The Government We Deserve

Something is rotten in these United States, and Americans know it. As usual, the focal point of their anger is Washington’s dysfunctional politics and partisan bickering. But the problem isn’t just the decline of civility in the halls of the Capitol. It’s much bigger. Today the country is reaping the foul harvest of policy decisions it has enthusiastically endorsed over the last 30 years.

How mad are Americans? Just look at this chart. For the last 30 years, Gallup has polled Americans about whether they are satisfied with the direction in which their country is heading. This chart shows the gap between the percentage that is satisfied and the percentage that is not. When the chart heads north of the zero line, most people are satisfied. When it heads south, most aren’t. And it’s fallen off a cliff.

In fact, the numbers have been sliding southward for a decade. There have been some brief upticks — the post-9/11 launch of the war on terror, the 2003 Iraq invasion, Barack Obama’s 2009 inauguration — but the trend is clear. And there’s no simple, short-term explanation. Earlier periods of intense dissatisfaction, such as the early 1980s and early 1990s, were closely tied to sharp economic downturns. But the recent decline was already in full swing when Americans seemed to be living large, well before the 2008 Great Recession.

Why? Because over the past few decades, Americans eagerly supported a series of decisions aimed at rolling back government’s influence in daily life. They were popular at the time. But now the country is paying a heavy price.

Call it a hangover from America’s neoliberal binge of the late 20th century, a massive political project aimed at limiting government’s role in everyday life. Americans wanted “a minimum of government authority,” Ronald Reagan said while campaigning for the presidential nomination in 1976. “Very simply, they want to be left alone.” And that was exactly the program enacted over the next quarter-century: Marginal tax rates were reduced, especially for the wealthy; social programs were restricted; controls on commerce and finance were removed. By the time 2000 rolled around, Reagan was remembered as one of the greatest presidents in modern history.

By then, the project of restricting government and liberating market forces was a bipartisan one. It was a Democrat, President Bill Clinton, who famously conceded in 1996 that the era of big government was over. Clinton signed the North American Free Trade Agreement in 1993 and a trade agreement with China in 2000, saying that this was “the only way we can recover the fortunes of the middle class in this country.” He also signed laws that loosened federal control over the financial sector, promising they would actually “enhance the stability of our financial services system.” Despite all his personal baggage, the American people heartily approved of this agenda: Clinton ended his presidency with a 65 percent approval rating.

Clinton merely followed what was, by then, the conventional wisdom about the virtue of the neoliberal project. Federal Reserve Chairman Alan Greenspan helped set the tone, promising that free markets would generate wealth and regulate themselves effectively. The United States, Greenspan said in 2005, had a “far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter-century ago.” Yes, Greenspan’s credibility took a beating after 2008, but before the crisis, he was one of the country’s most highly regarded policymakers. A 1998 Gallup poll showed that 57 percent of Americans had a favorable view of the Fed chairman, while only 9 percent had an unfavorable view. “With Greenspan, we find comfort,” journalist Bob Woodward wrote in his 2000 book Maestro. “He helps breathe life into the vision of America as strong, the best, invincible.”

Unfortunately, the decades-long neoliberal project had a price, which became increasingly obvious in the new millennium. The removal of trade barriers put U.S. jobs at risk, while lowering top tax rates and loosening the social safety net aggravated problems of inequality. Lighter regulation encouraged overexpansion and recklessness in the financial sector. Even before the 2007-2008 crisis, Americans were uneasy about the effects that followed from policies they had once enthusiastically endorsed. In 2004, according to an ABC News poll, a majority of Americans believed that they were no better off than when Reagan was inaugurated. In a 2006 CBS poll, two-thirds of respondents doubted that the next generation would be better off than they were. And in an April 2007 Gallup poll, a similar share said that wealth in the United States was unfairly distributed.

Then came the crash of 2008. The collapse of household wealth and the spike in unemployment were bound to produce widespread popular anger. In a sense, though, the United States was again realizing the consequences of its earlier choices. History showed that loose regulation of the financial sector would encourage cycles of boom and bust. Such crises had been commonplace in the decades before the New Deal and less frequent in the four decades afterward. Turbulence in the financial sector intensified after 1980, and each crisis demanded a vigorous governmental response. U.S. authorities were forced to intervene during the savings and loan crisis of the late 1980s, after the Black Monday crash of 1987, during the Long-Term Capital Management crisis in 1998, and after the dot-com collapse in 2000. The 2008 crisis was the same thing, just much, much bigger.

Popular attitudes about the handling of the crisis also reflected a deep ambivalence about the role of government in economic life. There was widespread anger at not just the rating agencies, predatory lenders, and fat-cat bankers, but also at the apparent cost of bailouts for the financial sector, along with opposition in principle to interventions like the takeover of General Motors. And as the government took on these onerous, unwanted economic necessities, many also worried about the rising federal debt. But there’s little doubt that the public would have been equally outraged if the Obama administration had actually followed a strict neoliberal path of nonintervention and deficit reduction. It would have been seen as cruel and inhuman.

The confusion that characterized economic policy generally was also evident on specific issues such as health care. Public ambivalence about the proper role of government was evident in a March 2010 Gallup poll about Obama’s 2010 Affordable Care Act, in which a majority complained that the law expanded government’s role in the health-care system too much — and also that it failed to go far enough in regulating the health-care industry. Now the country is stranded in a no man’s land: The system is predominantly private, but it lacks the key virtue of private provision-efficiency. At the same time, there is an extensive governmental role in regulating the sector, but this is frequently ineffective in achieving regulatory objectives such as cost containment. The U.S. health-care system is now so deeply entrenched, accounting for one-seventh of the national economy, that a radical overhaul is difficult, if not impossible, to imagine.

Americans’ ambivalence about the role of government also infects foreign policy. Consider the wars in Iraq and Afghanistan. As the Gallup satisfaction chart above shows, both campaigns produced an initial frisson of satisfaction with the country’s direction. The public mood, however, soon turned sour. Majority support for the Iraq war evaporated quickly, yet the engagement dragged on for eight long years. Similarly, it has been years since Americans had confidence in the Afghanistan mission, yet that fight continues.

Why is there such a disconnect? In part, because that’s the way the American people wanted it. After the Vietnam War, the U.S. military was transformed, relying more on technology and abandoning the draft. Today’s active-duty military represents a smaller proportion of the U.S. population than at any point since the eve of the Pearl Harbor attack. Moreover, today’s soldiers are volunteers. We don’t often think of these military reforms as part of the neoliberal project, but they undoubtedly were. The commission that recommended eliminating the draft included not only Greenspan but also America’s intellectual godfather of the unfettered free market, Milton Friedman. In 1962, Friedman had included the draft as one of those activities that was indefensible in a free society, along with tariffs, Social Security, and “detailed regulations on banking.” The commission’s report concluded that abolition of the draft would “minimize government interference with the freedom of the individual.”

And it did. But the military’s transformation had an unexpected effect. Americans might have won greater freedom from governmental interference, but the military complex gained some freedom too. Wars could be launched more easily because they did not impose a substantial burden on the American people. As the armed forces went to war in Afghanistan and Iraq, the rest of America followed President George W. Bush’s injunction: They went shopping. But a military divorced from its citizens also meant that wars could grind on long after the public had turned against them.

The neoliberal reforms launched 30 years ago did not come out of thin air. They were a response to a stodgy, feckless government, and they offered a fresh start after a decade of drift and uncertainty in national politics. That’s what Reagan meant in 1984 when he said that it was “morning again in America.” The slate was being wiped clean. But that was a generation ago, and now the limitations of the neoliberal project have become painfully clear. At that time, most Americans approved of smaller, more hands-off government. The question now is whether they will accept the consequences.