Who Governs? Maybe Nobody.

You recall Clinton's 1996 State of the Union Address, when he declared that "the era of big government is over." The president knew this wasn't true and--practically speaking--couldn't become true. For decades, federal spending had amounted to about a fifth of national income, while government social regulation--for the environment, worker health and safety--had steadily, though sporadically, risen. No one (not congressional Republicans and certainly not Clinton) was proposing massive cutbacks. But the slogan was clever and fit Clinton's larger purpose: to prepare for his re-election campaign by stealing potent issues from the Republicans. So Clinton made his memorable pronouncement.

Even if untrue, it displayed a shrewd political genius, because it instinctively spoke to Americans' deep ambivalence about government. We generally like the things government does for us, but we don't like the idea of big government, which seems intrusive and wasteful. The ambivalence leads politicians--usually of both parties--to expand government while claiming they're shrinking it.

Politicians have huge "incentives" to cultivate what political scientist Paul Light of the Brookings Institution calls "the illusion of smallness" in government. Writes Light: "Republicans can advertise their success in protecting private business from government encroachment; Democrats [can demonstrate] their creation of a leaner, meaner, and, therefore, more capably activist government." Light's insight helps clarify Washington's present confusion.

Budget surpluses, the president tells us, result from conscious and courageous policies of "fiscal discipline" and hard choices. Government seems to be shrinking. In 2000, federal spending will total about 19 percent of national income (gross domestic product), down from 22 percent in 1992. Since 1993, Clinton brags, the number of federal workers has dropped by nearly 400,000 to 1.8 million.

On the other hand, Clinton's budget celebrates--on page after page--the growth of spending. Between 1993 and 2000, spending on an assortment of education programs, from Head Start to college grants, grew 59 percent to $40.6 billion (page 43). Over the same period, child support jumped 129 percent to $4 billion (page 59); environmental spending was up 23 percent to $38.4 billion (page 89); civilian research and development--for health, space, energy--increased 34 percent to $40.8 billion (page 99); spending on Native Americans rose 53 percent to $8.2 billion (page 132). (For comparision, the consumer price index rose about 15 percent between 1993 and 1999; it might rise an additional 2 or 3 percent in 2000.)

Here is Light's "illusion of smallness" in action. In the ways that count--more money being spent to help more constituencies--government has expanded, even though overall indicators suggest that it's shrinking. How can this be? How can lax spending policies yield big budget surpluses?

First, some history. It isn't true that Clinton consistently pursued budget surpluses. This was a "hard choice" not made until mid-1995; before that he favored only "deficit reduction." In June 1995, he committed to a balanced budget--in the year 2005. Congressional Republicans showed only slightly more fervor for a balanced budget. Their proposed budget that year envisioned a surplus in 2002. Even that, many budget experts thought, embodied overly optimistic assumptions.

Next, some arithmetic. Surpluses arrived earlier because the economic boom caused an unexpected surge in taxes. This has equaled about 2 percent of GDP. That's worth about $180 billion. It has come mainly from the well-to-do and wealthy. In 1998, people with more than $200,000 of income paid 40 percent of federal income taxes, up from 30 percent in 1993. In 1999 the surplus was $124 billion; without the surprise tax surge there would be no surplus.

As for spending discipline, there wasn't much. The well-publicized spending "caps" imposed by the 1990 and 1993 budget agreements (under Bush and Clinton) served mainly to reduce the military after the cold war. Since 1990 the size of the armed forces has dropped from 2.1 million people to 1.4 million. Defense spending has declined from about 5 percent of GDP to 3 percent--another $180 billion saving.

Less defense mainly explains lower federal spending as a share of GDP. It also explains most of the drop in federal employees; many worked on hundreds of now closed bases. Moreover, the actual federal work force vastly exceeds the number of official federal workers, as Light argues in a new book ("The True Size of Government"). To federal workers must be added (a) people working under federal contracts and grants and (b) state- and local-government workers fulfilling federal mandates, he says. Light puts the grand total at 16.9 million in 1996. You can quibble with the math, but the total is huge and--outside defense--has risen since the mid-1980s.

So Clinton and Congress were rescued from deficits by two bits of good luck: the tax surge and the end of the cold war. A third surprise--an unexpected slowdown in health spending--also helped. I have made these points before, but they bear repeating because they are lost in all the self-serving and self-congratulatory political rhetoric. Clinton and the Republicans compete to claim credit for surpluses that neither created or expected. Both are exploiting events more than directing them.

No one is really in charge. Government is haphazardly accumulating more commitments and constituencies. "We know there's not a [federal] program for every problem," Clinton said in 1996. But he acts as if there is. He's championed dozens of small new programs and expanded old ones. Republicans are scared or shamed into offering imitations and, of course, have their own favored constituencies. As long as luck holds (the economy soars, defense spending stays low), this can continue until the retirement of the baby boom sharply raises government spending. But when luck does change, we will belatedly discover the truth: that the illusion of small government made government bigger.