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An Unintended Legacy of Obamacare: Shrinking Government in 2014

Rick Newman
The Exchange
U.S. President Barack Obama speaks about the economy at an event hosted by the Center for American Progress in Washington December 4, 2013. After the disastrous launch of the Affordable Care Act website, the president is looking to boost his tarnished popularity and credibility. Obama's speech in one of Washington's lowest-income districts is seen as his chance to swing the focus back to the struggles of the poor and middle class. REUTERS/Kevin Lamarque (UNITED STATES - Tags: POLITICS)

For conservatives, the introduction of Obamacare this year triggered a kind of political gag reflex. In retrospect, however, President Obama’s signature health-reform law may turn out to be the high-water mark for the activist government conservatives loathe, and an inflection point in Americans’ increasingly sour attitude toward Washington.

The disastrous rollout of Obamacare and the not-ready-for-primetime website Healthcare.gov could barely have been better scripted by Obama’s worst enemies. The troubled launch has pushed Obama’s personal approval rating to the lowest levels of his presidency. It has also convinced some voters who weren’t sure before that the government does more harm than good when it strays beyond its core missions.

There are two basic reasons the federal government seems certain to shrink in 2014 and beyond. The first is that the majority of Americans want smaller government. A variety of polls show that trust in government has basically collapsed. In part, that’s a short-term reaction to irresponsible leadership such as the Congressional shutdown of the government in October. But it’s also a long-term trend, with Washington’s reputation steadily eroding after a temporary boost in the aftermath of the 9-11 terrorist attacks in 2001.

For the first time ever in 2013, more than half of Americans — 53% — said they view the federal government as a threat to their personal freedom. In late 2001, only 30% of Americans felt this way. Americans now rate the government as the biggest national problem, according to Gallup, worse even than the lackluster economy.

The solution: Shrink government

The solution, voters seem to believe, is to shrink government. The portion of Americans favoring a smaller government outnumbers those favoring a bigger one by 56% to 35%. Among independents — often the swing voters who determine election outcomes — 65% want smaller government. Even Democrats, who usually favor expansive government, have grown disenchanted with Washington’s performance.

Americans remain somewhat conflicted in their views toward government because they like spending programs that funnel money toward ordinary people. And they’re much more charitable toward individual agencies, such as NASA, the Defense Dept., the Food and Drug Administration, and even the IRS, than they are toward “government” in general. Still, it’s hard to imagine anything like Obamacare passing today — especially since some Democrats who generally support big federal programs have been backing away from the controversial healthcare overhaul.

The second reason government seems certain to get smaller is money. We can’t even afford the government we have, which is why Washington borrows hundreds of billions of dollars every year and the national debt now tops $17 trillion. It seems almost inevitable the debt will have to come down in the future, though it’s hard to say when or even how that will happen.

Though few have noticed, the federal bureaucracy has already started to shrink. Since mid-2011, federal employment, excluding the postal service, has dropped by 112,000, or about 5.1%. That’s mostly on account of hiring freezes or attrition polices at many agencies. There’s room for the federal payroll to get even smaller, since Obama has made no major effort to streamline government or consolidate agencies, the way many companies were forced to downsize in order to survive a grueling recession.

The catch is that government spending has been going up, even as the size of the federal bureaucracy has been shrinking. That’s because an increasing portion of federal spending goes toward entitlement programs with relatively small overhead, including temporary aid to struggling Americans, such as extended unemployment benefits. That’s one program Congress may not renew for 2014, but the costliest programs — Medicare, Social Security and Medicaid— involve automatic spending on whoever qualifies, unless Congress changes the law.

With those automatic payments projected to skyrocket in coming years, Washington will face a stark choice: Either cut government significantly or tax Americans more in order to cover the real cost of the benefits they receive. If the economy remains weak, it will be remarkably hard for politicians to enact widespread tax increases, which would have to hit the middle class to raise enough revenue to solve the problem. Virtually all roads lead toward deeper and deeper cuts in government spending. Obamacare may have become law, in fact, just as the window of opportunity for such sweeping programs was closing.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success . Follow him on Twitter: @rickjnewman .