend of Americans expecting more of government is nearly a decade old. Here are several reasons Americans have become more receptive to big government:
The private sector isn’t solving major problems. The most pervasive socioeconomic problem in the United Sates is worsening wealth and income inequality. There’s no single explanation for why the rich get richer while the middle class shrinks, but it involves the offshoring of jobs, technological disruption, the soaring cost of health care and a college education, and intergenerational wealth transfer that has created an American aristocracy. Voters feel the economy is rigged in favor of the wealthy, and they’re not wrong.
Donald Trump tapped into that bitterness in his surprise presidential win in 2016, but he didn’t make improvements ordinary people noticed. So voters decided to go with Biden and his big-government solutions in 2020. Biden has promised more affordable health care, help with child and elder care, more high-paying union jobs and a restoration of the middle class. It will be tough to deliver on all that, but that’s why Biden’s spending plans are so large: He’ll only get one chance to convince voters he’s making a difference.
Giant budget deficits haven’t caused any problems. Budget hawks have been concerned about rising levels of U.S. government debt since at least the Reagan administration in the 1980s, when Congress passed a balanced-budget act meant to reduce federal deficits. But deficits have mostly gone up since then, and are now at levels economists once said would cause dreadful damage. That hasn’t happened, though. In theory, vast amounts of federal borrowing should squeeze out private borrowing and reduce the productivity of the U.S. economy. Yet there’s no sign that has occurred. Excessive federal borrowing should also push interest rates up, but interest rates are close to record lows.
Reducing the federal debt, which is the cumulative tally of annual deficits, was once a powerful rallying cry among conservative Republicans and other small-government advocates. But the absence of a crisis, as U.S. borrowing has blown through one worrisome threshold after another, has torpedoed the cause. Since expanding government and the spending that comes with it often comes from borrowed money, it’s harder to object if the borrowing seems fine.
Both parties have lost credibility. Republicans used to have a plausible claim as the party of fiscal responsibility, but since 2000, Republican presidents have overseen larger deficits than the Democratic presidents who preceded them. The budget surpluses of the late Bill Clinton years became deficits that averaged $443 billion per year under George W. Bush. Deficits soared beyond $1 trillion under Barack Obama, largely because of the financial crash and recession that ran until 2009. The deficit fell to $585 billion in Obama’s last year, then rose again during the first three years of the Trump’s presidency. Then came 2020, when the deficit exceeded $3 trillion on account of the coronavirus recession and massive relief bills.
Deficits tend to rise under Republican presidents because they cut taxes, as both Trump and George W. Bush did, and the promised increase in tax revenue from a boom in economic activity never materializes. The rise in deficits under Trump, which came when unemployment was falling to record lows and the economy was growing, has blown GOP credibility on the issue. Republicans controlled Congress for the first two years Trump was in office, and they passed their sweeping tax cut law in 2017, with no Democratic support. If Republicans truly cared about reining in deficits, that was the chance to do it. Instead, the tax cuts led to larger deficits, as many critics of the tax law predicted.
Americans like the coronavirus relief bills. The several large coronavirus relief packages Congress passed since the onset of the pandemic in 2020 were generally well constructed, with a lot of aid going directly to families through stimulus payments, unemployment insurance and tax breaks. That was a big improvement on the 2008 and 2009 bailouts, when a lot of money went to big corporations that didn’t necessarily share the wealth. Large majorities of Americans approved of these relief programs, including the American Relief Plan Biden championed, which the Democrats in Congress passed in March 2021. The success of those programs has given Biden a rare opportunity to offer voters more of the same.
If Biden does get most of the bigger-government legislation he’s seeking, he’s also likely to preside over the biggest mismatch between spending and revenue in modern times, outside of war or recession. Biden claims his spending plans amount to investments that will generate a positive return that will benefit all Americans, but some economists disagree. What those plans will do is test whether bigger government works. A debt crisis or some other calamity is still possible, and voters could quickly sour on building back bigger. The Tea Party should keep a couple of candles lit.
Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.
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