It was 24 years ago, on February 1996, when President Bill Clinton stood before a joint session of Congress and, in the course of delivering his State of the Union address, declared that “the era of big government is over.” For a Democratic president to say this is on the order of Hugh Hefner declaring the sexual revolution a failure. In any case, it seemed to cement in history the Reagan revolution and, coming not yet five years after the fall of the Berlin Wall, the ultimate victory of capitalism and limited government.
Much has happened since then to suggest that Clinton’s pronouncement might have been somewhat premature: Sept. 11, 2001, and the Obama administration, for instance, not to mention the current far-left revival within the Democratic Party fueled mainly by young people who know little of the Berlin Wall. But those are nothing quite as portentous as what we are witnessing now.
Major events tend to precipitate large shifts in government thought, and the COVID-19 pandemic threatens to do just that, throwing open the gates for a vigorous return to an era of big government.
Consider some of the following comments. Rahm Emanuel, former Chicago mayor and once Obama’s chief of staff, was recently quoted as saying, “The era of Ronald Reagan, that said basically the government is the enemy, is over.” Tom Vilsack, former governor of Iowa and Obama’s secretary of the interior, said, “This particular circumstance shows the importance of government at every level.” Joe Biden recently said, “I think there’s going to be a willingness to fix some of the institutional inequities that have existed for a long time. Milton Friedman isn’t running the show anymore.” One despairs of remembering just when, exactly, Friedman or his philosophy ran the show, but you get the point.
One recoils from making the suggestion that Democrats, even those on the party’s leftward-most flank, in any way welcome the eruption of a pandemic as an avenue to advance their policy aims. But it is hard to deny that those who politically champion the functionality of expansive state action see the situation as a vindication of their ideological outlook, and one can hardly blame them.
The federal government’s financial response to the COVID-19 crisis has, so far, been around $2 trillion. For perspective’s sake, that comes in at about $800 billion more than the entire fiscal year 2019 discretionary budget (everything other than Social Security, Medicare, and Medicaid) and is more than half the $3.5 trillion the federal government received in total revenue last year. Even this could be just the beginning, as further spending measures continue to be bandied about.
Historically, government spending increases substantially in reaction to a serious national crisis and thereafter never falls back to pre-crisis levels, even once the instigating circumstances have passed. This ratchet effect, described with prescient clarity by Robert Higgs in his masterful 1987 book Crisis and Leviathan: Critical Episodes in the Growth of American Government, is well established. Government spending, measured as a percentage of GDP, increased dramatically during the Great Depression and World War II, and thereafter never dropped back to pre-war, let alone pre-Depression figures. Similarly, federal spending has never retreated to pre-Sept. 11 levels, nor has it dipped below 20% of GDP since the 2008 financial crisis. Given the current figures being churned out by Washington, that is an ominous realization.
There is a countervailing thought, however; that is the optimistic potential of the COVID-19 crisis to illuminate the asphyxiating effect of government regulation, particularly as it applies to pharmaceutical development, also seen here and there as state governments look to ways in which to help beleaguered small businesses shuttered by the lockdowns to revive themselves.
Which vision will prevail? President Trump is not Milton Friedman, and he has not proven reluctant to use the power of the state when it suits his needs. He is above all things a populist, well before a doctrinaire conservative, and the public by and large docilely accepts the ratcheting up of government in such times. Polls demonstrate this holds true today.
Going forward, the government will face two primary economic challenges — in the short term, reigniting the economy and further out, it will need to come to terms with the consequences of burgeoning debt and other damage wrought by present decisions. The economically literate solutions will be to pursue an aggressive program of deregulation to permit the reengagement of private enterprise, while resisting the destructive impulse to raise taxes, and concurrently, to draw back spending as quickly as feasibly possible to at least pre-crisis levels (pre-2008 levels would be better) and prevent unsustainable levels of spending from becoming a “new normal.”
This will require a steely kind of leadership, to pursue the correct route rather than the more popular, but myopic, alternative of having Leviathan come to the rescue. We know which path Biden wants to take. This could end up being the greatest test of Trump’s presidency, greater even than the pandemic — whether he will choose to lead the nation to real recovery or consign himself to history as the Republican president who rang in the return of the era of big government.
Kelly Sloan (@KVSloan25) is a Denver-based public affairs consultant, columnist, and the energy and environmental policy fellow at the Centennial Institute.
