Precedents in Federal Growth

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As an opponent of government growth, I’m interested in what we can learn from history to help us reverse the trend going forward. We need to understand the mechanisms of government growth if we are to combat the disease.

In a new Federal Reserve Bank of St. Louis article, Thomas Garrett and coauthors provide a useful overview of explanations for the federal government’s historical growth. They note that while the economic depression of the 1930s helped boost the size of the government, the severe recession of the 1890s did not do so. What was the difference between the 1890s and the 1930s?

The authors identify a number of factors that paved the way for sustained federal growth beginning in the 1930s:

  • Path Dependency. Governments have inertia such that once a program is in place it is difficult to remove. When new programs are added during crises, they take root and aren’t cancelled when the crisis passes. Thus, government programs tend to accumulate over time.
  • Tax Bases. The addition of new tax bases provides the means of government expansion. The best example is the addition of the federal income tax in 1913, which fueled huge government growth in subsequent decades. This can be called “feeding the beast.”
  • Ideology. The rise of populism and progressivism during the late 19th and early 20th century broke down the traditional American resistance to big government. 

I would add an additional cause of growth: legislative precedent. Politicians push the envelope on their allowable powers, and they build on the power grabs of prior policymakers. This is evident, for example, when you look at the steady destruction of federalism over the last century due to the growth in federal aid to the states.

In the 19th century, presidents routinely vetoed legislation that provided subsidies to state and local governments. But subsidy advocates started gaining traction in the 1910s with the enactment of a series of new aid programs. The 1916 Federal Aid Roads Act, for example, was an early “matching” grant, whereby the federal government gave states higher subsidies the more they spent.

What started as a trickle became a flood as federal politicians found that they could use state aid to cater to an array of special interest groups that they previously had no access to, such as teachers. The matching idea was copied in dozens of other aid programs, and it has helped to propel Medicaid spending through the stratosphere.  

The health care bill just pushed through Congress contains a number of dangerous legislative precedents, such as the mandate to purchase health insurance. I’m astounded that members of Congress think it’s OK to use government power to force Americans to buy a certain product, or else face stiff fines. Where did they get such an outrageous idea? Well, from the precedent set by Mitt Romney’s Massachusetts health bill of 2006.

After the current health legislation passes, we can sadly expect politicians to pursue the mandate approach further. Will mandatory broadband be next? That sounds crazy, but with the Treasury empty, politicians are looking for ways other than spending to impose their will on the people.

With the health care mandate, Congress is crossing the Rubicon, breaking another traditional restraint on government and ramping up its war on individual rights.