Unless something big and unexpected happens, 2011 will be consumed by a debate over the size of government. Republicans will launch a critique of big government as part of their effort to cut spending. Democrats will surge to the barricades to defend federal programs.
Josh Haner/The New York Times
This debate will be contentious, but I hope it’s not rude to mention that it will be largely beside the point. National destinies are not shaped by what percentage of G.D.P. federal spending consumes. They are shaped by the character and behavior of citizens. The crucial issue is not whether the federal government takes up 19 percent or 23 percent of national income. The crucial question is: How does government influence how people live?
There have been cases when big government has encouraged virtuous behavior (in the U.S. during World War II), and cases when big government has encouraged self-indulgence and irresponsibility (modern Greece). There have been cases when small government was accompanied by enterprise and development, and cases when small government has led to lawlessness, corruption and distrust.
The size of government doesn’t tell you what you need to know; the social and moral content of government action does. The budgeteers and the technicians may not like it, but it’s the values inculcated by policies that matter most.
The best way to measure government is not by volume, but by what you might call the Achievement Test. Does a given policy arouse energy, foster skills, spur social mobility and help people transform their lives? Over the years, America has benefited from policies that passed this test, like the Homestead Act and the G.I. Bill. Occasionally, the U.S. government has initiated programs that failed it. The welfare policies of the 1960s gave people money without asking for work and personal responsibility in return, and these had to be replaced. The welfare reforms of the 1990s involved big and intrusive government, but they did the job because they were in line with American values, linking effort to reward.
Over the past few decades, Americans have waged political war as if all that matters is the amount of money going into federal coffers. The fights have been about “cutting government” or “raising revenue.” But amid this season of distraction the entire society suffered a loss of values and almost nobody noticed until it was too late. Both business and government started favoring consumption and short-term comfort and neglecting investment and long-term growth.
This hasn’t been a case of government corrupting capitalism or vice versa. The two have worked hand-in-hand. The government has erected a welfare state that, as Matthew Continetti of The Weekly Standard has pointed out, spends vast amounts on consumption (Medicare, Medicaid, Social Security, interest on the debt) and much less on investment (education, research, infrastructure), while pushing the costs on future generations. Meanwhile, the private sector has encouraged a huge increase in personal debt to fuel a consumption bubble. The geniuses flock to finance, not industry.
If we’re going to reverse this tide, it might be useful to put the Achievement Test back at the center of politics. This would help focus the national mind on the fundamental challenge: moving from a consumption-dominated economy oriented around satisfying immediate needs toward a more balanced investment and consumption economy. It might also cut through the gridlocked trench warfare between big-government liberals and small-government conservatives.
Reframing the argument around achievement wouldn’t end partisan division. Democrats and Republicans differ on what makes an economy productive. But it would allow for horse-trading.
As part of the budget process, Republicans could champion the things they believe will enhance productivity and mobility. Many of these will mean making sure people have the incentives to take risks and the freedom to adjust to foreign competition: a flatter, simpler tax code with lower corporate rates, a smaller debt burden, predictable regulations, affordable entitlements.
Democrats could champion the things they believe will enhance productivity and mobility. Many of these will mean making sure everybody has the tools to compete: early childhood education, infrastructure programs to create jobs, immigration policies that recruit talent, incentives for energy innovation.
The two agendas sit in tension, but they are not contradictory. The exciting thing about this moment is that everything is on the table. Thousands of policy proposals are floating around, thanks to the various deficit commissions and policy entrepreneurs. As the parties argue about the debt limit and the rest, it should be possible to take items from both and ram them into a package that cuts consumption spending in order to make investment spending more affordable.
How big will the resulting government be? That is a secondary issue. If a policy enhances achievement, we should be for that thing. If it displaces investment, we should be skeptical of it. Quality, not quantity, matters most.