The times have a fin de siècle feel for small-government conservatives. The Republican Party is now “owned” by Donald Trump who, in his first year, increased government expenditures by 86% over the last budget proposed by George W. Bush in 2008. The self-professed “king of debt” requested an additional $300 billion for his second year, leading to an anticipated near–$1 trillion deficit in 2019. He has expanded the scope of executive power by accelerating the issuance of executive orders and by challenging the rule of law whenever it threatens to check the presidency.
To be sure, Trump has cut taxes and reversed or frozen many growth-hindering regulations. But the Republican Party now largely takes direction from the president’s base — white working-to-middle-class voters in the Rust Belt and cultural conservatives. The parts of the agenda they champion call for more government — strong protection for Social Security, Medicare, and even core principles of Obamacare; limits on immigration, trade, and abortion; extra money for a military that, if the Syria pullout is anything to go by, will be doing less.
Perhaps the problem is that small-government conservatives don’t have a clear enemy and can’t perceive a meaningful threat. The great rebirth of classical liberalism in the years immediately after World War II was led by intellectuals seared by the experiences of totalitarianism under fascism and communism, people such as Milton Friedman, Friedrich von Hayek, Walter Lippmann, Ludwig von Mises, and Karl Popper. Among other things, they spoke of “capitalism and freedom,” warned of socialism’s “road to serfdom,” admonished us as “watchmen” to preserve liberty, and embraced the principles of an “open society”.
The 1970s provided another shock. In that decade, the U.S. suffered from debilitating stagflation of simultaneously high unemployment and inflation — under both Democratic and Republican presidents. Two oil crises, the Iranian hostages, and Soviet invasion of Afghanistan decimated confidence in the country’s world leadership. The Trilateral Commission’s “The Crisis of Democracy” report outlined how special interests overloaded a paralyzed federal government with demands.
The decade gave rise to an avalanche of small-government conservative ideas and a new economy and society built by them. Political leaders like Ronald Reagan, Margaret Thatcher, Canada’s Brian Mulroney, and, to some extent, German Chancellor Helmut Kohl, pulled the state back from the furthest corners of people’s lives. They privatized public industries, cut tax burdens, reduced regulations, unleashed capital investment, and generally revamped their social welfare states.
The ideas that crystallized in the Reagan presidency shaped American public life through the 1990s and into the early 2000s. Since the early 1990s, inflation has rarely topped 3% and is usually right around the 2% sweet spot targeted by the Fed. With the exception of the financial crisis, unemployment above 7% has been rare since Reagan’s second term; today it’s less than 4%. American growth hasn’t always been spectacular, but with the exception of 2008-10, we have avoided the “boom and bust” experienced repeatedly from the New Deal until the mid-1980s. Adjusted for inflation, annualized S&P 500 returns in the 1970s were about -1.3%; from Reagan’s second inaugural through to today they are about 8%. These ideas have driven the internet revolution and the greatest achievement of the past quarter century, a dramatic reduction of poverty in developing countries.
But we now face grave threats. The programs offered by many of the 2020 Democratic presidential candidates would increase annual federal government spending by about 50%, to nearly $7 trillion annually, or around 35% of GDP. The administrative state would expand tremendously, making its growth after legislation like Obamacare and the Dodd-Frank financial reform look anemic. A Sanders or Warren presidency also poses real danger to our traditional alliances across the world, as well as freedom of speech and conscience at home.
Reagan, Thatcher, and their allies are long gone. Only about one in five of today’s voters was at least 16 in 1970 and therefore has meaningful recollection of that era. Few remember how the federal government’s policies of regulation — wages, environment, health care etc.; bailouts — New York City, Chrysler, Conrail etc.; and expansion — Social Security, higher education, unemployment compensation etc.— accelerated our descent into economic abyss. Few remember President Carter effectively throwing up his hands and conceding defeat to the “malaise” of American politics in 1979.
So, small-government conservatives are complacent. Perhaps we are still celebrating successes. Perhaps we are still working out how to respond to Trump, rendered apoplectic by confusion nearly three years into his presidency. We certainly don’t realize how bad things can get.
Energetic and imaginative political movements are born and rejuvenated when their supporters recognize the vulnerability of core principles. It might be painful, but to re–energize, small-government conservatives might need a dose of the 1970s, a real possibility with a Democratic presidency or a second Trump term in which the president follows his worst instincts.
Andy Taylor is a professor of political science at the School of International and Public Affairs at N.C. State University. He does not speak for the university.