There’s Nothing Inherently Good or Bad about Small or Big Government
For the latter part of the 20th century and all of this century, Americans have railed against the “evils of big government.” Barry Goldwater, the 1964 Republican nominee for President, was the first national politician to carry the torch for small government.
Goldwater was a vocal opponent of the Civil Rights Act of 1964, rejected the New Deal, and advocated for reducing taxes and regulations. He lost in a landslide to Lyndon Baines Johnson, who campaigned on his Great Society program. This introduced popular large scale initiatives such as Medicare, Medicaid, federal education funding, and the Older Americans Act.
Less than two decades after Goldwater’s reinvention of conservatism, Americans were sufficiently convinced by Ronald Reagan’s sunny disposition, tied to his pitch for smaller government, that they elected him to the presidency in 1980.
Reagan liked to joke: “What are the nine most terrifying words in English language? I’m from the government, and I’m here to help.” Despite such rhetoric, Reagan expanded the size of federal government from $746 billion in his first budget to $1.14 trillion in his last. The federal debt tripled from $738 billion to $2.1 trillion under his presidency.
Given his mammoth spending increases, Reagan clearly wasn’t that afraid of big government. So, when politicians, pundits, or citizens rail against big government, what are they actually attacking?
For many – and not without good reason – big government is synonymous with totalitarian government, like that of Nazi Germany and the former Soviet Union. Both used government spending to control, terrorize, steal from, and murder their citizens.
So what is the correlation between totalitarianism or authoritarianism, and countries that feature higher taxes, higher investment, and more regulations? You wouldn’t be alone if you said it’s a one to one correlation. “Big government” = poverty and totalitarianism. And even if the correlation isn’t exactly one to one, the slippery slope to poverty and totalitarianism is short and steep. Conversely, countries with low taxes, limited investment, and few regulations automatically = more freedom and prosperity.
Government spending statistics and measures of freedom for the U.S. and other countries around the globe however, show clearly that there is no correlation between the size of government and freedom and prosperity. It’s a false binary. There is nothing inherently good (or bad) about big or small government.
In the United States, the size of the federal budget has grown with the population every year since 1965 bar one. (If you guessed 2010, Barack Obama’s first budget during the midst of the Global Financial Crisis, you would be correct). But even as the federal budget has grown, so, arguably, have individual freedoms. The Supreme Court has expanded gun rights and abortion rights, gay marriage has become the law of the land, you can stay open for business or shop on Sunday, the military draft has been abolished, censorship of movies, TV, music, and other media has massively declined, casino gambling is legal, anyone can open their own brewery, you can bank across state lines, and marijuana laws have been relaxed. (That’s not to mention how much more free we are thanks to technological advancements such as the internet and medical breakthroughs—all of which are ultimately spawned from government investment in basic research.)
Compared with the other industrialized democracies of the Organization for Economic Cooperation and Development (OECD), U.S. government spending is actually below average. In 2015 for instance, the ratio of federal spending to gross domestic product was in the bottom third of countries at 37.6%. Finland—no one’s idea of a poor, totalitarian state with annual per capita income of $43,400—spends 55.9%% of GDP. Finland has become a post-industrial information society and the third most prosperous country in the world. It also achieved the highest total score in the UN’s 2018 World Happiness Report, ranked the most stable, the safest, and best governed country in the world. It is also among the least corrupt and the most socially progressive. Its police are the world’s most trusted and its banks the soundest. Some other states with higher taxation and government investment than the US include: Denmark, Norway, the United Kingdom, Finland, and the Netherlands.
The libertarian Cato Institute ranked the following countries as the top ten most free in the world for 2017. In descending order they were: Switzerland, Hong Kong, New Zealand, Ireland, Australia, Finland, Norway, Denmark, and, tied at 9th place, the Netherlands and the United Kingdom. The United States ranked 17th. The conservative Heritage Foundation’s index shows similar rankings.
The U.S. federal spending to GDP ratio of 37.6% is close to Russia’s 34.5%. Despite similar spending ratios, few would argue that Russia’s authoritarian government closely resembles the United States in prosperity or freedom. Russia is a kleptocracy with an average annual income of $22,540 (the US? $58,030), abysmal rule of law, and Vladimir Putin controls the media, the courts, regularly orders extrajudicial murders, rigs elections, and literally steals corporations from his citizens.
Other OECD governments with larger spending to GDP ratios are not authoritarian in the least. France (56.4%), Finland (55.9%), and Denmark (53.6%) have three of the larger spending governments in the world. But these governments don’t limit their citizens’ freedom; they invest in free healthcare and education, sovereign wealth funds, publicly funded elections to prevent large corporations distorting the political process, and fund stronger oversight and enforcement of their financial systems for greater economic stability.
Whether governments are big or small matters little for citizens’ freedom and prosperity. What matters is the quality of their institutions, and how effectively and responsibly they are governed.