What Is 'Big Government,' Really?

James Kwak has a highly instructive post at the Atlantic arguing that it's simply not helpful to think in terms of one monolithic "big government" that must be shrunk to get our budget deficit problem under control. In fact, he notes, what is traditionally thought of as "the government" (what he characterizes as "Everything Else" besides Social Security, Medicare and interest on the debt) is not getting bigger as a percentage of Gross Domestic Product:

In 1960, the last full year of the Eisenhower administration, taxes were 17.8 percent of GDP and primary spending (excluding interest) was 16.4 percent. Social Security took in and paid out 2.2 percent. Medicare didn't exist. So Everything Else had a primary surplus, with taxes at 15.6 percent and spending at 14.2 percent.

In 2010, in the supposed age of "big government," spending on Everything Else was only 14.7 percent of GDP, and that was swollen by the recession and stimulus spending. By 2021, according to the CBO's alternative fiscal scenario (the pessimistic one), spending on Everything Else will be 13.0 percent--less than in 1960. Everything Else tax revenues--that is, everything except the Social Security and Medicare payroll taxes--will be 12.5 percent of GDP, for a primary deficit of only 0.5 percent. And that's assuming that all of the 2001, 2003, and 2009 tax cuts are extended indefinitely.

To solve our long-term deficit and debt problems, we've got to figure out how much of a safety net in terms of Social Security and Medicare we're willing to purchase as a society. If instead, we put most of the focus on starving traditional federal programs and agencies, we'll not only fail to address our fiscal problems, but we'll end up with hollowed-out, dysfunctional bureaucracies that further erode Americans' faith in government.