The Right Size for Government

I don't know anyone who disputes the idea of limited government. To say that government should not be limited is to advocate totalitarianism. Liberals and conservatives agree that the right size of government is a legitimate question. Conservatives generally believe that we have passed the right size of government many years ago and wish to return to a time of smaller government. This reactionary urge is purely emotional and not reason based, as I will show.

There ought to be no dispute on the broadly defined legitimate goals of government, for they are laid out explicitly in the preamble to the Constitution of the United States of America. They are:

Perfect the union of the people.
Establish justice.
Insure domestic tranquility.
Provide for the common defense.
Promote the general welfare.
Secure the blessings of liberty.

Specific limitations on government power are defined in the various articles of and amendments to the Constitution. Those explicit limitations are the subject of Supreme Court rulings and are generally not in political dispute, but when they are they can be resolved by the amendment process. The issue at hand concerns the governmental activities controlled by our Executive and Legislative branches of government.

The Constitution doesn't specify the extent to which the above six goals of government are performed. It leaves the general extent of government up to the people. It seems to me that somewhere between the extremes of zero government (anarchy) and complete government (totalitarianism) lies an optimal government.

Revenue and Taxes

Many conservatives believe that the best way to restrict the size of government is to restrict the ability of government to spend by restricting deficits, revenue, and taxes. Certainly many powers of government come from spending ability. Simply on the grounds of promoting the general welfare, a government ought not to overtax to the point that economic activity is unduly depressed, so it's not surprising that one of the main conservative arguments for low tax rates is economically motivated.

The so-called Laffer curve is an example of this kind of thinking. The Laffer curve purports to show government revenue as a function of tax (income, primarily) rate. The curve shows revenue rising with an initially rising tax rate, peaking, and then falling off sharply with increased rate. Proponents of this Laffer Curve argument assert that we have reached the point of diminishing returns long ago, and that further reductions in tax rates will result in increases in revenue. The 2001 Bush tax cuts for the rich put the lie to this notion with historically high deficits as the result. We are actually operating on the up (left) side of the Laffer Curve and nobody yet knows where it will peak. Ironically, the Laffer curve is usually invoked as an argument for lower taxes, yet it actually argues that higher revenues will be generated with higher than current tax rates. So economic grounds alone are insufficient to reduce government size further, and do not argue against a re-expansion of government to better perform the six goals of good government.

Good Versus Bad Government

To an anarchist, all government is bad (and consequently is too large). However, even sane people might aver that some governments can never be too small. Such was the case with the Nazi regime in Germany. The allies ensured its total destruction.

When we talk about the optimal size of government, as we are doing here, we mean the appropriate size of a good government, such as that of the USA. Small government advocates mean well and aim to make our good government better. They are merely misinformed, usually having been misled by anti-tax and anti-regulation corporatists. So for the purposes of this discussion, we assume the things that are wrong with government, such as waste and inefficiency are things that can and will be improved in the normal democratic process, and that corruption is small, manageable, and will also be rooted out in the normal working of the justice system.

We therefore focus on making good government better by continuing to reduce waste and corruption, expanding programs that work well, and eliminating unnecessarily burdensome or intrusive programs (such as No Child Left Behind).

Optimal Government

As shown above, reduction of government cannot be justified on economic grounds. In fact, there are many arguments for expaning the role of government in developing renewable energy, biotechnology, aerospace, and other high tech ventures in order to promote the general welfare. The fact of the matter is, nobody knows how large a good government might grow before it bacame unnecessarily burdensome on either the economy or personal liberty.

For example, increased taxation of the wealthy to improve education at all levels, making a college education virtually free for those willing to study hard, will increase the economic power of the nation and improve the quality of life for everyone, especially the wealthy. I suspect that the current size of government is far below the optimal, and that the best is yet to come.

Email Richard dot J dot Wagner at gmail dot com