Freeman

OUR ECONOMIC PAST

Ideological and Political Underpinnings of the Great Society

FEBRUARY 24, 2011 by ROBERT HIGGS

Filed Under : Government Spending, Welfare State

The surge of federal economic interventions that occurred during Lyndon B. Johnson’s presidency—the much-ballyhooed Great Society, whose centerpiece was the War on Poverty—differed from the four preceding surges, each of which had been sparked by war or economic depression. No national emergency prevailed when Johnson took office following John F. Kennedy’s assassination on November 22, 1963. The nation was not engaged in a major shooting war, and the economy was on the mend after the mild recession of 1960-61. For the most part, the Great Society represented simply the culmination of economic, political, and intellectual developments stretching back as far as the nineteenth century.

After the Korean War armistice of July 27, 1953, the United States had enjoyed a decade of respite from the rapid growth of government power over economic affairs. The wartime wage, price, and production controls lapsed, although authority to reinstitute the production controls remained. No major extensions of the government’s economic controls were enacted. Big government did not disappear, of course; many of the controls and other interventions put in place in the 1930s and 1940s remained in force. But businessmen, according to economist Herbert Stein, “had learned to live with and accept most of the regulations.” Government spending, especially for Social Security benefits, crept upward. All in all, however, the Eisenhower and Kennedy administrations were placid in comparison with their immediate predecessors and successors.

Under Johnson, however, the federal government’s intrusion into economic life swelled enormously. Major events included enactment of the Civil Rights Act of 1964, the Economic Opportunity Act of 1964, the Food Stamp Act of 1964, the Elementary and Secondary Education Act of 1965, and the Social Security Amendments of 1965 (creating Medicare and Medicaid), as well as establishment of the Office of Economic Opportunity (to oversee programs such as VISTA, Job Corps, Community Action Program, and Head Start), the Community Action Agencies, and many other bureaus ostensibly promoting poor people’s health, education, job training, and welfare. In addition, broad-gauge economic regulatory measures were adopted in connection with traffic safety, coal-mine safety, consumer-products safety, age discrimination in employment, truth in lending, and other areas.

What accounts for this multifaceted outburst? Do its various elements have a common denominator? Some scholars point to an intellectual development that Stein dubs “Galbraithianism,” after its leading propagator John Kenneth Galbraith—a loose collection of socioeconomic analysis and evaluation hostile to the free market and favorably inclined toward more sweeping government controls. “There was,” says Stein, “no demand for a new and different economic system” in the Galbraithian view. Rather, “[t]he ideological case for the old system, the free market, capitalist system, was punctured by the demonstration of exceptions to its general rules and claims, and this opened the way for specific policy interventions and measures of income redistribution without any visible limits.”

Galbraithianism’s arguments and attitudes gained strength from a spreading conviction that the U.S. economy would continue to grow forever at a fairly high rate, thereby ensuring that new and costly government programs could easily be financed by drawing on the “growth dividend.”

Economist Henry Aaron’s description of the climate of opinion in the 1960s essentially agrees with Stein’s. Aaron traces the widely held Galbraithianism back to previous crises: “The faith in government action, long embraced by reformers and spread to the mass of the population by depression and war, achieved political expression in the 1960s. This faith was applied to social and economic problems, the perceptions of which were determined by simplistic and naive popular attitudes and by crude analyses of social scientists.”

At the same time, a so-called New Class—composed of scientists, lawyers and judges, city planners, social workers, professors, criminologists, public-health doctors, reporters, editors, and commentators in the news media, among others—viewed new government programs as outlets for their “idealism” and as opportunities to do well while doing good. Thus a multitude of left-leaning intellectuals and pseudo-intellectuals gave significant leadership, support, and voice to the government surge of the Johnson years.

More prosaic political developments also played an important role. Lyndon Johnson, who had begun his political career as a New Dealer and political horse-trader in Texas, possessed not only boundless ambition but also keen political instincts and skills; he knew how to move Congress in the direction he wanted it to go. Moreover, the elections of 1964 gave the Democrats huge majorities in both houses of Congress and brought into office an extraordinarily leftish group of freshman legislators. According to Aaron, “No administration since Franklin Roosevelt’s first had operated subject to fewer political constraints than President Johnson’s.”

The specific forms the Great Society took reflected the increasing diversity of animals in the political jungle. While longstanding lobbies for business, labor unions, farmers, and middle-class professional groups continued to operate, many new interest groups organized and gained political clout on behalf of women, Indians, Chicanos, students, homosexuals, the handicapped, the elderly, and many others, none of whom had been directly represented as such to an important extent in U.S. politics. These groups demanded that the federal government solve a variety of racial, urban, employment, and consumer problems, real and imagined.

Galbraithianism, Marxism, and other varieties of critical socioeconomic analysis also helped to justify the displacement of antiwar and pro-civil-rights enthusiasms onto a diverse set of anti-market causes, giving rise to heightened support for environmental, consumer, and zero-risk regulations. No perceived social or economic problem seemed out of bounds in this cacophonous new political environment.

Although the Great Society established critically important new federal powers and agencies, it did not cause federal domestic spending to increase tremendously at first. A portentous sign might have been seen, however, in the quick acceleration of federal transfer payments, which increased from $34.2 billion in 1963 to $65.5 billion in 1969. Over time this locomotive gained more and more momentum. According to Michael D. Tanner of the Cato Institute, between 1963 and 2010, “the federal government spent more than $13 trillion fighting poverty.”

Almost everyone now acknowledges that federal entitlement programs, crowned by the enormously costly health-care systems the Great Society spawned, have promised much greater benefits than the government can fund, and hence that many of these benefits will have to be cut, notwithstanding the political fury such cuts surely will elicit. This impending sociopolitical tumult represents one of the Great Society’s bitterest fruits.

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ASSOCIATED ISSUE

March 2011

ABOUT

ROBERT HIGGS

Robert Higgs is a Senior Fellow in Political Economy at The Independent Institute. He is also the Editor at Large for The Independent Review, the Institute's quarterly journal.

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