The next 250: How big can government get?

The promise of self-government is that people can have the government they want. The peril of self-government is that they won't be able to agree on what they want.

Americans didn't argue about government while they remained colonists under the British empire. That is, they didn't argue among themselves. They often argued with the officials sent out by the British government, and via the agents their assemblies sent to London they argued with Parliament.

The intramural argument began with a debate over whether the United States should become independent. The debate escalated to violence when the independentistas in the Continental Congress declared a break with Britain. The fighting between the rebels and the loyalists was the most bitter in the American Revolutionary War. The loyalists lost and scores of thousands fled with the departing British.

This quieted the argument but not for long. In the states and in the country as a whole a fundamental division emerged. On one side were those who preferred government limited and small. On the other were advocates of energetic, expansive government.

The latter, led by James Madison and Alexander Hamilton, leveraged alarm over a tax rebellion led by Daniel Shays in Massachusetts to hold a convention in Philadelphia to replace the weak Articles of Confederation with a much stronger national constitution. The fight over ratification arrayed small-government groups who opposed the Constitution against big-government men who applauded it. The biggies won, setting a precedent that would last, with rare exceptions, for the rest of America’s first quarter-millennium.

The Federalists, the victorious proratification party, expanded the federal government with gusto. They nationalized the debts incurred by the states, and they constructed a system of national finance anchored by a national bank. Their opponents, calling themselves Republicans, opposed the expansion but failed to prevent it.

They had their revenge when the Federalists overstepped and outlawed criticism of government officials. A majority of voters tossed them out in favor of the Republicans. Thomas Jefferson, their leader and the new president, and the chief spokesman for the small-government philosophy, revealed a dirty secret of that camp: that their insistence on small government relaxed when they controlled the government. Out of thin air Jefferson conjured authority to purchase the vast tract of Louisiana from France, and he stretched the federal power to regulate commerce into a complete embargo on exports amid a war between Britain and France that led to seizures of American cargoes.

The Federalists shortly disbanded and then reconfigured as the Whigs. The Republicans renamed themselves the Democrats. After the Whigs broke apart over the slavery issue, their heirs adopted the Republican label for a new party devoted to the cause of brawny central government. Their first flex was to raise a large army that defeated the attempt by eleven southern states to exit the Union. In the bargain, Abraham Lincoln and the Republican Congress pushed government authority far into the domestic economy. And in the single boldest act by an American president ever, Lincoln cut the Gordian knot that had protected slavery since independence, effectively ending the institution and turning the economy of half the country on its head.

The growth of government slowed during the Gilded Age as the nation's attention turned to making money. But demands for more government resumed in the 1890s, with the Populists of that decade calling for reins on railroads, trusts and other manifestations of rampant capitalism. The Populists inspired the progressives of the early 20th century, who capped railroad rates, busted trusts and laid the foundation for the modern regulatory state. Significantly the progressives included both Democrats and Republicans. Bigger government had become bipartisan. 

America's involvement in World War I brought the curtain down on the progressive era. But it didn't terminate the growth in government. Indeed that growth accelerated as the federal government essentially nationalized major American industries to support the war effort. The nationalization was unwound after the war ended, but the sweet taste of war power lingered in many mouths in Washington.

When the economy booms, demands on government slow. This had happened during the Gilded Age, and it happened again during the roaring 1920s. But good times always end. The stock market crash of 1929 gave way to the Great Depression of the 1930s, which in turn created unprecedented demands for greater government participation in the economy. Franklin Roosevelt's New Deal extended government into industry, agriculture, transportation and nearly every aspect of economic life. The signature program of the New Deal was Social Security, which launched America into the age of the welfare state. 

Republicans and some Democrats complained about Social Security and what they saw as the creeping socialism of the New Deal. Strikingly, however, when the Republicans regained control of the government, taking Congress in the late 1940s and the White House in the 1950s, rather than repeal Social Security they extended its coverage.

Republican Dwight Eisenhower persuaded Congress to approve the greatest public works project in American history: the interstate highway system. Democrat John Kennedy put the government behind the effort to place a man on the moon. Democrat Lyndon Johnson's Great Society pushed the welfare state into corners of American Life Franklin Roosevelt hadn't dared to go. Republican Richard Nixon added environmental and workplace regulation that made the progressives of the early 20th century look like pikers.

Ronald Reagan was elected in 1980 on a platform promising to knock government back down to size. Reagan famously said in his first inaugural address that government was not the solution to America's problems but the problem itself. Reagan did cut taxes, but he failed to cut spending. Indeed Reagan set the Pentagon on a spending binge. The result was that Reagan piled up more federal debt than all of his predecessors combined. The mere interest on the debt became a major item in every subsequent budget. 

New programs came more slowly after Reagan, but the growth in existing programs continued. The end of the Cold War promised a peace dividend, as programs designed to counter Soviet power were dismantled. The promise was fulfilled briefly, until the terrorist attacks of September 2001 prompted a federal declaration of war on terror and the appropriations its waging required.

Barack Obama's Affordable Care Act was approved by the skin of the Democrats’ teeth, demonstrating that the spirit of the New Deal and the Great Society wasn't quite dead. The Republicans vowed to repeal it at first opportunity, but when that opportunity came, under Donald Trump, they left it in place.

Their flip-flop revealed something fundamental about the growth of government in America. As controversial as new programs might have been in the proposal stage, once enacted they gained constituencies that defended them stubbornly. The original critics concluded that repeal wasn't worth the political cost. The cogwheel of government had a ratchet that allowed it to turn in one direction only: toward bigger. The rules of the Hotel California applied: you can enter but you can never leave.

This has been going on for almost 250 years. Will it continue?

The ratchet mechanism is still in place. It's hard to see how it will be easily disengaged. The same political dynamics that have operated over the last quarter-millennium haven't changed.

But can it go on forever? No. The federal debt reached $100 billion during World War II. It topped $1 trillion during Reagan's first term, $10 trillion in 2008, $20 trillion in 2017. In late 2024 it stands at $35 trillion.

Measured against GDP the growth of the debt was less spectacular but still daunting. In 1980 the debt was 30 percent of GDP. In 2000 it was almost 60 percent. It crossed the 100 percent mark in the 2010s and now sits at 120 percent.

The debt has been able to grow because lenders have been willing to underwrite it. Will they continue to do so? At 150 percent of GDP? At 200? At 250?

Likely not. No large country has ever carried such debt for long. Lenders will worry about default and find other places to park their cash. Default can occur gradually, via devaluation of the currency, or at once, through the failure of the government to pay interest on time.

What happens then? Either taxes rise or government programs are cut. Americans don't like taxes. Many will prefer cutting programs. Social Security, Medicare and defense are the big tickets. Beneficiaries of Social Security and Medicare are acutely aware of what those programs do for them. And their numbers are growing as the population ages. The benefits of defense are harder to recognize on a daily basis.

Defense will bear the deepest cuts. The assertive foreign policy made possible by high defense spending will have to be tempered by the new fiscal reality. America will learn to pick its spots in world affairs. No longer the dominant global force, it will retreat to regional influence.

This isn't inevitable. Americans might decide that the defense of human rights in distant corners of the world warrants a return to a time when old people in America went hungry and without medical care. But don't count on it.

How long will the retrenching take? Not 250 years. Maybe fifty. Maybe much less. Already many Americans, especially in the Republican party, want to shed some of America's foreign commitments. If they get their way and the world doesn't end, the shedding will grow easier.

Britain and France did this after World War II, giving up their empires while consolidating their welfare states. America might become a bigger version of something similar.