Earlier this week I came across Ezra Klein and Matthew Yglesias commenting on a nice post from Brendan Nyhan about what effect, if any, Ronald Reagan had on the size of the federal government and on American perceptions of the size of the federal government. Which is interesting to me because I’m trying to become a bit of a Reagan wonk but also because this topic came up in a discussion on my facebook page last week. There was a discussion between a friend and me regarding Jonathan Chait’s post about how conservatives are reading Arthur Brooks’ The Battle: How the Fight between Free Enterprise and Big Government Will Shape America’s Future. Based on the write-up, it’s a ridiculous book, but what is interesting about this episode is that it’s yet another example of how conservatives (at least pretend to) live in a netherworld where actual facts about the US economy do not obviate theoretical frameworks for how they would like to view the US economy.
I quoted James K. Galbraith’s The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, from page 112:
Taking everything together, we find that the US is not a ‘free-market’ economy with an underdeveloped or withered state sector. It is, rather, an advanced postindustrial developed country like any other, with a government sector responsible for well over half of economic activity…And it is particularly good at disguising this fact and at cutting parapublic institutions in on the action.
This is basically the thesis of Galbraith’s book. I went on to quote page 114:
Overall, the New Deal survived Reagan quite intact, and the economy recovered–partly led by housing, partly by technology, partly by military spending. This was not because the conservatives around Reagan succeeded but because they had failed. Those who describe themselves as political conservatives but who are mainly interested in power rather than in ideas drew the lesson. They adapted. Rather than defeat the system, they decided to join it. And to turn it to their own purposes. Without saying a word.
But more to the point of the current discussion:
The history of the past three decades has often been written as a struggle between the spirit of Milton Friedman and the ghosts of Keynes and FDR–between the market and the state. The Reagan revolution was successful primarily in forcing changes in the way people thought and spoke: it resurrected Adam Smith and Friedrich von Hayek and established a new church of the free market, giving the right wing of the economics profession unprecedented exposure for its most extreme ideas.
Regardless of fluctuations in public opinion, Reagan’s tenure solidified a certain type of rhetoric that you still hear today, that you didn’t hear much of before 1980. There were harbingers, such as the “tax revolts” in California and other states, but it was a new development that outlived Reagan to have large swaths of conservatives expressing “skepticism toward government solutions to every problem.”
It’s also worth noting that Reagan, in addition to NOT actually shrinking the size of the federal government, was no free trade advocate, either. According to Benjamin Friedman in his Day of Reckoning: The Consequences of American Economic Policy Under Reagan and After,
President Reagan’s consistent rhetorical devolution to free trade notwithstanding, America during the 1980′s has taken more steps away from genuine free trade than in any comparable period since World War II. Outright duties, like the 100 percent tariff imposed on some electronic and semi-conductor products in 1987, have been infrequent. But protectionism built on back-door devices like “voluntary” export restraints, which exclude foreign-made goods while maintaining the fictionof free trade, is protectionism nonetheless. The share of America’s nonoil imports subject to such nontariff restriction has already grown from 17 percent in 1981 to 25 percent in 1986. And now businessmen abroad are concluding that the decline in the dollar since early 1985 is a modern equivalent to the Smoot-Hawley tariff we imposed in 1930.
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February 4, 2011 at 2:10 am
Merlin
Conservatives have some reasonably understandable policies; and so do Liberals. The problem lies in the political power structure. I may vote one way or another based on my beliefs and political stance, but the party benefitting from my vote and then, if successful, the administration who takes control makes the decisions. The decisions Reagan made do not paint a picture of Conservatives in general. They may have voted for him, but they didn’t make the decisions he made. The same is true for Liberal leaders and their voters. Clearly, power corrupts, regardless of the political affiliation. Whether Reagan inflated the size of our government or not, the people who voted for him have already swallowed the KoolAid and don’t want to accept the truth. The same can be said for any other decision by a Liberal president that wasn’t really approved by their voters. Proof of wrongdoing doesn’t correct the problem. It’s like throwing a stone at the opposition, only to result in another stone thrown your way.
February 4, 2011 at 6:53 am
rationalrevolution
I’ll gratuitously recommend my own article on the effects of Reagan: How Reagan Sowed the Seeds of America’s Demise | http://www.rationalrevolution.net/articles/recession_cause.htm
In short, he came into office when the US had its lowest level of debt since before the Great Depression, but he railed against the national debt as something that would destroy the country, yet when he left office he had actually tripled the national debt, and not just the national debt, but had put the country on a course of growing indebtedness in every sector, with both personal and private debt increasing massively.
The whole scheme of outsourcing government work to the private sector has been worse than a 100% failure. This is actually of of the major driving factors behind growing government spending and the corruption of the political system.
Reagan turned the federal government into a middle-man contractor that uses public money to pay private corporations. The result is inevitably that the corporation now have a profit motive to push for increased government spending, because their profits come from government.
The major obstacle to economic reforms and getting spending under control is now the private sector, because they have the power and they are the primary beneficiaries of government spending. We can’t execute reasonable budget cuts because any corporations that sees its gravy train getting cut will throw money at public officials to protect their gravy train.
Thus, the only budget cuts that are likely to make it through are the ones that have the least direct benefits for corporations, stuff like cutting Social Security (payments go to individuals) and public education, etc. IN essence, from an objective budget position the stuff most likely to get cut is the most vital stuff, while what is likely to remain is the least valuable stuff, because its just corporate welfare, and our government now serves corporations, not individuals.
February 4, 2011 at 7:30 am
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