@Jeff,
Well, I am not talking about "starving the beast," although debt is, in fact, a downward pressure on spending. I was talking about the political force against the increase of spending. Total government spending rose from below 5% of the national income in 1900 to near 40% of the national income by the election of Reagan. We are still at about that number today. It is a little bit lower, but we are near it. Of course, this doesn't account for everything, because things like the regulatory costs on private enterprise should be factored in as well in a truly honest and comprehensive discussion, as mandates are, in practical effect, public ownership of the means or results of production, but for the purposes of this discussion, I think that national income alone as a barometer is sufficient.
What changed was the dialogue of the political arena surrounding the role of government generally and of federal spending. Reagan was the first President since The New Deal to be successful in actually cutting into projected domestic spending, relative to GDP (and more importantly GDP per capita) and those cuts, while not what he had hoped to achieve as he was working with a Democratic Congress, were nonetheless dramatic and moved the nation's domestic spending trajectory downwards substantially. Domestic Federal spending continued to increase, but the rate of increase was lowered by a lot.
What happened is that he ran deficits because the administration was also successful in heavily lowering taxes and in simultaneously increasing defense spending. However, concurrent to that, the growth in per capita GDP and the growth in incomes, as a result of tax cuts, deregulation and a conscientious monetary policy, began to outpace the growth in government spending, foreign and domestic, so that by the mid-80's, despite the tax cuts, deficits peaked and then began to actually fall. Deficits, as a percentage of the economy, peaked in 1984 and fell every year through 1989. That is, despite the tax cuts and the increase in defense spending.
H.W. Bush was then elected in 1988 and took office in 1989. Under H.W. Bush, the rate of increase in domestic spending began to rise again, which in combination with the Gulf War, resulted in a significant jump in total Federal spending. It was actually, to that time, the largest jump in Federal spending since Nixon and the largest jump in projected spending since LBJ. H.W. simultaneously reached an agreement with the Democrats to increase taxes, in exchange for the Pay-Go system, but because he did not increase taxes by a commensurate level, deficits began to rise again, to almost 4% by the onset of the recession (3.7% on the year of 1990 and 4.4% on the entire year of 1991). Overall though, it was not a large recession and the economy returned to growth by the end of the Bush administration. Clinton then came into office on the moderate New Left platform, raised taxes a little bit more, reducing deficits, passed some spending increases in his first two years, but nothing too substantial, failed to pass his health case plan and lost control of Congress in 1994. Hence, projected domestic Federal spending remained at a much lower level by the time that Clinton lost control of Congress. He also implemented the unwinding of our previous military spending programs. From there, he remained basically deadlocked over the ensuing six years, resulting in no significant spending increases, allowing the economy to resume growth at a rapid level, which outpaced spending. Hence, by the late 1990's we were running a surplus. The only reason that we ran a surplus was because we had divided government and a very strong economy resulting in spending falling as a percentage of the economy.
George W. Bush was then elected, along with a Republican Congress and preceded to increase domestic spending, in his first term, by the largest margin since LBJ, returning to approximately where we had been prior to the 1990's expansion, while also cutting taxes. Foreign spending also increased due to the wars. Hence, we began to run large deficits. However, by the middle of his Presidency, he began to put a hold on the increase in domestic spending so that over his second term, growth began to outpace spending and with revenues increasing due to a strong economy, deficits began to fall. Deficits fell from '05 to '06 and from '06 to '07. We then hit the Great Recession and deficits rose rapidly.
Obama was elected and in his first two years implemented several very substantial long-term spending programs, particularly the ACA, as well as a substantial increase in regulation and a medium-sized tax increase, before then losing control of Congress and spending the rest of his Presidency struggling to implement any of his domestic program. From there, the economy resumed growth, although at a fairly low level and due to spending being held in check, deficits began to fall. Hence, after nearly forty years, we are about where we were in terms of total government spending.
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