Was the Debt Deal a Turning Point?

by Reihan Salam

My latest column for The Daily offers an optimistic interpretation of the debt deal, placing it in the larger context of the history of conservatism and the evolution of the U.S. welfare state:

Ever since the New Deal era, Congress has had the freedom to regulate almost every aspect of national economic life, and Democratic and Republican lawmakers have not hesitated to take advantage. The president commands a vast array of bureaucracies devoted to shaping the way we work, travel, eat, exercise, and sleep, and the executive branch is increasingly seen as the guarantor of American prosperity.There is a powerful built-in bias toward an expanding federal government, and conservative political victories have done very little to change that. As a result, the welfare state has been ascendant.

The Paris-based Organization for Economic Cooperation and Development traces in the richest countries the growth in public social expenditures, including spending on insurance programs, education and tax breaks designed to achieve society’s goals.In the United States, inflation-adjusted public social expenditures at the federal, state and local level increased more than 80 percent from 1990 to 2005. Inflation-adjusted GDP, in contrast, grew just more than 50 percent. That is, the welfare state grew much faster than the U.S. economy as a whole.

In the core economies of the European Union, which American conservatives so often deride as incorrigibly socialist, public social expenditures increased somewhat less over the same period.

This was an era of robust economic growth, when an increasing number of Americans were in a position to draw on their own resources to look after their health, education and retirement needs. In 1996, President Bill Clinton famously declared, “The era of big government is over.” Yet a close look at the numbers reveals that big government barely noticed. 

I go on to suggest that the debt deal might — emphasis on might — represent a turning point.

For the sake of balance, Arnold Kling offers a more pessimistic interpretation:


Another comparison would be with the Bowles-Simpson plan. That plan held spending to about 21 percent of GDP, and this plan never gets spending that low. That plan took on entitlements (admittedly without getting into specifics) and this plan does not.

I think it is reasonable to worry that the spending levels in this plan will become a floor rather than a ceiling. This is particularly likely to be the case if the narrative for the agreement becomes “The Tea Party won, and the left lost.” That narrative implies that spending could not possibly be cut further in a responsible way.

Baseball executive Bill Veeck, in Veeck as in Wreck, praised Horace Stoneham for appearing to lose negotiations while getting what he wanted. I think that is what the left accomplished in this case. Relative to the Bowles-Simpson baseline, which is where centrists on both sides thought that the budget should head, it was not the crazies on the right who were able to move the needle. It was the crazies on the left.

Arnold’s take strikes me as pretty reasonable. Granted, Bowles-Simpson was premised on significant revenue increases, thus neutralizing some opposition from the left. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.