I. Government Spending Under Reagan
Against my claim that government
spending grew rapidly during the Reagan years, he offers a graph showing that
non-defense federal spending as a percentage of national income grew only very
slightly during Reagan's tenure. I see two problems with this.
I can think of no reason why we should eliminate defense spending from the
category of government spending. After all, defense spending is money spent by
the government. Nor am I certain that state and local government spending should
be eliminated from the total. While it is true that the president has less
influence over state and local government spending than he does over federal
government spending, it is still a fact that the money spent by state and local
governments is government spending.
Second, I do not see any sensible reason to normalize spending by national
income. I suppose I might conclude that if a particular ten-foot tree in my
backyard grows two feet during a decade, while other ten-foot trees in my yard
grow three feet, that the first tree was not growing rapidly. But this supposes
that government spending has as much in common with private income as one tree
has with another. It comes perilously close to assuming that government spending
is not growing at all unless it is growing faster than private income.
So how can we test the proposition that government spending grew rapidly
during the Reagan years? The answer seems plain to me: by getting the figures for
government spending and seeing how fast they grew. Of course, we have to correct
the annual spending figures for the declining value of the dollar. It also makes
sense to correct for population growth — at least it does if we accept the
notion that government in some sense provides goods and services for people.
Happily, annual population figures and government spending figures are easily
available from the U.S. Census Bureau and an estimate of the declining value of
the dollar is available from the Department of Labor, which publishes each month
its Consumer Price Index.
A few simple calculations show that government spending per capita, corrected
for inflation by the CPI, yields the data reflected in the graph shown above.
The Reagan years are highlighted in the graph. A quick inspection revealed
that government spending grew about as fast during the Reagan presidency as
during the years immediately before and quite a bit faster than the years
immediately after.
Let's take a closer look, by checking the average annual change under each
president since 1960 in the chart below.
While spending grew fastest during the Johnson years, during which the welfare
state was greatly expanded (the "Great Society") and an expensive war in Vietnam
was pursued, it is interesting to note that spending rose faster under Reagan
than under the two presidents who preceded him and who followed him. It was even
higher than the average rate of growth (the dashed line in the chart) during the
entire 42-year period and has since been eclipsed only by George W. Bush, who
like Lyndon Johnson, pursued both an expensive war (Iraq) and a huge expansion of
the welfare state (Medicare-financed prescriptions).
It seems to me that these data strongly support the proposition that
"government spending grew rapidly under Reagan." Unless Prof. Friedman can tell
me why federal non-defense spending as a percentage of national income is a
better measure of "government spending," I will remain satisfied with the truth
of my claim.
II. Freedom Under Reagan
Here I am afraid the problem is murkier.
Prof. Friedman offers a graph showing the number of pages added to the Federal
Register each year, which is in general a measure of how much economic regulation
people face. It shows that the number of pages added during the Reagan years
declined from its highs under President Carter, and after five years had actually
fallen to roughly the same number of pages as were added under the previous
Republican president, before starting to rise for the last three years of
Reagan's tenure.
This doesn't seem very convincing to me for two reasons.
First, I question whether the number of pages added to the Federal Register is
an accurate gauge of how much individual liberty suffers. It may give us an idea
of how heavily regulated businesses are, but that is not the same thing as
individual liberty. Our freedom is reduced by all sorts of actions which are not
reflected in the Federal Register: for example, by outlawing certain forms of
consensual sex or the ingestion of certain substances.
Like all scientists, the economist wants to deal in measurable phenomena. But
not everything in life is quantifiable. That's why when libertarian and
conservative think tanks like the Heritage Foundation, the Cato Institute, and
the Frasier Institute attempt to measure freedom, they are careful to limit their
efforts to economic freedom. And even here, there is a certain element of the
arbitrary. Why, for example, should foreign exchange controls be included in an
index, but not the degree to which a person can privately move funds from one
country to another?
Three decades ago, in a review of Douglas Casey's "Crisis Investing," I
pointed out that Casey's ratings of the freedom one enjoys in various countries
depend in part on which freedoms one wants to enjoy. Casey had rated the Bahamas
as a very free place for investors, thanks to its low taxes and general absence
of regulations. I pointed out that while the Bahamas may be a free place for the
investor whose recreational drug of choice is alcohol, an investor whose drug of
choice is marijuana might prefer to live in the Netherlands.
There are two epistemological problems involved.
First is the problem of attaching hard numeric values to freedoms gained or
lost. Freedom is a matter of degree, but in what units do you measure it?
The other problem is the relative value of different freedoms. If you are a
gay American, the fact that in 1904 you were liable to be tossed into the
hoosegow and tortured by hostile brutes merely for being gay, but are not likely
to be so treated today, probably makes America in 2004 seem like a much freer
place than the America of 1904, despite the fact that taxes are much higher and
economic regulations much more onerous. On the other hand, if you are a
heterosexual businessman engaging in retail trade, the absence of sales and
income taxes and near absence of regulation in 1904 makes that time seem much
freer than today.
When I wrote that "individual liberty suffered" under Reagan, I was thinking
of things like his escalation of the War on Drugs, which resulted in the
imprisonment of hundreds of thousands of casual marijuana users and the enactment
at his administration's instigation of omnibus anti-crime measures that allow,
for example, federal officials to search your person (including, as I recall,
your body cavities) if you happen to be canoeing on a river in central Kansas.
(The law authorized customs officials to make such searches on any body of water
that connected to any body of water . . . that connected to international waters,
which means virtually any lake, river, or stream outside the basin areas of the
West.)
I am not convinced that the number of pages added to the Federal Register is
a good measure of freedom, even if we grant that there is a direct correlation
between Federal Register pages and freedom. After all, under Reagan, the number
of pages of regulations continued to grow at about 19,000 pages per year. It
seems to me that freedom suffers so long as any pages are added. Indeed, I am
sympathetic to the proposition that freedom suffers as long as the Federal
Register contains any regulations at all.
To me, the data offered by Prof. Friedman does not "speak for itself." Hard
data supports my claim that "government spending grew rapidly" during Reagan's
presidency. While it seems impossible to obtain the same kind of scientific data
to support my claim that "individual liberty suffered" during those years, I
think the anecdotal evidence is quite convincing.
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