Is the Era of Big Government Really Over?

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Speech before the Republican Women’s Club, Palo Alto, California, January 29, 1998 by George Marotta, Research Fellow at the Hoover Institution, Stanford University

In 1996, President Clinton said that “the era of big government is over?” At first blush, that good news might appear to be true because we are very, very close to getting rid of the budget deficit and balancing the federal budget for the first time since 1969. On the other hand, in the State of the Union message earlier this week, the President talked about more than a dozen programs that he wanted to start or expand.

What are the facts? It is true that the federal budget for 1997 had only a small deficit of about $20 billion, and it is possible that the budget for 1998 might be in balance. And for fiscal 1999, the President has promised to submit a balanced budget proposal to the Congress.

However the hard facts are that spending and taxes have gone up every year since the Reagan tax cut in the early 1980s. Therefore, one has a right to ask: what good is a balanced budget if it is constantly balanced at higher and higher levels?

For example, in 1992 federal revenues were $1,091 billions and spending was $1,381 billions. The budget this fiscal year will approach $1,700 billion with revenues and spending close to balance. In other words, taxes have gone up 56 percent in the past six years and spending has gone up 24 percent.

The balanced budget has not been achieved by a reduction in spending. All we’ve done is to reduce the rate of increase in spending while taxes have boomed because our economy has boomed. The President claims that federal government employment has been decreased over the past six years. But we know most of that has come out of our defense establishment because of the end of the cold war. But where is the peace dividend in reduced taxes that we all expected (and deserve) upon the demise of the “evil empire.”

Last year, the Republican Congress and the Democrat President crafted a plan to balance the budget by the year 2002. Congress got certain tax cuts that they wanted, and in return the President got an increase in spending in selected programs. However, we all know that if the bipartisan agreement had not been made, the budget would have been in balance sooner than 2002.

During the latter half of this century, we have been a participant in the most gigantic ideological and geological contest the world has ever seen. Two superpowers armed to the hilt with nuclear missiles faced off around the world. The long-awaited outcome: the “evil” empire and communism lost out to democratic capitalism. The world has changed dramatically since that fateful day in Berlin in 1989 when the free people of Berlin demolished that Wall — even with bare hands.

In economic terms, free markets won out over centrally-directed economies. Since the whole world was watching the superpower contest, almost every country in the world is rushing away from the communism and toward the free markets. Even before 1989, countries like Britain, France and Italy were “privatizing” many of their formerly “nationalized” industries. The reason was simple: government-control didn’t work well. These countries had to take action to stop the brain drain caused when intelligent, hard-working citizens fed from oppressively high taxation.

If the era of Big Government is over, why does it take us longer and longer to work just to pay our taxes. We have come to the sad state of affairs where taxes are the major expenditure of the average family in America. That is a sad commentary, indeed!

The average one-income family paid 35.6% of its income in taxes in 1997. A median two-income family paid $22,521 in taxes — the largest ever according to the Tax Foundation! The average family paid 26 percent in federal taxes, 12 percent in state and local taxes. In order words, taxes equalled the total of food, clothing, shelter and health costs for the average family.

Tax Freedom Day, the day when we stop working to pay taxes at all governmental levels and start working for our families and ourself arrived at May 9 last year — longest ever! Doesn’t sound to me like the era of big government is over.

Oh, yes, the budget is going to be in balance, but the fastest growing item in the budget is interest on the $5.4 trillion public debt that previous “statesmen” have racked up. I am ashamed that our generation has just saddled my youngest grandchild with $20,000 (his portion of that debt) and little Jacob is barely out of diapers! (I thought the President was worried about the welfare of our children!)

The younger generation seems to be passively accepting today’s excessive tax levels without the kind of fight exhibited by our forebears who dumped tea into Boston Bay. Reminds me of a story about our youngest son who telephoned his mother and father upon obtaining his first job after college (in 1982).

“Mom and Dad, guess what; I am instant middle class.” “What do you mean, Dave?” “Well, I got my first check and do you know that I pay 28 percent in federal taxes and 7 percent in payroll taxes.” “Welcome to the workaday world, son, we’re proud that you are now contributing to societies’ cost.”

Well, those numbers peaked my curiosity. So, I did some rummaging among my old files. I was shocked to learn that in 1951 after my graduation from college, I paid only 6 percent federal tax and 1 percent social security. My seven percent was certainly much less burdensome than his 35 percent! His federal tax burden is five times what the older generation paid.

Of course, we cannot measure big government by spending levels alone. Since the government has just about reached the limits of our tolerance for more government spending, have you noticed how they are passing laws that tell others to pay for certain benefits. Two examples are the minimum wage and family-leave provisions. Here, the government is forcing business to do things — and also to pay for them.

Most countries in the world having seen learned first hand that central government planning does not work are moving away from that model. Not in America! The political Nannies inside the Beltway think they know best what is good for America — not we individuals, families, or businesses.

Recently, I learned the startling fact that there are more government bureaucrats employed in our country than there are workers in the manufacturing sector! This is a very disturbing fact — we all know that government does not create wealth — private industry does.

June and I have been in business and we can tell you that instead of government helping us, it discouraged us from hiring additional employees because of all the hassle and red tape. Every small business owner knows that the twelve scariest words in the English language is hear someone say that “I am from the government and I am here to help you.”

In defense of the current size of the U S Government, many liberals point out that our government is smaller than many other governments. They then go on to cite the fact that France takes one half of all the wealth of their country to run their governments (compared with our 36 percent), Germany takes 45 percent and the UK takes 40 percent.

What the liberals forget is that most of the settlers who came to America were fleeing from the old way of doing things and were trying to get into a more liberal (old-fashioned use of that term) environment! In other words, Americans tolerance of big government with its high taxes is much less that our European counterparts.

Why is Government Growing?

There are many reasons why government continues to grow and I would like to examine some of the major factors tonight. I am sorry to report that the current political scene is dominated by a liberal class that seeks and supports a larger role for government in society. On the other side are the conservatives (you and I) who are much smaller in numbers that seek a reduced role for government.

We are not trying to conserve anything — we are on the attack to roll back government; the liberals want to preserve a large role for government. In effect, the liberals want to conserve present big government with less freedom for the individual to live his or her own life. So, throw out the old terms as we used to know them.

The bad news (for conservatives) is that liberal forces have the advantage and, unfortunately, they may prevail. There are many reasons for believing the trend toward bigger government will continue.

First, the number of bureaucrats is large and growing. There may be a slight reduction at the federal level, but state and local levels are growing faster. Most bureaucrats will do anything to preserve their jobs, which, by the way, pay much more than those of the average citizen. It is in the bureaucrats’ interest to paint the worst possible picture of the problems that their programs face. Nothing ever gets solved. The cold war has ended, but cold war programs abound!

Second, Uncle Sam has deep pockets because of the printing press and deficit financing. In our own personal finance, if we were currently balancing our monthly budget but we knew we had a big balloon payment to be met in two months, we know that we are in trouble. That’s just the situation that the federal government faces now. Talk about balance is very misleading because of major problems with Medicare and Social Security.

We know that if they did not count the current excess in Social Security receipts over outlays of $60 billion that the government would have a big deficit NOW. Sadly, we have come to accept the fact that no demand is too expensive to the federal government when the cost of the program can be shifted to future generations.

Because Uncle has deeper pockets than anyone, he is fair game for all sorts of cheats: defense firms overcharging, doctors requiring unneeded medial tests, persons feigning disability to qualify for benefits, people dumbing down their finances to qualify for various programs, a Representatives padding their expense accounts and putting fictitious family members on the government’s payroll because everyone does it, hundreds of Representatives overdrawing their government-run bank checking accounts to personally benefit from not having to pay interest on their “loan,” etc., etc.

Third, the media contribute to the growth of federal government in two major ways. The nature of the media magnifies societal problems because bad news sells, and good news does not. Also, over two-thirds of media personnel belong to the liberal persuasion and believe that government should play the major role in solving those over-dramatized problems. One editor told me that “the role of the media is to comfort the afflicted, and to afflict the comfortable!”

Fourth, our children are being taught by educators who are mainly liberal. Could it be that the president wants to reduce class size and hire 100,000 more teachers in order to gain more votes? It is well known that public-school teachers, as part of a government-run monopoly, tend to be more tolerant of government. Then at the college level, my wife and I did a study which revealed that over 80 percent of professors in the social science departments of one university (and probably most universities) are registered with the more liberal (read Democrat) political party (which generally favors more government.)

Fifth, most voters are compromised because we all are receiving some kind of benefit that we want continued. Also most voters want their representatives to go in there and get as much as they can from government. Every month, the government sends out millions and millions of checks to every segment of our society. The “gimme” recipients are in effect bribed (with their own tax dollars) to support large status-quo government.

Sixth, we keep getting more government because we seldom discontinue out-of-date programs. For example, we still have a food-stamp program, although it was started when we had farm surpluses and we no longer have surpluses. We still have foreign aid programs, although the Cold War is over. Now, we pay farmers not to farm; medical schools not be train more doctors; tobacco farmers to make the transition to other types of farming; compensate communities for closing military bases (we used to pay them earlier because they were adversely impacted when the bases were opened!)

Seventh, our very nature as compassionate human beings contributes to big government. Although we intellectually know that government can’t solve all problems, we are willing to throw some dollars at them anyway. Here’s where liberals are good at shaming conservatives. If conservatives talk about costs or about how recipients of government largess may have to change their behavior, liberals charge conservatives with being mean spirited.

Eighth, because we are busy and hate to get involved in messy human problems, we have frequently delegated to government those things that might be better solved by neighbors at the local level.

Ninth, government grows because its leaders create the type of crises that only big or bigger government can tackle. The most obvious example, of course, are wars. Wars create bigger governments and after wars, governments seldom revert to their former size. Global warming is a current (and possibly man-made crises) which of course will require bigger government spending and/or more government regulations to solve. There goes more of our liberties!

What Can We Do About It?

Privatization.

All levels of government are running programs that could be operated more efficiently and at lower cost by private companies. It is a win-win situation. Britain, France, Italy and many other countries have used this device much more often than have we. Let’s join the worldwide trend away from inefficient government. Let’s see, Amtrak, the Postal Service (is that the correct word, service), etc. etc. Federalism. Support the movement of programs from the federal level to the state and local level. We have accomplished a major step in decentralizing the welfare program. We must give our current President a lot of credit for this. I don’t think a Republican could have done that. Now, let’s do it for other programs. Why hire a federal official from New York, who was trained at a Massachusetts college, to go to Idaho to administer a federal program!

Speak out.

Whenever you see something that needs changing be the first to speak out. Write letters to the editor, write opinion articles for newspapers. Call into talk shows. Sound off. If you do, others may have the courage to support that point of view.

Talk to younger folk.

They are the future of our country. They are so busy working to pay all the taxes they are required to pay (and support their families) that they have little time for research. Tell them about the good old days when government was less obtrusive and costly. When they realize what is being done to them AND they realize their growing political power, there will be a citizens’ revolt!

Support think tanks.

If you have little time to do the required research, make a financial contributions to the many research organizations in our country that are producing good studies and data that need to be disseminated more widely.

Simplify tax code.

One reason why government has grown so large is the very, very bad tax system we have today. It is so complex that few realize what government is actually costing us. We never would have had the present large government if it weren’t for the withholding tax system. The best system for reducing oppressive government would be a national sales tax. This is a favorite proposal of the Libertarian Party voters. Then, they say, we would really know the cost of government every time we paid that 18 (or whatever) percent federal sales tax. However, I will take a flat tax, or any kind of tax, except the present system. Former Secretary of Treasury William Simon said it best, “Let’s have a tax system that looked like it was designed on purpose.”

In his State of the Union message, the President made a plea that we not have any across the board type of tax cuts, but that we continue with his strategy of using “targeted” tax cuts for specific groups and purposes. Conservatives should completely reject this type of cut because it is specifically engineered to favor those people who will vote for larger and larger government. Cuts should be general and across the board to allow middle class Americans to do whatever they want with their own money. After all, it is their money.

Fifty percent of the top earners pay 95 percent of the taxes; the lower fifty percent pay 5 percent of the taxes. Government-lovers support redistribution of monies from the top fifty to those in the bottom fifty in order to create more voters who are dependent upon government transfers for a larger percentage of their livelihood. If this is not a prescription for class warfare, I don’t know what is.

I have a radical proposal: let us have a simple tax system that does one thing: raises taxes, rather than try to solve all of societal problems through the tax code. Simplification would save our taxpayers hours, days, and weeks of travail and would contribute significantly to improving the national output, to say nothing of an improved citizen attitude toward their government.

Report illegal activities.

If you see or hear of someone ripping off government (which means us taxpayers), report them to the proper authority. Set a date certain to end each and every government program. Require that each new program created by government be given an ending date, at which time it must be reaffirmed or ended. Also require that bureaucrats serve limited (and not lifetime) terms in their positions.

Require that legislators have limited terms

— because that is wanted by 85 percent of the voters.

Take care of our families and neighbors.

If we all did more within our own families and also helped our neighbors (as the Bible tells us to do), government could shrink. I have to tell a personal story here. Our middle son is a lawyer. As such, he pays double in payroll taxes as he is both employer and employee. He pays so much that he suggested to me that if he didn’t have to pay that, he would take care of me in my old age! Well, that’s what families did before Social Security and Medicare was invented.

Read Hayek’s book.

Frederick Hayek (Nobel Prize winner) wrote in his 1946 book, The Road to Serfdom, that the more you look to government to solve your problems, the more power that government will have to later oppress you. The greatest danger facing free men and women today is that the power of government is growing so imperceptibly gradual that we hardly realize that IT rather than some smaller monopoly such as Microsoft could really do us harm in some future day.

In Summary

We recognize that liberal forces have the easier argument for the further expansion of government. However, as we have seen in the Soviet Union and in Eastern Europe, there comes a time when the size of that government becomes intolerable to the masses. The solution then becomes obvious to everyone and change is made.

As in any enterprise, it is easier to grow and add on new programs. It is very, very difficult to end a program because you have both the provider and the recipient locked into a system that they want perpetuated.

True, we have needs that must be addressed, but we will be a better society when we make the federal government the last resort, rather than the first, to solving our societal problems.

I agree with many who wish we could put a cap on total government spending, say, twenty-five percent. After all, the church can get by with a tithe of only ten percent. In the discussions of the amendment to the Constitution that permitted the federal government to tax our individual incomes, one representative suggested that a cap of ten percent be included in the legislation. He was laughed down because everyone agreed that the government would only need one or two percent! What a missed opportunity!

In the many future debates over whether we should adopt this or that new program, let’s hope that the voices of those legislators who believe in the wealth-creating process of private enterprise will drown out those who favor government’s redistribution other people’s money. That not only encourages dependency, it also destroys incentives for the most productive elements of our society.

A society that is more concerned about the redistribution of wealth than about its creation will produce only an equality of poverty, as recent history has shown.

 

–this is the end of BIG Government —

 

 

(Don’t we wish)

 

Clinton Presidential Library photo in the public domain.

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George Marotta served in the U.S. Army in the Pacific, graduated from Syracuse University, worked in U.S. foreign affairs and Stanford's Hoover Institution, and founded a financial firm in Palo Alto. He is mentor and father of David Marotta.

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