The journalist Joel Mathis asked, in connection with a book I wrote, since conservatives accuse liberals of wanting a government that's always bigger than the one we have, what's the conservative reply to the accusation that we on the Right always want taxes that are smaller than those we currently pay? My answer is one way to describe the difference between liberals and conservatives is that liberals want government spending to be the independent variable that determines tax levels, and conservatives want government spending to be the dependent variable determined by taxes. I'm a conservative in this regard, not just because I think the government we get by letting our tolerance for taxes determine the size of our welfare state will be smaller than the one we get by telling the government to do all sorts of compassionate things, and then mentioning as an aside some years later that we'll need to raise taxes to pay for all our commitments. I'm a conservative because I think it's democratically healthy to confront the hard question about taxes first and directly, and then let our answer to that question determine the budget perimeter for our welfare state. It is democratically unhealthy to proceed the way liberals have habitually dealt with the problem, by promising generous programs that will "pay for themselves" or even "pay for themselves many times over," and only later, after people have come to expect and depend on the stream of government benefits, fess up about the taxes required to sustain them.
Mathis suggests a fiscal and moral symmetry: For liberals the answer to how much government should spend, especially on social welfare programs is always, "Just a little bit more," while for conservatives the answer about the right level of taxes is always, "Just a little bit less." But there are important asymmetries. Believing that we should have all the government, but only as much government, as we're willing to pay for--as opposed to all the government we need, or think we need, or just plain want--conservatives are happy to discuss the limits of a democratically bounded welfare state. Doing so is sound economics, because we'll never have a structural deficit resulting from a built-in mismatch between the government's spending commitments and its taxing capacities. It's also good politics because it insists that the citizens make their decisions about the scope of the welfare state on the basis of clear, honest assessments of what its programs will provide and cost. Both the politicians and the voters, in other words, are required to be adults.
Medicare's initial cost projections, for example, were based on the assumption that people receiving large government subsidies for hospital stays and doctor visits would avail themselves of those benefits at exactly the same rate as they did when they were paying for those services on their own. This same spirit of candor is reflected in the argument for Obamacare, which insulted our intelligence by claiming that a massive expansion of our entitlement programs was, above all, a way to control costs - although how it would control costs couldn't exactly be specified since the government boards that would come up with all sorts of ingenious solutions to the problem of delivering the same level of health care to all the people now getting it, and additional health care to millions of others, while dramatically reducing per-patient health care outlays, wouldn't issue their initial recommendations until after Barack Obama's presidential memoirs were published.
Moreover, when liberals feel that when we're closing in on alleviating the ancient causes of human misery--people being ill-housed, ill-clad, ill-nourished, etc.--they react by getting to work on coming up with new problems for the welfare state to solve. In 1957 Arthur Schlesinger called for government to address the "problem" of "spiritual unemployment," and, sure enough, by 1965 President Johnson is promising us that the Great Society will banish "boredom and restlessness." This is the madhouse aspect of the political situation I was trying to describe in "Never Enough"--conservatives' feeling that as we put check marks by the items on the top of the list, whether from growing prosperity or the success of welfare state programs, liberals are busy adding new items to the bottom of the list.
There's another way in which the preferred liberal framework for considering the welfare state argues against an open, productive discussion about what the government should and shouldn't do. You point out that federal taxes account for a lower proportion of GDP than they have for 60 years. But not all GDP percentages are created equal. In 1950 the per capita Gross Domestic Product was $12,343, using the OMB's "chained price index" to adjust for inflation by expressing 1950's nominal dollars in terms of the dollar's buying power in 2005. In 2010 per capita GDP, deflated the same way, was $42,190. America was nearly three-and-a-half times more prosperous in 2010 than in 1950.
If liberals would participate in a discussion about what the welfare state should do, and the limits to what the welfare state should do, we could grapple with the question of how long-term economic growth would enable us to finance the welfare state's operations with a constant or even diminishing slice of a growing pie. This is certainly the approach we have taken to defense spending. In 1953, at the height of the Korean War, America devoted 14.2% of GDP to national defense. In 2010 we spent 4.4%. By this measure, our defense spending has declined by nearly two thirds. But America today is a much richer country than it was in 1953, even after taking into account the current slow recovery from a severe recession. Using the OMB's "total composite defense deflator," our defense outlays in 2010 were $617 billion, measured in 2005 dollars, while those expenditures in 1953 were $515 billion. Measured in real dollars rather than GDP points, we spent 20% more for defense in 2010 than we did in 1953.
Welfare state spending has grown in relative terms and really grown in absolute terms. In 1950, the last time federal taxes yielded less than 15% of GDP, federal outlays for "human resources" amounted to $44 billion, using OMB's "total composite non-defense deflator" to express every year's outlays in terms of the dollar's value in 2005. ("Human resources" here includes all federal outlays for Social Security; all other income maintenance programs; Medicare; all other health programs; and all programs for education, job training, and social services.) In 2010 human resources outlays, deflated the same way, were $2.06 trillion, 47 times as large. Even if we adjust for population growth, the increase is enormous, from $288 per American in 1950 to $6,547 per capita in 2010, a 23-fold increase. This increase is the result of devoting a much larger slice of a much bigger pie to human resources in 2010, when human resources outlays equaled 15.7% of GDP, than we did in 1950, when they were only 2% of GDP.
So, Mathis asks, how high should do conservatives want our taxes to be? High enough to pay for the things the government needs to do. Which are those? In a democracy, all the things the people feel the government really ought to do. I'm happy to abide by the outcome of the democratic debate over that question, but I think it should be conducted honestly. Honesty requires stipulating that the amount of government we get is no larger than the amount we're willing to pay for, as opposed to the dream-world welfare state we would build if wealth were limitless.
It also means that as our nation becomes more prosperous we should expect the welfare state's budget to require a diminishing portion of our national income rather than, as it has since the New Deal, a growing portion. We should expect this for two reasons. First, a welfare state with a clearly defined mission, as opposed to one where the goal posts are constantly receding as we move down the field toward them, should be one we can finance the way we have financed defense spending over the past half-century--by spending a smaller portion of our growing national economic output. Secondly, a growing economy should mean that more and more Americans can pay for more and more of their own needs and wants through their own economic efforts, rather than through the political efforts it takes to secure more and more generous welfare state benefits for more and more recipients. In other words, one of the reasons to like a growing economy should be that it makes a smaller welfare state possible, rather than because it makes a bigger one possible.