Peggy Noonan’s suggestion to use a 36 inch ruler to gauge right versus left in politics does help to explain the opposing views of tea partiers, Republicans and Democrats.  Noonan describes 0 inches as pure right and 36 inches as pure left (opposite of what you might expect).  She bemoans her perception that modern-day politicians negotiate between the 25 and 30 inch mark on the far left end of the ruler.  She asserts that tea partiers will try to move back to the 5 inch mark.

In politics, he who sets the framework usually wins the game.  Using American history since the agricultural 1770’s, urbanizing 1860’s, industrial 1920’s or depression 1930’s as a base, a case can be made that post-war politics and economics has been debated on the left end of the ruler, with a mixed economy government share of GDP at 20% and government spending/taxing share of GDP at 25-30%.  These shares of the economy double those of laissez-faire capitalism, the roaring twenties or the depression.  Noonan takes this long-run historical view of how the yardstick should be labeled.

Noonan is right in pointing out that politicians of both parties in a democratic system inherently seek to spend more money.  The rise in government spending in the Bush presidency after the unusual decline in government spending in the Clinton presidency (with Republican congress) is a modern reminder.  Tea partiers are right to have gut level concerns that government spending will continue to climb unchecked.  The trend in 2000-2008 was up.  Extraordinary banking and industry bail-out funds were piled on top of the stimulus spending for the Great Recession.  Health care and social security spending increases are expected in the next two decades.  Whether the various spending increases are justified or not, the trend is clearly up, without any clear countervailing force in Washington.

Those on the left might agree with the challenge to be faced, but they use a different scale to gauge left versus right, object to the accusation that they have driven up government spending, hold the Republicans responsible for inciting anger in the tea partiers and offer different long-run solutions.

If the scale is set between 100% individual, 0% government pure libertarianism versus 0% individual, 100% government pure socialism, the Democrats argue that the post-war game has all been played on the right (0-18 inch) side of the ruler.  Government share of GDP is 20%.  Government spending and taxes share of GDP is 30-35%, including all transfers.  This did not increase between 1960 and 2008.  The US tax burden at 27% of GDP is only 75% of the 36% average level for 30 developed countries.  Only Mexico, Turkey, Korea and Japan spend less than the US.  Total government spending in western European democracies is 40-55%.  Government spending did increase with the Vietnam War and Great Society policies, but was reduced by the Reagan revolution.  Government spending fell from 37.2% of GDP in 1992 to 32.6% in 2000. 

Democrats argue that their fiscal discipline was demonstrated in 1992 to 2000 when they balanced the federal budget and reduced the deficit, employing the “pay as you go” policy to force spending cuts to offset spending increases.  They point to Bush led Medicaid and defense spending increases as the cause of increased government by 2008.  They see the Bush tax cuts as redistribution to the wealthy and don’t see the overall tax-cut initiated economic growth claimed to increase net tax revenues.

Democrats argue that they have not purposely increased the long-run share of government in the economy.  They claim that the one-time investments/guarantees for the banking/auto industries were necessary for the whole economy, addressed issues that had grown for decades, will be partially recaptured and do not require continued funding.  Similarly, they pursued a moderate one-time Keynesian fiscal stimulus in response to a deep recession, just as was done by other governments of all parties in all countries for the last 60 years.  The stimulus spending lies between the 4.7% of GDP boost in 1982 and the 2.3% growth in 1992. Democrats argue that these actions are necessary and moderate and would have been undertaken by a responsible Republican successor to the Bush administration.

Democrats argue they are unfairly characterized as “big spenders” by the Republicans.  This simple accusation has stirred a populist response from “regular Americans”.  While Democrats have historically focused populist rage on big business and big banking, the Republicans and tea partiers have effectively used big government, Washington, elites, foreign countries and religions as targets, tying them to the Democratic Party.  Democrats argue that the monetarist, supply side, tax cut economic policies of the Republican Party since Reagan have been adopted for their populist simplicity and political effectiveness alone, further polarizing economic policy making.

Finally, Democrats have adopted part of the Republican play book in fundamentally looking to the private sector to drive the future economic growth required to support even the historic level of government spending.  The stimulus spending was partially focused on future industrial growth and infrastructure.  The banks and auto firms are returning to pure private ownership.  Small business lending and investment tax credits have become a focus.  Health care reform maintained private providers and insurers as the core of the system.  The costs of the war in Iran have been reduced.  A bipartisan group has been appointed to work on the Medicare/social security future.  Steps are being taken to promote exports.  A reduced public sector role for the mortgage industry has been proposed.  Obama and many Democrats have continued the pro-business approach used by Clinton.

On the other hand, Republicans can fairly point to steps taken by the Democrats that indicate a continued desire to “tax and spend”.  The stimulus bill benefited state government, construction and other Democratic interests disproportionately.  Health care reform achieved growth in government commitments without structural cost solutions.  Labor unions were given special treatment in the auto bail-out.  Fannie Mae and Freddie Mac’s roles were not touched in the banking reform.  The financial consumer protection agency smacks of unlimited and uninformed regulation.  The proposed increase in taxes for high earners is significant and is not coupled with structural spending reforms.  A second mini-stimulus has been approved and unemployment benefits have been extended to record lengths.

The current economic situation has raised the stakes for politics.  We should expect to see ongoing attempts to define the ruler and place the participants at marks that favor one group or another in the public eye.