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The Great Society and Beyond

The liberalism of the post-1960s is usually associated with cultural or “lifestyle” permissiveness, a moral relativism regarding issues of personal choice, especially sexual conduct. But it also represented the next step forward in the welfare state, concentrated in the Great Society program of 1965. In modern liberalism, the cultural revolution and the welfare state reinforced one another—in order to be truly free, individuals needed their basic economic needs to be provided for by the State. The ‘60s extended the entitlement ethos of the New Deal into what historian Fred Siegel calls “dependent individualism.” The new liberalism insisted that the government provide basic economic goods so that individuals could be free to express themselves however they chose, to experiment in alternative lifestyles, free from the burden of providing for themselves or for others. When the Supreme Court declared that the Constitution guaranteed the right to contraceptives or abortion, the next step was to demand that the government pay for them. In the 1970s organizations like the National Welfare Rights Organization formed to demand welfare payments as a right.

A liberal resurgence was visible in Congress as early as 1958, and President John F. Kennedy revived liberals’ hopes for an active, executive-led federal government. After Kennedy’s assassination in 1963, Lyndon B. Johnson won a landslide election with Democratic majorities not seen since the New Deal. Congress finally abolished racial segregation in the Civil Rights Act of 1964—notably, not under its power to enforce the Fourteenth Amendment, but under its power to regulate interstate commerce. If Congress determined that segregation impeded interstate commerce, it could also determine that it aided interstate commerce and impose it. It also prohibited racial and sex discrimination in employment. Johnson also extended the program of “affirmative action” for government contractors—racial preferences to increase minority representation—by executive order. Federal bureaucrats in such agencies as the Department of Health, Education and Welfare rewrote the civil rights laws that prohibited racial preferences and quotas. The Elementary and Secondary Education Act of 1965 brought federal regulation for the first time into primary and secondary schools. Medicare and Medicaid paid for health care for the elderly and indigent. Soon these programs together with Social Security consumed most of the federal budget. Johnson also declared a “War on Poverty,” and greatly expanded federal welfare programs such as Aid to Families with Dependent Children. Many states also expanded their welfare systems, and many began to permit collective bargaining by public-employee unions.

The Supreme Court also expanded the scope of rights-based claims into the economic sphere, flirting with the idea that any policies that discriminated on the basis of wealth or income, such as school spending that was based on local property taxes, might be unconstitutional, but pulled back from this in the early 1970s.

These domestic liberal trends continued under the Nixon administration. As the nation encountered economic decline with the rise of global competition, Congress permitted the president to impose wage and price controls under the Economic Stabilization Act of 1970. The U.S. increased its tariff on imports for the first time since World War II, and foreign governments could no longer convert their dollars into gold. New regulatory agencies like the Occupational Safety and Health Administration and the Environmental Protection Agency imposed significant burdens on the economy, imposing costs on businesses that had to comply with new regulations. The number of federal agencies rose from 27 to 77 between 1960 and 1977, and with a few years the EPA had more employees than the Interstate Commerce Commission, Securities and Exchange Commission, and Federal Trade Commission combined.

Republicans sought to pursue many of the goals of liberal Democrats, but to do so through simple income-transfers rather than the provision of social services through bureaucracies. Nixon proposed a guaranteed minimum income or negative income tax, which eventually developed into the Earned Income Tax Credit, adopted in 1975. As a means of encouraging work rather than a dole, the federal tax code established supplemental income as an income tax credit. Congress also adopted a guaranteed income for the elderly and disabled in the Supplemental Security Income program. The “stagflation” of the 1970s, a combination of inflation and unemployment, led to a significant reconsideration of the premises of the New Deal political economy. Deregulation of major industries began under Jimmy Carter, freeing the trucking, airline, petroleum, and telecommunication industries from restrictions on entry to new competitors. State taxpayers began to rise up against taxes and spending, as when California enacted Proposition 13 in 1978, which placed limits on real property taxes. Ronald Reagan was elected in 1980 proposing to cut taxes and reduce federal spending. He was more successful at the former than the latter. Even the Supreme Court began to revive property-rights protections, particularly through the Takings Clause of the Fifth Amendment.

The reforms of the 1980s ushered in nearly three decades of impressive economic growth, aided by the “peace dividend” of reduced defense spending when the Cold War came to an end.

The Democratic Party moved in a more economically centrist direction. After an initially unsuccessful attempt to provide national health care, President Bill Clinton declared that “the era of big government is over” (William J. Clinton, “State of the Union Address,” January 23, 1996). But the growth of government continued in his administration and that of his successor, George W. Bush, who expanded programs like Medicare and further federal intervention in secondary education. The federal government also embarked on an aggressive campaign to promote home ownership, which led to many risky lending policies that resulted in a sharp financial crash at the end of 2008.

Liberals saw the economic crash as the result of deregulation of financial markets. Conservatives argued that this view ignored the ways in which government policies had caused the downturn and depicted it instead as a “market failure” that called for more government intervention.

Thus the end of the George W. Bush presidency and the Barack Obama presidency saw a massive government-spending stimulus, significant new regulation for the banking industry, and especially the Affordable Care Act, a long step toward a national entitlement to health care.

The 1960s ushered in a new version of liberalism, dedicated to more economic control alongside more personal freedom. The harmful economic effects of government regulation produced a revival of free-market policies in the 1980s. But the administrative state built up in the New Deal and Great Society weathered this period of reaction, and expanded again when an economic crisis almost as serious as that of the Great Depression occurred in 2008. Government spending reached forty percent of gross domestic product, a level never attained in peacetime. The national debt exceeded the annual national income for the first time since World War II. The U.S. political economy now more resembled those of social democracies of western Europe than it did a laissez-faire system.

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