Politics

America’s Policy-Propelled Earthquake

Even as frustrations over partisanship grow, the partisanship itself only increases. How did this happen and when? Most search for answers in the personalities of the present. Yet the real answer lies in the policies of the past.

For decades the economic pressures of social policies have been building and are increasingly being played out in our politics.

If you are looking for a date for the origins of today’s partisanship, try 1972. This is well earlier than most would assume, but there is a strong argument to be made for it.
This was the first year in which federal payments to individuals first outstripped America’s national defense and international aid spending. It marked a watershed for America’s government priorities.

Before 1972, the federal government’s primary function had been the nation’s defense at home and abroad. The New Deal’s creation of Social Security, and the later additions of Medicare and Medicaid during the 1960s’ Great Society, began the mission change. However, this change in character of the federal government’s mission was obscured by a succession of military conflicts that kept defense spending high.

In 1949, the government consumed just 14.4% of the nation’s GDP. Defense and international spending amounted to 7.1% of GDP vs. 3.7% for federal payments for individuals.
By 1959, the federal government consumed 18.9% of GDP—defense and international amounting to 10.6% and federal payments to individuals 4.6%. In 1969, it was 19.5% of GDP for the government, with 9.2% for defense and international vs. 6.1% for individual payments.

The policy change was also obscured by the social programs themselves. Originally, they had the appearance of forward-funded insurance programs. Both Social Security and Medicare were funded from payroll taxes, not income taxes. This distinction immediately served to wall-off these programs. With dedicated funding, they not only became sacrosanct, they became self-propelled.

By 1979, Social Security and Medicare alone had overtaken all defense and international spending. The federal government then consumed 20.1% of GDP and defense and international accounted for 4.9%. However, federal payments to individuals had swelled to 9.3% of America’s economic output.

While defense spending would increase in the build-up that brought down the Soviet Union, by 1989, defense and international spending had been overtaken for good.

So what does this have to do with today’s partisanship? Everything. Like geological movements, politics is but the surface floating on the tectonic movements beneath. In society, those underlying movements are economic.

Washington has begun to increasingly strain under the economic pressure of its social spending policies. Declining demographics within society and decreasing defense spending in fiscal policy long helped hide these social policies’ redistributive nature. However, the drop in the worker-to-retiree ratio and the end of the post-Cold War “peace dividend” have exacerbated the pressure they once ameliorated. At the same time, the income tax has become ever more centered on the top earners.

Last year, the federal government consumed almost a quarter of the nation’s GDP. Of that, defense and international spending accounted for just 6.2% of GDP, while federal payments to individuals were 14.7%.

In sum, America has gone from having a relatively light social- program burden, which was spread over a broad tax base, to having a heavy social-program burden focused on a narrowing tax base.

The distributive nature of government’s demands has changed too. In the past, government taxed for a broadly consumed good: national security. Today and increasingly, its demands are on behalf of a more narrowly consumed good: redistributive social policy.

Such redistributive policy is, by definition, a zero-sum exercise: as such it is inherently divisive. The electorate is now feeling the strain of the resulting spending, deficits, and debt growth—and the costs associated with them: tax and interest rate hikes.

The critics of Washington’s partisanship are right, but for the wrong reasons. Yes, the divisiveness has increased, but it is the policies and their resulting effects that are divisive, not the politicians per se. The participants are more cause than effect. They are merely embodying the pressures that are being felt in the economy and the electorate.

And the critics of conservatives are wrong for the wrong reasons. Conservatives—neither today, nor the appearance of Reagan 30 years ago—did not bring about today’s political confrontation.

Political confrontation has been, and will increasingly be, brought on by inherently unsustainable liberal social spending policies. Too much was promised and now too much is owed.

The escalating political pressure in Washington is the result of the collision of enormous economic forces in the electorate. The earthquake that will come will merely be manifested on the political surface, not originated there.

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