The fiscal history of the U.S. government is the history of the ratchet effect described by Robert Higgs in Crisis and Leviathan: The federal fiscal footprint grows dramatically during periods of national emergency, and then it never declines to its pre-emergency levels — if it declines at all. What was extraordinary last year becomes ordinary next year, or closer to ordinary. That is why before the coronavirus epidemic struck and the economy was, by most measures, doing pretty well, the U.S. government already was planning to spend more money in 2020 than it was spending in, say, 2007, with the Iraq War “surge,” or in 1968, at the height of the Vietnam War, or in 1969, when Americans landed on the moon for the first time.
In 1930, federal spending amounted to 3.4 percent of GDP, while taxes came in at 4.1 percent of GDP, producing a small budget surplus. That was not to last. The Great Depression sent GDP crashing from $98.4 billion in 1930 to $58.3 billion in 1933. Spending had ramped up to 10.6 percent of GDP by 1934, with a budget deficit of 5.8 percent of GDP. Then things tapered off a bit, both spending and deficits mostly declining through 1940, but with the economy still struggling and war looming, neither returned to pre-Depression levels. And then, both increased dramatically: Spending leapt from 11.7 percent of GDP in 1941 to 23.8 in 1942 to 42.6 in 1943, while the deficit went from 4.3 percent of GDP to 13.9 percent to 29.6 percent in the same years.
When the twin emergencies of the Great Depression and World War II concluded, spending ticked down — but, again, not to pre-war levels. In 1948, spending was 11.4 percent of GDP, with a sizeable budget surplus of 4.5 percent of GDP. But federal spending would never be that low again. It began to climb, and by 1983 it had doubled, to 22.9 percent of GDP, with a deficit of 5.9 percent of GDP, the largest budget shortfall since 1946. In the post-Reagan era, spending hit its low point in 2000 and 2001, 17.7 percent of GDP (with small surpluses) both years. The high point was 2009, with the federal government running a 9.8 percent–of–GDP surplus and spending 24.4 percent of GDP. That was an emergency period, too — the financial crisis. During the decade before the financial crisis, federal spending never hit 20 percent of GDP; since then, it has never been below 20 percent of GDP.
Spending tends to increase during wars, but the U.S. government is not spending that money on the military: In 1957, Washington spent 9.8 percent of GDP on the military, and by 2015 the government had cut that by more than two-thirds, to 3.3 percent. Wartime emergency spending quickly was diverted into a larger peacetime welfare state.
The evolution of Leviathan is easiest to follow in financial terms, because those are quantifiable and published. But the growth of state power — here at home and abroad — is more complex than that, and more invasive — and it is in very many cases popular, even when it is nakedly self-interested. The Alliance for American Manufacturing, a union-backed lobbying group that advocates “buy American” mandates in practically all government purchases and other forms of trade protectionism, argues that the epidemic shows the immediate need for such mandates in practically all government purchases and for other forms of trade protectionism. In the most recent Gallup poll, nearly 80 percent of respondents endorsed anti-outsourcing measures. Elizabeth Warren, who has long advocated laws mandating higher wages, says the epidemic shows the need for such laws, which generally enjoy broad support. The same goes for other tangential issues opportunistically attached to the epidemic response.
There is an emotional payoff to crisis solidarity — and a big political payoff, too, which is why Donald Trump has taken to calling himself a “wartime president,” why Emmanuel Macron has declared “We are at war!” while Queen Elizabeth II does the same. Even Angela Merkel is invoking that unpleasantness from 1939 to 1945: “Since the Second World War, there has been no challenge to our nation that has demanded such a degree of common and united action,” she said. So the epidemic is, from that point of view, a lot like World War II, except the Germans are on our side. Perhaps most important from the politicians’ point of view, the “wartime” rallying effect seems to be in evidence: Merkel’s numbers are up and, as of this writing, so are Trump’s.
A critical difference is that the economic challenge of World War II was mobilizing resources and maximizing output for the war effort. The challenge in our time is trying to minimize the damage that will be done by forcibly idling businesses, industries, and much of the nation in the service of social isolation, the hygienic deep freeze in which the epidemic, it is hoped, will die down. And so the predictable opportunism of the political caste is, in a sense, more nefarious: Businesses and individuals find themselves in the position of needing aid not because of normal organic economic changes or unwise investments (I guess the Fortune 500 shouldn’t have spent all that money on avocado toast) but because they are (to varying degrees voluntarily) being co-opted to serve a different social end — an important one. Forcing people into the position of needing assistance and then conditioning that assistance in self-serving political ways is corrupt, and it should be understood as corruption.
For example: There might have been some pretty good “loose lips sink ships” reasons to restrict the communications of certain businesses receiving military contracts during the war against Germany and Japan (oh, all right: You, too, Italy, you, too!), but there is not much good reason for restricting the First Amendment rights of U.S. business owners and executives during this epidemic. Nonetheless, Washington is doing precisely that, for example by forbidding recipients of federal business aid to speak against unionization in their firms. Aid is normally conditional, and there is not anything wrong with that where the conditions serve some legitimate purpose related to the intended use of the aid. This is not that. This is rank political opportunism and the diminution of basic political rights. Progressives tempted to justify this restriction of political speech on the grounds that he who pays the piper calls the tune should think very carefully about the principle they are forwarding and the ways in which it might be applied to people receiving other kinds of government aid.
There are dozens of other abusive interventions of that sort written into aid packages and other coronavirus emergency measures. The temptation to maintain these abuses even after the coronavirus emergency has passed will be very powerful. And, in many cases, such proposals will be popular, though there already are pockets of resistance to the heavy-handedness of the response (e.g., police arresting a man for playing T-ball with his daughter in an otherwise empty park, prohibiting the sale of vegetable seeds at stores that are open for selling “essential” goods, prohibiting “drive-in” Easter services and other innovations in social-distancing worship, etc.), most prominently from conservative religious communities and in rural areas. But in the main, these measures have support and are widely defended in the press on “wartime” grounds. The natural inclinations of the American people are considerably more authoritarian than is the American Constitution, which is one of the things that make it so handy to have a constitution that is written down in English words and sentences that are generally understood to be binding on the government.
There are measures appropriate to wartime (this is not a war) and to other national emergencies that are not appropriate to ordinary times. That is one of the reasons why populist politicians, including Donald Trump and Bernie Sanders, always strive so hard to convince us that we are in the midst of an emergency, that every scraped knee calls for the moral equivalent of war. Everyone who follows public policy can think of an “emergency” measure that proved eternal: Those of you dinosaurs with landline telephones are still paying part of a small tax instituted to help offset the costs of the Spanish–American War of 1898.
The United States has changed since the end of World War I, when efforts to retain Woodrow Wilson’s authoritarian “war socialism” were swept away in Warren G. Harding’s “return to normalcy.” Returning to normalcy after the coronavirus epidemic is going to take a concerted and programmatic effort — it is going to be a political project of some consequence.
And it will be resisted.
In 1930, the federal government was spending less (in GDP terms) in total than today it spends on Social Security alone — and it was a good deal less presumptuous. Today, the federal government is faced with a genuine emergency. Eventually, it will be the emergency, unless we see to it that it isn’t.
This article appears as “The Leviathan Virus” in the May 4, 2020, print edition of National Review.
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