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Big Government vs. Small Government – Which Is Ideal for the U.S.?

By Michael Lewis

governmentThe term “big government” stimulates plenty of images and emotions, and they’re generally negative. Words like “bureaucratic,” “inefficient,” “intrusive,” and even “corrupt” are often associated with the term. Economists charge that big government interferes with the mechanisms of free enterprise. Libertarians believe it seeks to control private or personal freedoms guaranteed by the “natural law” eloquently philosophized by John Locke and formalized in the U.S. Constitution’s Bill of Rights. And politicians claim big government lacks checks and balances on its exercise of power, leading it to represent special interests to the detriment of its citizens.

Small government, on the other hand, is generally believed to lead to a more efficient and flexible system. “Getting government off our backs” or “getting government out of the way” are cries to return to the low-tax, no-regulation beliefs of the American Revolutionary period. The size of government envisioned by the country’s founders sought to cast off tyranny and empower small businessmen and entrepreneurs.

Small government was best summarized by the principal author of the Declaration of Independence and third President of the United States Thomas Jefferson when he claimed, “That government is best which governs least, because its people discipline themselves.” Meg Whitman, former CEO of eBay, current CEO of Hewlett-Packard, and one-time Republican candidate for Governor of California described it as “making a small number of rules and getting out of the way. Keeping taxes low. Creating an environment for small businesses to grow and thrive.”

“Small government” is the mantra of patriots, conservatives, hippies, and progressives alike, but what do the terms “big government” and “small government” really mean?

Political Party Positions

Republicans and conservatives have effectively captured the role as protectors and advocates of “small government,” leaving Democrats and liberals to wrestle with the pejorative connotations of “big government.” Mitt Romney, Republican presidential candidate in 2012, defined the best government as “small,” effecting policies that “expand (its citizens) freedoms, broadens their opportunities, allow them to keep more of what they earn, afford them better education, let them choose their own healthcare, and turn loose the free enterprise system to create more jobs.”

Democratic presidential candidate Barack Obama’s version of the role of government, detailed in the first presidential debate, included keeping America safe and creating “ladders of opportunity and frameworks where the American people can succeed.” The President went on to argue that “if all Americans are getting opportunity, we’re all going to be better off. That doesn’t restrict people’s freedoms. That enhances it.”

Despite the fact that 62% of Americans believe that “the Federal Government controls too much of our lives,” according to a 2012 Pew Research Center report, in reality, “big” and “small” government are subjective terms, the definitions of which change according to each person who defines them.

The top four defense contractors in 2010 (Lockheed Martin Corp, Northrop Grumman Corp, Boeing, Raytheon) – collectively accounting for almost $45 billion in government purchases – would hardly complain that our government is too large, nor would the communities affected by hurricanes Katrina or Sandy who sought and received considerable government aid. Most recognize that the interstate highway system, the Internet, and the amazing medical discoveries of the 20th century were possible only with the support and leadership of the Federal Government.

On the other hand, a businessman struggling against new regulations, or a smoker who’s prohibited from lighting up in public and forced to pay exorbitant taxes to indulge his habit, or a property owner forced to cede a right-of-way to the prospective Keystone XL pipeline are all likely to believe that government is too large and threatens their freedoms. For every complaint about the excesses of government, there is an equal response wanting government to do more.

The preference of citizens for an activist or limited government depends upon several factors including political party, age, education, physical location, and the direct consequences of government action or inaction in their lives.

  • Republicans Generally Prefer a Limited Government. Evidenced by their 2012 Party Platform, which declared the goals of the party to “return government to its proper role, making it smaller and smarter… keeping taxation, litigation, and regulation to a minimum,” the Republican party has clearly adopted smaller government as its mantra. The Democratic platform, by contrast, advocated a more energized government that “stands up for the hopes, values, and interests of working people, and gives everyone willing to work hard the chance to make the most of their God-given potential.”
  • The Government Should Do More to Solve Problems. This is the attitude held by 59% of Americans aged 18 to 29, while a similar majority (58%) of those 65 and older people think the role of the government should shrink.
  • Opinions Vary Among College Graduates According to Specific Social or Financial Issues. According to opinion polls, college graduates are more likely to favor government restrictions on guns and protected borders, and are more tolerant of different lifestyles and policies on legal immigration. Paradoxically, however, they generally prefer maintaining and strengthening the social safety net of entitlement programs, including Social Security and Medicare, while simultaneously limiting federal restrictions and regulations on business activities.
  • Citizens Who Reside in Heavily Rural, Less Densely Populated States Favor Small Government. These citizens are generally conservative, less dependent upon visible government services, and more likely to believe that personal freedom, individual responsibility, and moral principles are under attack by intrusive government action.
  • Self-Interest Is of Utmost Importance Regardless of Belief System. Despite one’s beliefs, self-interest invariably trumps communal responsibility or obligation. Those who favor limited government may protest when businessmen peddle unsafe products or bankers engage in risky investments with depositors’ funds. Those who advocate activist government may chafe under the restrictions of airline travel or what they consider exorbitant personal income taxes.

what is the role of government?

Factors Affecting the Role & Size of Government

Government is the system by which a society formally regulates the economic and social interactions and activities of the individuals within it. The role, reach, and impact of government is directly affected by a range of factors:

1. Population Density

Government tends to grow larger as the number of people governed increases. Helen Ladd, economist and professor of public policy at Duke University, confirmed that increases in population density result in higher demand for public services and per capita government spending. In 1970, the U.S. population was 205 million with total government spending at $322 billion ($1,571 per capita). By 2010, the country had grown to a population of almost 309 million with total public spending at $3.6 trillion ($11,662 per capita).

Supreme Court Justice Oliver Wendell Holmes, Jr. once wrote, “The right to swing my fist ends where the other man’s nose begins.” As we live closer together, the distances between other citizen’s noses shrinks, increasing the need for a government to protect both our rights and our noses.

2. Size and Complexity of the Economy

The degree of industrialization affects the role and size of government in any country. Even though Spain and Colombia have similar populations of approximately 46 million, Spain, a member of the European Union, is more industrialized than the agrarian- and mineral-based economy of Colombia, which is geographically larger. In 2010, Spain’s government spending exceeded $672 billion, while Colombia’s public expenditures were less than $98 billion.

Similarly, the United States at the start of the 20th century, when it was less industrialized and more dependent on agriculture, had total government spending of less than 7% of GDP. In 2013, however, total government spending is going to equal almost 40% of GDP, reflecting the fundamental change in the nation’s population and economic structure. In 2010, the U.S. economy ($14.59 trillion) was larger than the combined economies of China ($5.93 trillion), Japan ($5.46 trillion), India ($1.73 trillion) and Russia ($1.48 trillion).

3. Interaction With Other Countries

New York Times columnist Thomas L. Friedman declared in his book “The World Is Flat” that “technological and political forces have converged, and that has produced a global, Web-enhanced playing field that allows for multiple forms of collaboration without regard to geography or distance – or soon, even language.” While the role of our country in foreign activities has been debated since its inception – “isolationists” versus “imperialists” – technology, the ease of capital formation, movement across borders, and the growth of multinational organizations has made the argument nearly obsolete.

Countries and governments today are forced to respond to the globalization of terror, economic competition, intellectual property, and energy with increased government activity to protect their interests. In 2010, our national budget of $3.6 trillion was more than double that of China’s $1.7 trillion. From 2006 to 2011, U.S. defense spending increased from $624.8 billion to $817.7 billion. By contrast, China’s defense budget was $35.1 billion in 2006, growing to $91.5 billion in 2011, reflecting China’s increasing presence in world relations.

4. Social Goals and Beliefs

As basic needs such as food, shelter, and clothing are met, there is growing pressure to devote more resources to services that private citizens cannot easily coordinate on their own. This includes an employment market open to all, good schools for children, comfortable retirement for the elderly, and a strong social safety net for all. Adolph Wagner, a 19th-century economist, first proposed the idea – now known as Wagner’s Law – that government tends to grow as society becomes richer. The growth of social services alongside the U.S. economy appears to confirm Wagner’s hypothesis.

Ideal Government

In December 2012, the sponsors of the nonprofit TED, a conference/community of people dedicated to their mantra of “Ideas Worth Spreading,” asked the question “What would your ideal government system look like?” Responses included:

  • One where decision-makers advance on the basis of their productivity, and not on the basis of their willingness to “spread the wealth around.”
  • Simpler is better. Modernize the Constitution. Regional, limited representation rather than state representation to make government more transparent and accessible.
  • The Constitution should be rewritten every 20 years to adapt to current needs and developments.
  • One party. Its simple purpose would be to uphold the laws of our original Constitution and to provide military defense against outside threats.
  • Citizens who wish to vote would first have to pass a test of their knowledge about current events and the platforms of the candidates. An ideal government would have higher taxes, more social support, education, healthcare, guaranteed food and housing, and less incarceration.
  • No government is actually ideal.

Over the centuries, philosophers have often defined “ideal government” in similar terms. Plato, writing in Greece around 400 B.C., said, “The punishment which the wise suffer who refuse to take part in government, is to live under the government of worse men.” On the other hand, Dean Acheson, secretary of state under President Harry S. Truman, complained in a 1971 interview, “People say, if the Congress were more representative of the people, it would be better. I say the Congress is too damn representative. It’s just as stupid as the people are; just as uneducated, just as dumb, just as selfish.”

Final Word

The terms “big government” and “little government” more likely reflect the attitude of the individual than the actual size or role of our existing government. The foundation of democracy – the form of government where each citizen has an equal say in the decisions that affect their lives – is compromise, an outcome where no one gets exactly what they want, but everyone gets something. That is both the benefit and the shortcoming of the system under which Americans have lived for more than two centuries. Most would agree that our government, despite its flaws, has served the nation well.

What do you believe is the ideal role of government?

Michael Lewis
Michael R. Lewis is a retired corporate executive and entrepreneur. During his 40+ year career, Lewis created and sold ten different companies ranging from oil exploration to healthcare software. He has also been a Registered Investment Adviser with the SEC, a Principal of one of the larger management consulting firms in the country, and a Senior Vice President of the largest not-for-profit health insurer in the United States. Mike's articles on personal investments, business management, and the economy are available on several online publications. He's a father and grandfather, who also writes non-fiction and biographical pieces about growing up in the plains of West Texas - including The Storm.

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  • James Hendrickson

    Good stuff. I would personally say that small government is better, largely because smaller governments allow the private sector and individuals to coordinate their own activities. This generally leads to greater economic development, diversity and artistic production.

    • MLewis

      James,
      The challenge is to let free enterprise work while protecting us from its excesses. Difficult though it may be , good government and leaders constantly strive for that balance.
      thanks for writing.

  • http://mydebtucation.blogspot.com/ Mario

    I wonder if as many people would say they would prefer government to be much smaller if we hadn’t already grown so used to the things government provides that they’ve become invisible to us. On the other end of the spectrum you could also look at the example of the uproar any time we try to make even small cuts to the biggest big government thing of all — our half-of-the-discretionary-budget national defense.

    • Mlewis

      Mario,
      I think you’re right – most people don’t recognize all of the ways government touches our lives, just the things we don’t like when they interfere with our plans and actions.
      thanks for writing.

  • http://www.yanksgoyard.com/ Jimmy Kraft

    I actually liked this response from the TED meeting:

    “One where decision-makers advance on the basis of their productivity,
    and not on the basis of their willingness to “spread the wealth around.”

    However, I’m sure the rules and guidelines that constitute “productivity” would be argued and discussed ad nauseum.

    It just seems like Congress, right now, is so far detached from those whom they serve that they know little about what we need/want. They are too busy fighting with each other that nothing is accomplished. In my short life, I haven’t seen such a unproductive Congress as we have right now in office.

    • MLewis

      Jimmy,
      I agree with your comment about Congress – I hope someday soon we get past all of the partisanship and get on with solving the problems of the country.

      Thanks for writing.

  • Abbie

    Big government, small government. How can we defined what
    is small and what is big. There are many people I know that thinks the
    government is in their lives and business too much and others that think the government should intervene on more issues. All I can say is no matter whether we define the government as too big or too small, the government will forever be in our lives.
    Be happy and enjoy life because we really can’t control what happens in
    Congress and Washington. We elected them and gave them the power to do
    what they think is best for our Country not what we think is best.

  • Phil Gaboriault

    Big Government as our founders understood it for America was
    based on Public Services that were provided to the public that the town, city
    or states couldn’t provide properly. One
    has to understand the difference between Private Sector and Public sector! The Public sector works for a Government
    entity such as a town, state or the federal Government. Their Job is to provide
    services to the general public in some way. They do pay taxes like everyone
    else; however if you take a simple example of a Public service worker that is paid
    $100,000.00/yr. Say his or her taxes paid to town, state and federal equals $40,000.00/yr.
    This leaves a net cost for this Public Service employee of $60,000.00/yr. If
    you apply the same for all Public employees, there will remain a large net balance
    owed that must be paid by taxes on the Private sector (businesses, and their
    employees, and the self-employed). Presently the total taxes paid by the
    Private Sector don’t cover the net costs for these public services. So the Towns,
    Cities, State and US Government have to borrow money (float bonds paying interest
    like a credit card). The US Government now owes over $17,000,000,000,000.00 (17
    Trillion dollars). Before Obama took office we owed under $10,000,000,000,000.00
    (10 trillion dollars). He has nearly doubled the debt due to his liberal
    policies of big Government with all the subsidies. If we continue this way, the
    Government will go into bankruptcy. People will lose all they have worked for and
    the Government may try to take over your savings, retirement funds etc. The only answer is to vote these liberals out
    of office. We should have a new law for voting requiring a person to be off
    Government subsidies in order to vote. Subsidies are a way to pay voters to
    vote for those that support hand outs and you can’t expect a voter to vote them
    self-off the free hand outs.

    • http://www.moneycrashers.com michael r lewis

      Phil,
      Thanks for writing. We agree that the Federal Debt is a problem, but I suspect we disagree on the cause or the solution. I suggest that the problem is the result of our citizens and politicians living in a Polly-annish world where bills never come due and problems can be extended forever. What exists in the public arena exists on an individual level – less than 25% of people have any retirement savings, nor plans to establish adequate savings. As humans, we are unwilling to defer gratification today for security tomorrow. Yes, we have established social programs without funding them just as we have fought several wars while cutting taxes. It is a politically popular approach, even though it is not rational. In other words, our debt load is the result of society as a whole, rather than just those who work in government offices or receive government benefits. And it will take sacrifices from everyone to solve the problem – cutting public benefits as well as raising new tax dollars.

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