Yglesias Contra Wagner

Matthew Yglesias has a provocative post in which he claims that the progressive effort to expand the welfare state is now mostly done. There are still lots of items on the progressive agenda but they no longer has to due with expanding the size of government.
Here’s Matthew’s post in its entirety.

The End of Big Government Liberalism
For the past 65-70 years—and especially for the past 30 years since the end of the civil rights argument—American politics has been dominated by controversy over the size and scope of the welfare state. Today, that argument is largely over with liberals having largely won. The size of the US public sector is still going to look low by international standards, but this will be a bit misleading since the way the structure of the Affordable Care Act works is to use public money and public regulation to leverage a lot of formally private money. In practice, the United States will still be a small government country compared to Sweden or Denmark or France (which combines Danish-style taxes with a below-the-waterline iceberg of hidden state-directed economic activity), but not compared to the United Kingdom or Spain.
Due to the bill’s almost comically delayed implementation, for several years we’re still going to have a lot of political tussling over it. And even once it’s in place, the system will continue to be debated and tweaked for years to come. But over time, I think American politics will come to look quite different and we’ll look back on this day as a turning point.
The crux of the matter is that progressive efforts to expand the size of the welfare state are basically done. There are big items still on the progressive agenda. But they don’t really involve substantial new expenditures. Instead, you’re looking at carbon pricing, financial regulatory reform, and immigration reform as the medium-term agenda. Most broadly, questions about how to boost growth, how to deliver public services effectively, and about the appropriate balance of social investment between children and the elderly will take center stage. This will probably lead to some realigning of political coalitions. Liberal proponents of reduced trade barriers and increased immigration flows will likely feel emboldened about pushing that agenda, since the policy environment is getting substantially more redistributive and does much more to mitigate risk. Advocates of things like more and better preschooling are going to find themselves competing for funds primarily with the claims made by seniors.

This is an interesting point and I hope Matthew is right but I have my doubts. Matthew is basically taking on Wagner’s Law which says that the size of government in a modern industrial state will continue to grow as a share of the economy. Perhaps there’s a Scandinavian upper limit of around 60%. If so, then we’ve still got a long way to go.
I’m inclined to think the political push for greater government isn’t over. If healthcare reform is the first step to a single-payer system, and many smart people think it is, then it fundamentally alters the political system. Healthcare isn’t just another program, it’s a major change in attitude of how the citizen relates to the state. It could be the start of a self-reinforcing cycle of people seeing the government as responsible for other areas of their lives (“hey, I trust them with my health so why not this too”).
Plus, my dystopian side can’t escape pondering the internal contradiction of the welfare state—it needs babies to work but ultimately produces smaller families. That often leads to more immigration which further undermines support for the welfare state. On top of that, military spending is out the window.
Not very happy thoughts, but it’s an interesting point to think about. I believe that Matthew’s flavor of progressivism involves separating wealth creation from wealth distribution. I’m not so certain he’s in the majority.
Julian Sanchez has more.

Posted by on March 24th, 2010 at 6:02 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.