Big Government

Without a World War, We Have an Unaffordable War-Sized Government

Americans distract themselves with freak-show headlines while political institutions escape their control.

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It's good fun to mock politicians' inability to keep their pants on and to wage culture war against those awful people on the other side of the political divide, but at some point we're going to have to pay some attention to a growing problem in our midst. While we rubberneck at freak-show headlines, the deeply flawed officials who provide so much distraction have expanded the size and power of the government they control to an extent not seen since the days of global warfare, with no plan for restraining or even sustaining the behemoth they've created.

"The U.S. effort in World War II was off the charts," Calvin Woodward of the AP reported last month. "Battles spread over three continents and four years, 16 million served in uniform and the government shoved levers of the economy full force into defeating Nazi Germany and imperial Japan. All of that was cheaper for American taxpayers than this pandemic."

Trillions of dollars are being spent, we are told, to alleviate economic pain caused by the pandemic, off-set government-mandated lockdowns, and develop vaccines. But, while politicians talk a fair game about helping us, first the Trump and then the Biden administrations have taken advantage of opportunities to push their agendas and buy favor with spending bills sold as emergency measures.

Of the $1.9 trillion "relief" bill signed by President Joe Biden last month, "[o]nly about 1 percent of the entire package goes toward COVID vaccines, and 5 percent is truly focused on public health needs surrounding the pandemic," commented Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. "Meanwhile, nearly half of the package will be spent on poorly targeted rebate checks and state and local government aid, including to households and governments that have experienced little or no financial loss during this crisis."

The $2 trillion "infrastructure" plan unveiled last week by the White House actually places (probably unnecessary) repairs to roads, bridges, and water systems as secondary concerns, after a plan to "reimagine and rebuild a new economy" along green-ish lines favored by the president and his allies. A big part of that scheme is a very un-infrastructure-ish emphasis on subsidizing electric vehicles. The bill also pushes old-school labor unions.

"The focus on jobs, and particularly unionized American jobs, means that Biden's $2 trillion spending plan will buy a lot less infrastructure than it otherwise could," observed Reason's Christian Britschgi.

Federal spending last year, before the current administration's massive spending bills, consumed 31 percent of GDP—a level not seen since the 1940s. The last time the U.S. government was this big it fielded armies against Nazi Germany, fascist Italy, and imperial Japan.

"How can the U.S. possibly afford this?" the AP's Woodward asked. "At least for now, debt is cheap."

We should be glad that debt is relatively cheap, because the U.S. government has put taxpayers on the hook for a lot of it. Before the pandemic, federal debt was expected to hit 98 percent of GDP in 2030. Debt at that level "would dampen economic output" and servicing it would inevitably "reduce the income of U.S. households," the Congressional Budget Office predicted.

Then the pandemic hit, and the federal government went on a spending spree that beat the debt prediction by 10 years and set the country on track for much worse. In July of last year, the International Monetary Fund cautioned that U.S. federal debt would rise to 160 percent of GDP by 2030 "even without further rounds of fiscal stimulus." But, of course, we've seen much more spending since then. 

Why assume debt-fueled spending without revenues to match? Even allowing for the administration's proposed "largest federal tax increase since 1942" in the words of The New York Times, it's unlikely that new revenues will cover costs; under the tender ministrations of both mutually loathing major political parties, the federal government hasn't balanced a budget in 20 years

New spending and taxes will sting, whatever the alleged benefits. "[T]he level of GDP by 2030 is between 3 percent and 10 percent lower than it would be without the increase in expenditures and revenues," the CBO forecast in March based on assumptions of a permanent increase in government spending of 5 percent to 10 percent of GDP.

Interestingly, the massive debt and hobbled economy predicted for America of 2030 looks much like Italy of 2021. Carlo Bastasin of the Brookings Institution thinks that's no coincidence—he sees the U.S. following Italy down a path of political turmoil and economic decline.

"Overseas observers of American politics are certainly disconcerted by the degree of domestic political animosity in the U.S., and by the self-inflicted delegitimization of its democratic institutions in the last two decades," he cautioned in December 2020. "Memories of what happened in the early 1990s, when Italy's state and institutions suffered a severe loss of credibility and the political fight turned fierce and acrimonious, still haunt," he added. "Since then, the Italian economy has never recovered, in part because investors need a stable political framework to take risks, particularly around intangible investments."

Like Italy, the United States is currently ranked by the The Economist's Democracy Index as a "flawed democracy" rather than a full example of that political system. "The consequence of the long-running culture wars in the US and the heightened political polarisation of recent years is that social cohesion has collapsed and consensus has evaporated on fundamental issues," notes the Index, whose authors see little prospect for improvement "[a]s Americans increasingly occupy two distinct and conflicting realities."

In such an environment, the temptation to use political power to reward friends and punish enemies is irresistible, since the opposition is despised and agreement is virtually impossible. That leads us to a spiral of spending and unproductive and unsustainable growth in a government that intrudes ever-further into our lives, crowds out private effort, and acts as an anchor on the economy.

And since we've lost control of our political institutions to feuding factions that are intent on bending power and money to their own purposes, we distract ourselves with culture war trivia and gossip about politicians' sex lives. Meanwhile, the government grows bigger, more expensive, and more dangerous.

NEXT: Wartime Rationing Changed How America Ate for a Century. The Pandemic Will Do the Same.

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  1. “We Have an Unaffordable War-Sized Government”

    We DO have a war on our hands! A war against the unauthorized uses of DANGEROUS medical implements of death and destruction. such as cheap plastic “lung flutes”! If it were NOT for disobedient trouble-makers using cheap plastic flutes without permission, ALL of this spending would NOT be needed!

    In these dangerous days, stay ye SAFE from the Flute Police!

    To find precise details on what NOT to do, to avoid the flute police, please see http://www.churchofsqrls.com/DONT_DO_THIS/ … This has been a pubic service, courtesy of the Church of SQRLS!

    1. Take your quack medicine back to Tijuana! The free medical market has spoken and your magical flute is NOT approved by the FDA!

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    2. I’ve noticed that this guy thinks he’s funny, but he’s actually kind of annoying.

      1. I think you could’ve left out the words “kind of” from your comment.

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          1. Wow. There’s insane, and then there’s this. I’m impressed you are actually able to function in society.

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      2. He’s the worst. I regularly counsel him to commit suicide, but he just won’t listen. Best thing for him really, his comments are going nowhere.

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  2. Russia’s continued aggression in eastern Ukraine shows us that America needs a bulked up military. Don’t worry about the debt. Modern monetary theory allows substantial debts to be incurred so long as the United States remains perceived as the global hegemon. Remember: Empires don’t die; they slowly commit suicide.

    1. If debt doesn’t matter, why is tax collection so important?

      1. Taxation is more of a tool to prevent wealth inequality in society and people making less than $100k really should not have to pay any taxes in a morally just society.

  3. Perhaps you haven’t noticed we are in a global war.

    It is just that this time the war is not among nations, but against those in each nation who prefer individual freedom against those who insist on total control over the individual.

    1. Take your sympathy for white nationalism back to 4chan, you neck bearded incel!

      1. Jealousy is such a corrosive emotion – – – – – – – – – – –

  4. Anyone who thinks that the government plans to actually pay back this debt, hasn’t been paying attention.
    And it’s not just the US, almost every other government in the West is racking up massive debt too, almost like people who were just told that money was free.
    And it’s not just governments either. Many of the world’s biggest multinationals have started going crazy with borrowing. Many who don’t really need it.

    Meanwhile, the IMF has been saying for the last two years, that it’s time to loosen inflation controls.

    Meanwhile, UBI is being touted as an alternative to savings.

    1. Meanwhile, the uberwealthy like Gates and Buffett are buying up land like mad.

      1. Jimmy Buffett growth stocks have outperformed Warren Buffett value stocks for the past 7 years. I wouldn’t take anything Warren says very seriously.

        1. Not so much what they’re saying as what they’re doing.

    2. “Many of the world’s biggest multinationals have started going crazy with borrowing. Many who don’t really need it.”

      They need it. Leverage is the only way to play this game. We have already divorced valuations from any sort of reality. Consider the oft cited example of the market cap of Ford vs that of Tesla.

      In such a reality you do not want hard assets, you want debt.

      He who defaults last wins.

      1. It’s the old saying (the numbers aren’t the original but with inflation I changed it) “if you owe the bank $1000, the bank owns you, if you owe the bank $1e9, then you own the bank”

      2. Their actions sure look like they think inflation—with commensurate devaluation of their debt—is coming soon.

        Make friends with your neighbors. Or move to somewhere that’s possible. I think the bromide, “All politics are local,” is about to become very true, very soon.

    3. As I’ve remarked before: When somebody gets too deep into debt to ever get out, and realizes it, they can respond in two ways: Either cut way back to minimize the degree they cheat their creditors, or go on a borrowing binge to party down before their creditors figure it out, too.

      Governments basically always take the latter route.

      What’s going on is that our political class have decided that default is unavoidable, and so there’s no point in trying to avoid it. Now they’re in the “cheat the creditors as much as possible before they wise up” stage. With a large element of money laundering so as to personally financially immunize themselves against the coming crash.

      1. Sharks, chewing on a dead floating whale.

      2. Exactly. We’re in the “grab everything you can before the whole thing comes tumbling down” phase.

        1. “The grabbing hand grab all they can
          All for themselves after all”

          Depeche ode nailed it almost forty years ago.

      3. They will not default.

        Hyperinflation will happen way before then.

    4. There’s a reason BTC jumped from 10k to 60k.

  5. [T]he United States is currently ranked by the The Economist’s Democracy Index as a “flawed democracy” rather than a full example of that political system. “The consequence of the long-running culture wars in the US and the heightened political polarisation of recent years is that social cohesion has collapsed and consensus has evaporated on fundamental issues,” notes the Index, whose authors see little prospect for improvement “[a]s Americans increasingly occupy two distinct and conflicting realities.”

    A precursor to an inevitable dissolution. People that cannot agree on the basic fundamentals of what it means to be free should not be forced to live with or among one another under a polity that is openly committed to repressing one or the other. We can only hope the dissolution is peaceful, but a dissolution there must be.

    1. They don’t disagree about what it means to be free. The left simply disagrees with real Americans that freedom is desirable. The left is anti freedom on everything short of drugs and is pro total government control on pretty much everything else.

      1. War is Peace

        Freedom is Slavery

        Ignorance is Strength

      2. The Left favors only those freedoms which do not seriously inconvenience the workings of the Administrative State

      3. “The left is anti freedom on everything short of drugs…”

        Do not confuse permission with freedom.

  6. Article V, Convention of States?

    Specific to enforcing a balanced budget, term limits, and reversal of government power.

    Is it even possible or, even so, is it too late?

    1. Basically too late to do anything but manage the crash so that we recover faster. The debt is already so high that debt service would be impossible at historically normal interest rates.

      Most likely they’ll inflate the debt away by having a hyperinflation, because that way they don’t have to legally admit to having defaulted on it.

    2. Not necessarily too late. The debt crash will depend on investors having some other place to go for their “default currency”. As bad as the politicians are trying to make it, we’re still the best car in the junkyard.

      But that analysis could change overnight if some other currency looked better.

      That said, I do not think term limits should be on your list. Take some time to research the results in states that implemented term limits. The basis assumption is that term limits create a gap during which power devolves back to the people. Ohio’s experience is that unelected bureaucrats sucked up the “free” power. We citizens saw no benefit.
      If state-level term limits did not revolutionize state politics, why do you think you’d see a different result at the federal level?

      1. The smart ones are already into BTC.

      2. Maybe I’m just really sick of hearing career self enriching politicians like Schumer natter about how they were “born to legislate.”

        Of course term limits would mean nothing without also eviscerating the administrative state.

      3. “…we’re still the best car in the junkyard.”

        So much of economics is belief – population psychology really – that it is difficult to rely on data alone, and while that is the widely held belief, watching the price of specie lately and seeing how little they have responded to the Federal money spigot has me wondering if we really are still the best car in the junkyard or if other currencies (if only in aggregate) are filling the gap.

        On the other hand it doesn’t really matter too much – there are still a silly amount of Dollars held all over the globe and when people realize they are worth a lot less than they previously thought the pain is going to be massive.

    3. “Article V, Convention of States? Specific to enforcing a balanced budget, term limits, and reversal of government power.” — Who would do this? Not Democrats. Certainly not Trump-loving Republicans. How many libertarians and non-libertarian proponents of fiscal sanity are there…even among the _Reason_ commentariat?

      1. I can assume the opposition to such would be monumental, of epic proportions. I fully expect we’d all be arrested on trumped up charges and sent to a gulag for a while. If it accomplishes nothing but to show that our government has become a self serving sham and create some degree of “constitutional crisis” to which they respond with FYTY, that would at least be a start.

  7. We had stark choices in November, and again with the Georgia Senate runoffs.

    Where the fuck were you then Toosilly?

  8. Time to start a world war I guess.

    1. ‘I do not know with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.’ Pair with, “This business will get out of control. It will get out of control and we’ll be lucky to live through it.”

      Or unlucky. Radiation sickness is a terrible way to go.

      1. No, no, we’ll ALL become incredible hulks.

    2. Located deep within the Pentagon, a random excuse generator creates the necessary reasons to invade a country when politically necessary.

      Sure, sometimes it says that Canada is selling yellowcake uranium to Suriname, but if you run in enough times, you get something workable.

  9. But we do have wars.
    War on drugs
    War on poverty
    War on crime
    War on obesity
    War on hate

    And all of these wars require an ever expanding Gov burocracy.

  10. The World Wars of the 20th century were fought to make the world safe for White Genocide via unlimited third-world immigration and FORCED integration/assimilation for EVERY White country and ONLY White countries.
    Diversity means chasing down the last White person.

    1. Fuck off, chemjeff. Your astroturfing isn’t fooling anyone.

    2. Awww… Teedy Rosenfeld’s Race Suicide letter of 1903 updated for a modern readership. How quaint. Teedy also oversaw the 1907 Hague Convention Respecting the Laws and Customs of War–none of which stuck during the Balkan Wars that escalated smoothly into WW1.

  11. Well I have to say one thing; whatever I was thinking on my way to work this morning in terms of my problems [will I have enough to retire and live out my years; do I yell at people too much, etc. ] are entirely eclipsed by the article and the comments thereto. Hell, I may not even have a country in which to live; and will I have to learn Mandarin Chinese?

    1. I don’t know, and it couldn’t hurt. Should be a useful language for business, at any rate.

      1. You could probably master two European languages in the time it takes to get started with Chinese. Dutch may be the easiest. I remember flying on KLM (Dutch Airlines) and watching (without earphones) an episode of Seinfeld (popular US TV series) on the little screen mounted on the back of the seat ahead of me. No sound, just the Dutch subtitles which I read. By the end of the episode I felt as though I had a firm footing in the language.

    2. ” will I have to learn Mandarin Chinese?”

      Speaking it is relatively easy if you can master the tones. Not every English speaker can. Reading and writing is probably too late. Chinese elementary school students devote almost all of their study to the characters. Syntax and grammar is a cinch.

  12. Both parties only care about the debt when it suits them. The GOP gripes more but they don’t seem to care if it’s tax cuts or wars they support.

    Maybe if more people voted libertarian? However according to the fascists on here you should vote GOP because the libertarian party isn’t fascist or anti-American enough.

    I love America and freedom so I voted Jorgenson even though she’s kind of a stupid bitch.

    1. Voting for the best platform (the LP, despite infiltrated flaws) makes a lot more sense than voting for or against some puppet. Jo could have gotten 12% of the vote and really changes some laws, but her campaign was saddled with a communist anarchist cretin. Sad.

  13. It’s the Alinsky-Cloward-Piven-Block Yomomma strategy to destroy America in order to “fundamentally transform” it.

  14. While we rubberneck at freak-show headlines, the deeply flawed officials who provide so much distraction have expanded the size and power of the government they control to an extent not seen since the days of global warfare, with no plan for restraining or even sustaining the behemoth they’ve created.

    Stop blaming THEY. The problem is YOU.

    1. As long as you say that looking into a mirror, I agree. I don’t vote for, or advocate that shit.

      1. Traitor

  15. While we rubberneck at freak-show headlines

    What we need is a return to the sedate, low-key journalism of Morton Downey Jr.

    1. “What we need is…”

      To dissolve the union? Just think how much better 50 unaffordable war-sized governments are than just the one we have today.

    2. Morton was the only teevee personality with guts enough to have Dr Petr Beckmann (once a Reason boardmember) on his show. Beckmann talked about the relative safety of nuclear electricity.

  16. That’s why we keep having wars. Korea, Vietnam, Grenada, Panama, Afghanistan, Iraq, Libya, Syria and Bush’s never ending war on “Terrorism”. And it won’t be one war, it will be two. If the US get embroiled in Ukraine/Russia, an emboldened China will invade Taiwan.The US will have to respond. This is what you get when you elect an ultra liberal, cognitively impaired, WEAK President, that he and his party are doing everything possible to divide this country by money, by class, by sex, by ethnicity and by race. Hope you don’t have sons and daughters of military age.
    Enjoy!

    1. “The US will have to respond.”

      The US does not have to respond.

      Taiwan is not part of an alliance like NATO where members promise each other assistance if one member is attacked. US even went so far as to withdraw their recognition of Taiwan in favor of the PRC back in the 70’s. China is constantly moving troops into and out of places like Xinjiang (Uighur country) and Tibet. The US response? Nothing of substance.

  17. Germany and Japan had high taxes and government spending in the 1930s and early 1940s, and they got through it OK. Less population turned out as good as more lebensraum.

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