Conservatives are trying out a new slogan to influence the ongoing budget negotiations: “Spend One Dollar Less.”
As reported by National Review’s Jonathan Strong, twenty major conservative leaders all signed a letter stating that “If Washington wants to take on more debt… isn’t it fair that they at least be forced to spend One Dollar Less next year than they’re spending this year?”
There are several problems with this argument, but it also points to an important question: Should government spending as a share of the economy go higher or lower as we get wealthier?
On the specific “Spend One Dollar Less” argument, it’s worth noting that raw dollar spending is an incomplete way of understanding what the government does. In order to gauge the size of government spending you need to reference the actual size of the economy. How much of the economy’s resources is the government using? A large, rich country spending a certain amount of money is less an issue than a small, poor country spending the exact same amount, all else equal.
Every year there is some amount of growth and inflation in the economy. As such, the amount of government spending needs to grow in dollar amounts each year simply in order to keep doing the same things on the same scale. This is why spending and debt, when actually being analyzed, are usually conveyed as a percentage of GDP.
And that’s not all. The government provides services to—which means that as the country grows in population the government should also expand to keep the level of services constant. The U.S. population has increased about 0.7 percent in each of the past several years, with 2.25 million new people in 2011. Those are new people who will need roads, schools, clean air and water and all the other things the government provides. To keep services constant, government spending in raw dollars will have to increase too.
This also points to a related and more interesting question. Over the next decade the federal government is expected spend about 22 percent of GDP. Should that number grow or shrink as we get richer as a country? This is a fundamental difference between liberals and conservatives.
As the sociologist Lane Kenworthy, author of the forthcoming Social Democratic America, notes, it’s a historical fact that as countries have grown richer, they have spent more on social insurance. As we become richer we value security and insurance more and we are willing to spend more on it. We do this as individuals, and we do this as a country as well. Insurance mitigates against bad luck, including the bad luck of being born in poverty.
Conservatives would counter that, as we grow richer, there are more opportunities to provide security privately, without the use of government. As such, government spending should be reserved for very core, minimal functions, which will shrink as private forms of insurance and risk-mitigation flourish.
The last decade hasn’t been too kind to the latter vision of how prosperity will evolve. The serious market income gains have been concentrated in the top 1 percent of Americans, who in turn use it to fuel luxury spending competitions rather than run private welfare states. As MSNBC’s Ned Resnikoff reports, private food banks are terrified of the sequester (which cut The Emergency Food Assistance Program that helps food banks) and recent food stamp cuts, because they can’t offset that austerity with private charity. Economic insecurity has increased, and longer-term trends don’t point to any reversion soon. Any sensible politics that evolve out of this situation will involve government spending to increase with the times.
Mike Konczal is a fellow at the Roosevelt Institute, where he focuses on financial regulation, inequality and unemployment. He writes a weekly column for Wonkblog. Follow him on Twitter here.