The Era of Big Government Being Over Is Over

The era of big government is not over. It was never over (I'm looking at you Bill Clinton). It's still going strong and, in fact, may be getting a second wind. As Larry Summers put it (reported by Albert Hunt in a recent Bloomberg column):

The Republican vow to significantly reduce the size of government is a foolish pipe dream, Larry Summers says, not because of liberal policy aspirations but because of structural economic realities.

At a lunch on Wednesday, Summers, a former Treasury secretary and a leading Democratic economic-policy thinker, explained the substantive as well as political impracticalities of cutting entitlements and defense spending in the years ahead. 

"If we want to maintain traditional American values, government will need to be significantly larger," Summers declared at the event, hosted by the liberal Center on Budget and Policy Priorities.

Significantly larger! That Overton window is moving..... 

And, as Paul Krugman notes, it's not like the Republican efforts to downsize government and cut taxes were ever as successful as they claimed and many liberals feared:

We tend to think of the period since Reagan’s election as a conservative era; even though Republicans controlled the White House only a few years more than Democrats, there were lots of centrist Dems willing to cooperate with R agendas, versus almost no cooperation when Ds held the WH. And one tends to think of the period as a whole as involving tax-and-transfer policy tilting to the right.

Yet that’s not something that jumps out from the numbers. Think about taxes on the top 1%. Yes, Reagan and GW Bush cut them; but both Clinton and Obama raised them. The CBO estimates have some funny fluctuations, driven I think by capital gains: big capital gains raise tax receipts without a corresponding rise in measured income, as I understand it. Still, the overall picture is that at the end of the Obama years taxation of the rich was pretty much back where it was pre-Reagan:

Meanwhile, there were harsh cuts to some social programs — Clinton ended welfare as we knew it — but expansions of others. One simple metric: Medicaid enrollees as a percent of the nonelderly population, via the CDC:

He concludes: "a welfare state supported by progressive taxation has been much more robust than the year-by-year political narrative might lead you to think."

Exactly. Big government never went away and, looking 10 or 15 years down the road, the chances are very good that it's going to get much bigger. As Margaret Thatcher put it in a completely different context: there is no alternative.