SINCE THE New Deal spang up almost 50 years ago in reaction to the Great Depression, total government expenditures have burgeoned from a relatively trifiling 12 percent of GNP to more than a third of the nation's total output. However, as tax burdens have grown heavier, inflation rates higher and disappointment over Great Society and other government ventures deeper, the appeal of government programs designed to solve each and every one of the nation's problems has dimmed while their costs have become increasingly apparent.
In fact, the majority of Americans now agree that there should be lower taxes and less government spending, and everybody is ready to sacrifice his or her neighbor on the altar of fiscal restraint.
In this atmosphere, it is easy to conclude that Congress' annual token budget-cutting ceremony will not suffice, and that the nation is on the eve of a "taxpayers' revolution" that will drastically reduce government spending almost overnight.
Unfortunately, the evidence in the table accompanying this article suggests that this fine revolutinary fervor may prove no more than a fizzle when Americans are faced with putting their share of government benefits where their mouths are. For while most seem amenable to the rhetoric of fiscal austerity, a majority also have their feet in the government trough. As of 1977 (the last year for which Commerce Department data are available), the percentage of the population dependent on spending by government at some level for a significant part of their income came to 54 percent -- up more than 11 percentage points from 1960's 42 percent. Although the country now seems anxious to kick the liberal spending habit, those programs have become so numerous and so large that over half the population is hooked.
This rather startling figure includes only those for whom government income makes a major difference to their standard of living: major in the sense that those involved would vigorously firht the eliminations of their government benefits. Government employees and their families clearly belong in this group, but so do people on government pensions and social security, even though they may also have income from other sources. On the other hand, petty beneficiaries such as participants in the school milk program are excluded.
Obviously, any significant attempt to cut government programs -- even a mild across-the-board cut -- is likely to receive some very determined resistance from more than half the population. If you don't believe this, ask anyone who is about to retire -- even a dyed-in-the-wool conservative -- whether he would give up his forthcoming social security benefits as the price of reducing government spending.
Who makes up this enormous constituency? Persons employed directly by the government and their dependents accounts for about 13 percent of the population, but surprisingly have played no role in the growth of the government-dependent sector in the 1960-1977 period. In-deed, this segment of the dependent population was a slightly smaller proportion of the total in 1977 than it had been in 1960, as shown in the table.
In addition to direct government employment, government purchases of goods and services provide income for a vareity of people and their dependents. Likewise, goverment regualtion and protection push prices, and hence revenues, above equilibrium in certain industries (e.g. steel, trucking and textiles). This probably boost employment in these industries in about the same proportion.
But this combined category also fails to account for the rise in the percentage receving government-bases income, as it has actually shrunk from 10 percent of the population in 1960 to about 8 percent in 1977.
To find where the big increase has come from, we have to look not at persons engaged in producing government goods and services, directly or indirectly, but at recipients of transfer payments -- those payments for which no current work is being performed. Here is where the Great Society and other vast government programs in the last two decades have had their impact.
Social security exhibited particularly alarming growth, soaring from less than 10 percent to almost 17 percent of the total population. Enlargement of the portion of the population over 65 accounted for only about one percentage point of this increase. The vast majority came from a reduction in the initial eligibility age from 65 to 62, and climbing numbers of child and disabled social security recipients.
Although not as important in terms of absolute size, the welfare, government pension and veterans' pension sectors exhibited extremely strong growth. Over 5 million children were added to those benefiting from the Aid to Families with Dependent Children category between 1960 and 1977, despite the fact that the number of children under 18 shrank by 300,000 in that period.
Overall, the 12 percentage point increase in transfer recipients' share of the population actually slightly exceeds the total increase in the percentage of those depending on government spending for their income. By the same token, this shift in favor of transfer beneficiaries also slightly exceeds the total percentage decrease in the nongovernment dependent sector from 57.7 percent to 46.5 percent.
Perhaps more important, note that the decline in the group not dependent on the government was entirely accounted for by a drop in dependents in that category. The change that occurred between 1960 and 1977 was, in effect, a shift in which those dependent on the private sector became government transfer payment recipients. Unfortunately, this is just the group most likely to be indifferent to the burdens of excess government spending. They pay few taxes and their incomes are largely indexed to inflation.
But this need not mean that all is lost. Cuts in existing programs may not be in the offing, but the American voter in his current mood is scarcely likely to tolerate expensive new programs that ballon into "uncontrollable" budget items, as was the case with Medicare and many other Great Society programs. While government may not get any smaller in absolute terms, its rate of growth may be curtailed in coming years.
In contrast, private-sector growth over the next decade is likely to be strong, after the major worldwide recession we expect during the next several years is completed. With the postwar babies continuing to enter the 25-to-44-year old age group, residential construction and consumer durbables spending should keep expanding throughout most of the 1980s. Moreover, fewer new entrants to the labor market and more sympathetic public policies should create an extremely healthy atmosphere for capital spending, especially in labor-saving equipment.
The net result of a sluggish public sector and a briskly moving private sector would, of course, be a declining share of total production that is controlled by government, fianlly reversing the 50-year trend set off by the New Deal. This would be, however, and evolutionary process, not an overnight revolution.