"I'd rather be lucky than good," said Vernon "Lefty" Gomez, the New York Yankees' Hall of Fame pitcher. One needn't be an athlete to appreciate his jaunty stoicism about how little we can effect, and how much we are affected.
Writers, fidgeting in front of their computers, convinced that outside forces no more determine the fate of their work than they do the outcome of chess matches, are in particular need of the solace and humility Gomez proffers. It's hard for an author to know, and unseemly for him to say, whether he's written a good book. Clearly, however, my book, Never Enough: America's Limitless Welfare State, has been a lucky book—lucky in the way that doctoral dissertations on the Soviet Union, completed months before its demise, were unlucky.
I sent Never Enough's manuscript to Encounter Books in March 2009, six weeks after Barack Obama was inaugurated president. Having finished a book about the proper dimensions and provisioning of the welfare state at just the moment when the electorate seemed to have laid that question to rest, I thought my timing was as bad as that of aspiring Sovietologists in 1991. The Democratic victories in the elections of 2006 and 2008, combined with the credit crisis and recession that followed the collapse of the Lehman Brothers investment bank, apparently meant liberals would have decades in which to make big government bigger, while conservatives would spend long, dismal years praising free markets and limited government to shrinking islands of true believers amidst seas of empty chairs.
"For the first time since the Johnson Administration, the idea that government should take bold action to create equal opportunity for all citizens doesn't have to explain itself in a defensive mumble," George Packer wrote in the New Yorker after the 2008 election. Time magazine's cover on the election reached back even farther, photoshopping Barack Obama into a Franklin Roosevelt pose, complete with pince-nez and cigarette holder. Peter Beinart's cover story, "The New Liberal Order," contended, "If [Obama] can do what FDR did-make American capitalism stabler and less savage—he will establish a Democratic majority that dominates U.S. politics for a generation." Beinart predicted that Obama would have an "excellent chance" to launch that "era of liberal hegemony" by widening and deepening the Democratic base, since "taking aggressive action to stimulate the economy, regulate the financial industry and shore up the American welfare state won't divide his political coalition; it will divide the other side."
Matt Bai of the New York Times was one of many political analysts endorsing this thesis. The week before the 2009 inauguration he wrote that Obama "stands to become the first president since the 1970s to unapologetically spend the taxpayers' money—and, more likely than not, he won't have to raise anyone's taxes to do it. No liberal born after Roosevelt could ask for more."
Enter the Tea Party
Never Enough's luck had changed by the time its first copies reached bookstores in May 2010. The "settled" question of the need for a much bigger welfare and regulatory state had become unsettled after the nation took a sharp detour off the road to social democracy. The book makes no mention of the Tea Party, for example, which coalesced and began asserting itself in the first weeks of what was supposed to be the new liberal era. By August 2011 Peter Beinart was writing that although "Barack Obama may be president," the Tea Party is "running Washington." Showing undiminished confidence in the crystal ball that served him so badly three years before, he declared that the debt ceiling agreement cutting federal spending without raising taxes "ended whatever hopes liberals once entertained that...we were living in another great age of progressive reform." To the contrary, America has entered an "era of fiscal scarcity," meaning that "progressive dreams are now likely dead for many years to come," while "the Tea Party's dream of a government reduced to its pre-welfare-state size becomes ever [more] real."
Replacing the anticipation of hegemony with resignation to futility has caused bitterness, confusion, and despair among liberals. In 2010 the journalist Michael Tomasky advised his fellow liberals to come to terms with the fact that, against all expectations, "the party of government's very raison d'être" had ceded rather than gained ground during Obama's presidency. "The great bottom-line hope back in November 2008 was that Obama was going to restore trust in government and prove it could solve problems. That hasn't happened."
Holding forth on why that hasn't happened has become an industry, one of the few to expand during Obama's presidency. Liberals have ascribed most of the blame for scuttling their semi-permanent majority to Barack Obama, Mitch McConnell, and James Madison. That liberals should repudiate a Democratic president, so soon after experiencing multiple O-basms in public during his campaign, is startling. ("He is not the Word made flesh, but the triumph of word over flesh, over color, over despair," Ezra Klein wrote for the American Prospect after the 2008 Iowa caucuses. "Obama is, at his best, able to call us back to our highest selves, to the place where America exists as a glittering ideal, and where we, its honored inhabitants, seem capable of achieving it, and thus of sharing in its meaning and transcendence.") By the summer of 2011 the leftist historian Michael Kazin lamented, "Obama has fallen short of FDR" because he "appears to have no strategy for creating a long-term majority—either for his party or for the progressive causes he believes in."
A Tomasky article written at the same time, during negotiations over the debt ceiling, complained, "Obama has hardly ever gone to the American people to insist firmly that there are some things he would never abide." He fails to make clear what political principles he holds "sacred or inviolate" because what's most important to Obama is "not to lead. It's not to fight. It's not even to win. It's to be the most reasonable and unflappable person in the room." A few weeks later Tomasky delivered an even harsher judgment: there are "millions and millions of Americans who invested great hope in [Obama], and he has let them down. Let them down terribly."
Liberals came to consider Obama's even-tempered commitment to post-partisanship, however admirable in the abstract, a betrayal of their cause in the circumstances following the 2008 election, because it meant capitulating to the Tea Party and scorched-earth congressional Republicans. "How can you sustain a democracy if one of the two major political parties has been overrun by nihilists?" Joe Klein of Time asked during the debate over health care in 2009. The dwindling remnant of "honorable conservatives" among Republicans has been "overwhelmed by nihilists and hypocrites more interested in destroying the opposition and gaining power than in the public weal." Two years later Jacob Weisberg of Slate decried the same dynamic even more stridently: "A Congress dominated by mindless cannibals is now feasting on a supine president."
Congressional Republicans had so much success in diluting, delaying, and impeding the Democrats' agenda after the 2008 election, many liberals concluded, not just because Obama was feckless and the GOP reckless, but because our Constitution is fundamentally flawed. In expecting Barack Obama to be a 21st-century Franklin Roosevelt they were looking forward to a way of governing as well as a set of policies, joining a long procession of intellectuals and activists who hoped the extraordinary set of circumstances that gave rise to the New Deal would define the norm. As the political scientist Sydney A. Pearson, Jr. explained:
When [FDR] took office in 1933 the separation of powers effectively ceased to function for the first time in a major domestic crisis other than civil war. The first hundred days of Roosevelt's administration saw the executive branch write laws in the White House, send them to Capitol Hill where they were rubber-stamped without debate, and enacted into law. For a brief period the American people saw how a parliamentary system would function.
The first sentiment animating 19th-century Progressivism was admiration of parliamentary democracy, a system sometimes described as dictatorship punctuated by elections. It has remained appealing ever since to intellectuals and activists for whom "the practice of American democracy meant the institutionalization of the liberal-progressive agenda," in Pearson's words. Many liberals were enraged that Senate minority leader Mitch McConnell could marshal his 41 Republican colleagues to exploit the filibuster and other procedural arcana to thwart 59 Democratic senators as well as President Obama and the Democratic majority in the House of Representatives. These complaints that the Senate's rules frustrate democracy led to complaints that its existence does so: a legislative chamber where Wyoming's 564,000 residents enjoy equal representation with California's 37 million was condemned as "resolutely, aggressively, anti-democratic," one which "ought to be abolished."
Economies, Good and Bad
It will be noted in considering these arguments that Team Obama, which deftly surmounted every obstacle on the road to the White House, is the same crew with the same captain that suddenly lost the ability to articulate its priorities and principles. Furthermore, the Tea Party ideology is not fundamentally different from the conservatism of Barry Goldwater's followers, who reviled but scarcely delayed the advent of Great Society liberalism. Finally, the constitutional framework that robbed Barack Obama of the chance to be a transformational president was the one that allowed Lyndon Johnson to enact landmark Great Society legislation, and Ronald Reagan to dramatically lower and simplify federal taxes in 1981 and 1986.
In other words, these insubstantial explanations for the evanescent era of liberal hegemony after November 2008 seem to have been built to assuage rather than persuade. For those who write and read these arguments, only malign or random forces outside liberalism can account for a liberal epoch that ends a few weeks after it begins. It's not that liberals would rather be lucky than good, exactly. Rather, believing liberalism inherently good, they are left with bad luck, principally in the form of inadequate champions and egregious adversaries, as the only possible explanation for its setbacks. There's no need, in other words, to entertain the possibility that liberalism itself has defects that vitiate its political appeal and governmental efficacy.
The fact that activist government is in trouble in arenas both within and beyond American national politics, however, makes it hard to believe that none of liberalism's troubles are of its own making. In December 2010 a New York Times article warned that "many state and local governments have so much debt—several trillion dollars' worth, with much of it off the books and largely hidden from view—that it could overwhelm them in the next few years." Furthermore, "It is the long-term problems of a handful of states, including California, Illinois, New Jersey, and New York, that financial analysts worry about most." The article was too diplomatic to point out that this handful is no eclectic assortment, but an honor roll of states where the New Deal faith in the moral imperative and practical feasibility of big government holds sway. Richard Ravitch, who was then New York's lieutenant governor, told the Times that the most deeply indebted jurisdictions did not borrow themselves into peril "with bad motives." Rather, "Ninety-five percent of them didn't understand what they were doing. They did it because it was easier than taxing people or cutting benefits."
Considering the question of big government from an international perspective, the European social democracies that don't have sovereign debt crises are imperiled by ones that do. Even if those massive problems are resolved without catastrophe, Europe's welfare states still confront demographic tides engulfing their social insurance systems. It appears that history played a cruel joke on liberals just as they were toasting the advent of their long ascendency. Janet Daley of London's Telegraph wrote that Americans in 2008 "elected a government which chose to embark on the social democratic experiment at precisely the moment when its Western European inventors were despairing of it, and desperately trying to find politically palatable ways of winding it down." In Europe, home of the "post-war philosophy which accepted the state as an unquestionable source of benevolence and all-pervasive social justice," according to Daley, "there is now a broad understanding that the social democratic project itself is unsustainable: that it has grown wildly beyond the principles of its inception and that the consequences of this are not only unaffordable, but positively damaging to national life and character."
Liberals will object that efforts in America and Europe to "reduce—or, at least, to examine rigorously—the role of government intervention in all areas of social life," in Daley's words, are entirely the consequence of a severe global recession brought on by the excesses of capitalism, not by the excesses of efforts to make it more stable and less savage. Thus, the current travails prove nothing about the intrinsic viability of social democracy.
The experience of California, however, one of the states most committed to activist government, argues that the only thing more inimical to the liberal project's fiscal health than a bad economy is...a good economy. It was in 1999, when the dot-com boom was turning every Silicon Valley nerd into a millionaire, inundating California's state and local governments with tax revenues, that the state legislature enacted SB 400, making public workers' pensions considerably more generous.
State highway patrol officers, for example, had their pension benefit formula changed from "2 at 50" to "3 at 50." That is, after 1999 a patrolman as young as 50 could, with 25 years of service, retire with 75% of the salary he received during the 12-month period in which he was most highly compensated—3% of salary for each year on the force. A 30-year veteran would receive a pension equal to 90% of salary. Those pensions would have equaled 50% and 60% of peak salary, respectively, under the pre-SB 400, "2 at 50" formula. SB 400 conferred corresponding pension increases on most other state employees, and set in motion a process that extended them to California's local government employees as well. All these benefits were applied retroactively, indexed against inflation, and paired with generous health insurance and survivor benefits.
One of the reasons the state legislature passed SB 400 with little debate or dissent—it carried the Assembly by a vote of 70-7, and the state senate by 39-0-was that CalPERS, the state's public employee retirement system, authoritatively assured lawmakers that, in effect, the dot-com boom would go on forever. Expecting returns on its investment portfolio to continue at the rate of the late 1990s for at least the next decade, CalPERS advised that SB 400's pension enhancements could be implemented "without it costing a dime of additional taxpayer money." When market realities proved very different from this wishful thinking, public employers' obligations to pay into pension funds soared, costing the state billions of dollars more than CalPERS had predicted, and still leaving it and other public pension funds severely under-capitalized.
"Happy Days are Here Again" did not become the New Deal theme song by accident. Decades of experience with liberalism in America and social democracy in Europe show that social welfare commitments, pledges that commentators not otherwise fond of faith-based arguments insist must be held "sacred or inviolate," are routinely predicated upon robust, never-ending economic growth. As a result, welfare state obligations chronically exceed the revenues meant to cover them by a GDP percentage point or two. Or a few. Or a few more than a few.
In 1967 Paul Samuelson, one of the foremost economists of the past century and a leading American apostle of Keynesianism, discussed social insurance in a Newsweek column destined to be quoted repeatedly, always by conservatives:
The beauty about social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in. And exceed his payments by more than ten times as much (or five times, counting in employer payments)!
How is this possible? It stems from the fact that the national product is growing at compound interest and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population. More important, with real incomes growing at some 3 percent per year, the taxable base upon which benefits rest in any period are [sic] much greater than the taxes paid historically by the generation now retired....
Social Security is squarely based on what has been called the eighth wonder of the world—compound interest. A growing nation is the greatest Ponzi game ever contrived. And that is a fact, not a paradox.
Compound interest is a marvel. If a nation's welfare state obligations are growing faster than the demographic and economic foundation that must provide for them, however, there's a problem—indeed, a problem that compounds over time as the gap between commitments and revenues widens and ultimately devastates. A council of philosopher-kings, such as the late Professor Samuelson's fellow Nobel laureates in economics, might have the wisdom and unfettered power to bend the payment and revenue curves until they align. But in a democracy where politicians compete for the voters' favor, borrowing is always "easier than taxing people or cutting benefits," in Lieutenant Governor Ravitch's words.
Samuelson's ode to compound interest appeared late in the afternoon of America's long postwar boom, but was written as though 1967 was still the morning of an endless, sunlit day. Assured by pronouncements like his, as the California legislature was assured by the CalPERS assessment of SB 400, Congress approved double-digit increases in Social Security four times in the five years after 1967. Compounded (of course), the increase amounted to 71.5%.
Why doesn't America have a vast, generous, enveloping welfare state like the ones in Europe? Why does the one we do have grow so much more slowly than its liberal advocates would like? These questions have been the subject or subtext of innumerable seminars at the Brookings Institute and Kennedy School of Government, as well as conversations at the Democratic National Committee headquarters.
I submit that the Occam's Razor answer really is the best explanation: America doesn't have a big welfare state because the American people don't want one. "Wanting one" does not mean telling some polling firm's dial-and-smile employee who's just interrupted your dinner that, yes, you "favor" "more" government spending on this social need or that social problem. Such slender, amorphous survey data do more to mislead than reveal.
Wanting a big welfare state means agreeing to pay for it. That, again, is different from telling the intrusive pollster—anonymously, hypothetically, non-bindingly—that you're amenable to higher taxes to further some good cause. Intensity, which does and should matter in a democracy, is a quality public opinion surveys measure badly but actual elections reflect well. It took Democrats several years and electoral defeats to realize, for example, that the polling majorities in favor of gun control were sirens luring them into political danger. It turned out that many people in the not-so-small minority opposed to gun control were prepared to vote for or against a candidate on that basis, while very few people who told a pollster they favored gun control favored it so avidly that the issue determined their vote.
A democratic nation that wants a big welfare state, then, is one where a clear, durable majority is willing, even determined, to elect parties and politicians who explicitly tell the voters that prosperity, decently and harmoniously shared, requires much higher levels of government services and expenditures, that these necessities cannot be rendered without raising taxes, and if elected they will do all they can to enact such tax increases. Politicians like...well, there's the problem. Politicians like former Vice President Walter Mondale, who told the 1984 Democratic convention, "Mr. Reagan will raise taxes, and so will I. He won't tell you. I just did." Mondale's candor earned him victories in the District of Columbia and his native Minnesota, forcing President Reagan to cobble together an Electoral College majority by carrying the other 49 states.
The ghost of Mondale's promise and subsequent defeat has haunted his party since 1984. "When campaigning for president, Obama had to pledge, as all Democrats since Walter Mondale have, that he would never raise a tax on middle-income people," Michael Tomasky wrote in 2010. "Obama had to make his sub-$250,000 pledge, or he probably would have lost the election."
The best evidence that the American people oppose a European-sized welfare state is the Democrats' embarrassing contortions to belie their efforts to bring about exactly that result. Fears about asking voters for the revenue a big welfare state needs cause Democrats, as we have seen, to hope desperately that a full-throttle economy will solve their problem for them by rendering the tax question politically moot. When liberal politicians acknowledge that tax increases are necessary for sustaining and expanding activist government, they immediately retreat to howlers about the feasibility of paying for their agenda by holding more than 95% of the country exempt from higher taxes. Obama "had to commit himself, if he wanted to be president, to a bad fiscal policy," according to Tomasky. Or, in the opinion of Jonathan Chait, a tireless advocate for higher taxes on the affluent, "It has become clear that Obama's pledge not to raise taxes at all on anybody earning less than $250,000 a year is no longer compatible with even the minimal demands of government over the next decade."
When liberals do secure major expansions of the welfare state, of which the Patient Protection and Affordable Care Act (PPACA) in 2010 was the most important in many years, they insist their achievement is quite different from what it seems to be. Barack Obama bet his presidency, in the journalist Ryan Lizza's assessment, on the idea that health care reform would also be, or at least be seen as, a plan to reduce the federal deficit. The argument, which originated with Obama's first OMB director, Peter Orszag, was that since the federal government already knew how to provide much better health care for much less money, it needed only a good deal more power to "persuade doctors to become more efficient health-care providers, thus saving billions of dollars." The tortured argument that the government could improve its finances by giving more assistance to more people caused even observers who liked PPACA, such as the Atlantic Monthly's Clive Crook, to deplore the politics that carried it to victory:
It is right to provide guaranteed health insurance, but wrong to claim this great prize could be had, in effect, for nothing. Broadly based tax increases and fundamental reform to health care delivery will be needed to balance the books. Denying this was a mistake. What was worse—an insult to one's intelligence, really—was to argue as Obama has...that this reform was, first and foremost, a cost-reducing initiative, and a way to drive down premiums.
The dilemma is that efforts to advance the liberal project, even successful ones, end up discrediting the liberal idea. The journalist and blogger Matthew Yglesias lamented the unfortunate lesson taught by Obama's 2008 campaign: "A platform of no tax increases for the bottom 95 percent can win elections, but it reinforces rather than debunks the right's fundamental view of the tax question—that public services aren't worth paying for—and merely suggests that the correct answer is to get someone else to pay for them." Believing, "The most important issue is whether or not the government has the revenue needed to finance generous spending on social services," Yglesias reminds liberals that their lodestar, the "Scandinavian model of a cradle-to-grave welfare state" is "financed largely through regressive taxation."
The problem with trying to secure "enough revenue to...implement a transformative domestic agenda," is that the politics of raising taxes "at least a little from a broad group of people" is "tricky." Raising government tax revenue to "unprecedented high levels will require winning a difficult argument about what's economically feasible." These difficulties in no way suggest that liberalism has a fundamental problem in securing popular support. People have always grumbled about paying taxes, Yglesias contends, even while understanding, "Taxes let people take risks with their lives, guarantee a financially secure retirement, educate children, keep our roads drivable, pay police, and help ensure that the benefits of prosperity are broadly shared."
Only when the virtuous people were deceived and betrayed by conservative demagogues did the tax issue become a dagger pointed at liberalism's heart:
But starting in the late 1970s, political entrepreneurs on the right helped launch a broad "tax revolt" that completely changed the public's view of taxation. Before, higher taxes were a price that one might or might not want to pay in order to finance an expenditure. After, taxes became an unmitigated evil, and "to do that, you'd have to raise taxes" became an unanswerable objection to any policy endeavor.
One problem with this analysis is that there is, in fact, an obvious answer to conservatives' "unanswerable" objection: "Yes, we will have to raise taxes, but all of us are going to be better off with higher taxes and additional government programs than with lower taxes and fewer policy endeavors." This obvious answer, however, is essentially the Mondale tax promise.
People vs. the Powerful
Mondale's defeat, and the ensuing conviction that liberal politicians must never again suicidally promise higher taxes and more extensive welfare state benefits, raises another problem with Yglesias's argument. Is it really the case that the tax revolt "completely changed the public's view of taxation?" This version of recent history ascribes remarkable powers to conservative "political entrepreneurs," like the ones who thought up California's Proposition 13 and guided it to a landslide victory in June 1978.
It also ascribes remarkable stupidity to the American people. For many years they made the rudimentary connection between the level of taxes and the level of government benefits, which meant they were at least amenable to arguments that their interests would be well-served by "generous spending on social services." All it took, however, were preposterous conservative claims that taxes are "an unmitigated evil" for them to abandon their long years of clear, responsible thinking.
Everyone in politics, across the ideological spectrum, is susceptible to the "Howell Raines Fallacy," named by Mickey Kaus in honor of a former New York Times editorial page editor, and describing that page's "easy assumption that one's righteous views are shared by the great and good American People." Conservatives, however, standing athwart history yelling Stop, are better prepared to take political setbacks in stride. We expected them, after all, and have the further consolation of seeing our hell-in-a-handbasket analyses vindicated.
The cognitive dissonance liberals suffer when their own righteous views are not shared by the people is far more acute, being so difficult to reconcile with liberalism's master-narrative. "Standing up for ‘the people, not the powerful'...is the Democratic Party's meaning and mission," former Vice President Al Gore wrote in 2002. The "struggle between the people and the powerful was at the heart of every major domestic issue" during his 2000 presidential campaign and remains "the central dynamic of politics." There is no easy way, starting from that premise, to account for evidence that the people are tuning out or even standing up to liberal meliorists, whose purpose in life is standing up for them against the powerful.
Thus, liberals believe that Americans, deep down, want a Scandinavian welfare state, or would if only they understood its virtues. Yglesias shows that liberals are so committed to this idea that they are prepared to imply strongly that if Americans don't want what liberals want for them it's because they can't understand it. (He refrained, at least, from echoing Jane Smiley, the novelist who blamed John Kerry's defeat in 2004 on the fact that "red state types, above all, do not want to be told what to do—they prefer to be ignorant. As a result, they are virtually unteachable.")
Such are the lengths liberals will go to banish the thought that the people reject the liberal agenda despite understanding it, or perhaps even because they understand it. In fact, there are good reasons to doubt that in or about June 1978 human nature changed. In the aftermath of the tax revolt people view taxes pretty much the way they always have, as "a price that one might or might not want to pay in order to finance an expenditure." The problem is that people don't want to pay higher taxes because they think the expenditures liberals keep recommending don't sound like they're worth it. The people might, for example, resist the idea that the dramatic expansion of social welfare programs will have wondrous results because they have a feeling—vague, perhaps, but not unfounded—that we have already experienced a quasi-dramatic expansion of social welfare programs, one that has had sub-wondrous results.
Updating some of the statistics in Never Enough's first chapter, in 2010 the federal government spent $7,369 per American through its Human Resources programs (Social Security; all other income support programs; Medicare; all other health programs; and all programs in education, job training, and social services). Adjusted for inflation, those per capita outlays were twice as high as they had been in 1989, 3.1 times as high as in 1974, and 4.4 times as high as in 1970. Are the most vulnerable among us twice as numerous as they were 20 years ago, and four times as numerous as 40 years ago? Or have the most vulnerable been rendered 50 or 75% less vulnerable than they were two and four decades ago? If not, and if we rule out the possibility that Americans today have amnesia about the Third World quality of life we endured in 1989 or 1970 before government programs rescued us from squalor and misery, we have to rule in the possibility we've built a welfare state that has earned a dubious achievement award in the category of spending lots of money to little effect.
Never Enough argued that America's welfare state would be leaner, fairer, and more effective if its programs were means-tested, so that we radically curtailed the provision of public benefits to the least vulnerable among us. Means-testing is a necessary condition for a politically and economically sustainable welfare state but not, however, a sufficient one. The parts of the welfare state that are already means-tested have grown dramatically, even though the problems those programs are meant to alleviate do not seem markedly less severe. A 2009 Heritage Foundation study of 71 means-tested welfare programs found that expenditures on such programs had increased from 1.2% of GDP in 1964 to 5% of a far larger GDP in 2008, and were on track to average 6% of GDP for each year in the decade after 2008. The $714 billion spent on these programs in 2008, $522 billion by the federal government and $192 billion by the states, worked out to $16,800 for each American living below the poverty line in 2008. Even divided among people with incomes up to twice the poverty level ($44,400 per year for a family of four in 2008), who are eligible for many means-tested programs, each one would have received about $7,000.
An American voter, then, need not be greedy, bigoted, callous, or fanatical—or in the thrall of political operatives who are—to conclude that the startling tax increases needed to secure the blessings of a European cradle-to-grave welfare state are distinctly resistible. Denmark, France, Germany, and Sweden all devote more than a fourth of their GDPs to government social spending, according to the latest figures (2007) from the Organisation for Economic Co-operation and Development. The United States allocates less than one-sixth of GDP for those purposes. To have spent an additional 10 GDP percentage points on social programs in 2010 would have cost roughly $1.45 trillion, and allowed America to emulate "the most decent societies in human history," according to Paul Krugman's recent characterization of Europe's social democracies. It would also require, absent still more government borrowing, a tax increase of about $12,800 for every household or, if we honor President Obama's promise about shielding non-affluent families from higher taxes, an increase averaging $256,000 on each household in the top 5% of the income distribution. Imagine how many more votes Walter Mondale might have lost had he jettisoned the vague commitment to "raise taxes" in favor of the bold promise to increase them by 40%, which is what adding a tenth of GDP to the tax bill would have meant in 2010, and you grasp the essence of the liberal dilemma.
Thus, there's no reason to anticipate that the attractions of a much bigger welfare state will be a lever liberals can use to pry unprecedented tax increases from American voters. Liberals thought the crisis of 2009, if they didn't let it go to waste, would guarantee them an era of hegemony. The circumstances greeting the Democrats turned out to be unpropitious in one crucial respect, however. The ability of Social Security and Medicare to withstand the demographic wave of baby boomers, who were just beginning to enroll in the programs as Obama settled into his new job, raised the question of whether America could afford the welfare state it already had, gravely complicating efforts to persuade the people to endorse an even bigger one.
The corresponding political question is whether conservatives can use resistance to tax increases as a lever to move the electorate to accept a welfare state significantly smaller than the one sprawling up and out from the foundations laid by the New Deal and Great Society. The fiscal policies put forward by Paul Ryan, the Republican chairman of the House Budget Committee, are best understood as an attempt to accomplish this goal. Ryan's approach tells voters that if federal taxes are to be maintained at their historic levels, around 18% of GDP, big changes will have to be made in the welfare state. His proposal, for example, turns Medicaid into a block-grant program, and changes Medicare from a defined-benefit to a defined-contribution insurance system.
Will that dog hunt? The early indications are that voters aren't stampeding to embrace Ryan's approach. A few weeks after he unveiled his proposal the Democrats made it, especially the Medicare changes, the basis of their successful campaign in a special election for a New York House seat, in a reddish upstate district (NY-26) Republicans had held in the adverse elections of 2006 and 2008.
And yet. It's highly unlikely that our fiscal problems will be decided entirely on conservative terms, where government spending is ratcheted down to permit the continuation of tax levels Americans have grown accustomed to. It's also unlikely they will be resolved entirely on liberal terms, where taxes ratchet up to cover the promises the welfare state has already made, and then go up a lot more to pay for the additional promises liberals want it to make. A resolution that prevents a national bankruptcy, whether achieved in one grand bargain or through a series of policy changes taking place over several election cycles, is almost certainly going to fall somewhere between these two poles.
The question of whether the compromise will be made largely on liberal or on conservative terms depends on which side has the upper hand, politically, in the negotiations. That, in turn, will depend on the choice the American people make once it becomes clear to them that they must make a choice. Do they want a welfare state that can be sustained by a tax burden in line with the one we have known since the 1980s? Or do they want significantly higher, broadly applied taxes, in order to continue expanding the New Deal-Great Society welfare state, thereby rejecting the idea of making fundamental changes to it?
Elections like the one in NY-26 don't prove that when push comes to shove the voters will break in the Democrats' direction. Rather than choosing high taxes over a limited welfare state, the voters may have been expressing the hope that such a choice, which America has postponed for many years, is one we can go on postponing. Democrats did not win, in other words, by asking voters to choose between Paul Ryan's Medicare plan and instituting a national Value Added Tax. They won by encouraging the belief that the indefinite continuation of Medicare wouldn't require any difficult choices. The fiscal arithmetic argues that this hope, like so much else about our welfare state, cannot be sustained indefinitely.
Dieting the Beast
The assessment in Never Enough i now question most strongly is that supply-side tax cuts turned out to be of little value to conservatives in their efforts to reduce and ultimately reverse the growth of the welfare state. The basis for dismissing the "starve the beast" argument that tax cuts would ultimately force spending cuts is that the beast is ravenous, but not fussy. It will devour dollars that have been borrowed as eagerly as ones that have been taxed. As the journalist Jonathan Rauch put it, the transformation of "a limited-government movement into an anti-tax movement" has meant that conservatism "is not starving the beast. It is fueling the beast's appetite. And the beast has a credit card."
Sovereign credit cards also have credit limits, however, as events on trading floors and in election booths since 2009 have reminded us. Perhaps—the question will be settled in markets and elections in coming years—tax cuts do starve the beast, but only after we've approached the point where borrowing can no longer make up for the revenue not generated by taxes politicians are afraid to raise. Conservatives can take hope on this point from Matthew Yglesias's gloomy prediction that by ruling out tax increases on anyone making less than $250,000, Obama and the Democrats have made "something approximating Ryanism inevitable."
Conservatives could help their cause and their country by following Congressman Ryan's lead in making clear that their goal is not to starve the beast, which implies it will die, but to come up with a diet that reconciles the welfare state's genuine needs to the food supply's limits. The historical data, some of it presented in Never Enough, show that as nations prosper their welfare states have always expanded. It's plausible for democratic electorates to decide that economic growth gives a society the leeway to direct a portion of its additional income into public programs while the rest is consumed or invested privately.
Though the alternative path has hardly ever been taken, it is equally plausible. A democracy could conclude that a growing economy means that a welfare state with a clearly defined mission, as opposed to one where the goal posts are constantly receding as we move toward them, can be financed by spending a decreasing portion of the nation's increasing wealth. This is exactly the approach we have taken with defense spending. In 1953, at the height of the Korean War, America devoted 14.2% of GDP to national defense. In 2010 we spent 4.8%. By this measure, our defense spending has declined by two thirds. But America today is a much richer country than it was in 1953. Measured in real dollars rather than GDP points, we spent 20% more for defense in 2010 than we did in 1953. There is no obvious reason why the same logic should not permit welfare state spending to grow in absolute terms, if necessary, while shrinking relative to a larger economy. If the aversion to taxes and the limits of borrowing mean that we are approaching a time when it becomes impossible to do welfare state business the old way, then conservatives will get an opportunity, perhaps soon, to persuade America to try a new one.