Ready for the big history of big government? Take a big breath…
Since the middle of the 1900s (up until the present day), the two main American political parties (Democrats and Republicans) have disagreed most strongly on one big issue: how "big" should the federal government be?
That might sound a little abstract, so let's pump the brakes. There are a bunch of ways the government can wield power. But when Americans talk about "big" government, they're mostly talking about the government's role in regulating the economy.
You know what they say about big government…wait, do you? It can take a few forms.
The Constitution originally gave Congress the right to pass taxes. By raising or lowering tax rates, the government affects both individuals and businesses. The government can also make laws that define the rules of the game for business. For example, monopolies are illegal, and so is insider trading. These regulatory laws are generally considered good things, but sometimes they get so complicated that average Joes and Janes without armies of lawyers have a hard time running businesses and interpreting the rules.
The government can also provide economic security to people in the form of a safety net. Since the Great Depression, the U.S. government has provided services to citizens in order to make the economy a safer playground. Through programs like Social Security, Medicare, and the Works Progress Administration, the feds basically givepeople money and jobs, or provide services like healthcare.
Historically, the Democratic Party has favored the political philosophy of social liberalism, which suggests the idea that the government should try to create a fair and equal society through economic regulation. Why did this idea take root? It's pretty simple: things got bad for the economy…
The Great Depression, which started around 1930, was a straight-up disaster for many Americans. In 1929, a massive stock market crash led to the failure of banks, and widespread unemployment. People lost their homes, their livelihoods, their life savings, and their faith in the economic system, not to mention the government of Republican President Herbert Hoover.
In response to the crisis, President Franklin Delano Roosevelt, a Democrat, came up with a novel idea: America's Founding Fathers had promised a nation of freedom, guaranteeing rights like "life, liberty, and the pursuit of happiness." But in such dire economic circumstances, true freedom could only be obtained through economic security. In other words, it's hard to feel free if you're unemployed and starving.
So Roosevelt promised a "New Deal " for the American people. He got Congress to spend money in order to put people back to work on public projects, and he created programs like Social Security, whereby Americans who reached retirement age got to receive a check from the government every month. Many of these New Deal programs are still going strong today. By using tax revenue and borrowing money, the government tried to spend its way out of the Depression.
Now let's start to fast-forward. After Roosevelt died in office, the handful of Democratic presidents who followed him carried forward the New Deal mantle. For example, President Lyndon Johnson put together a domestic agenda known as the War on Poverty in the 1960s. In contrast, later Republican presidents like Richard Nixon and Ronald Reagan thought that "big government" should rarely intervene with the economy, and spend money mostly on the military. These politicians favored tax cuts, and letting the free market determine peoples' economic fates.
Now chew on this factoid, Shmoopers: Bill Clinton was the first Democrat since Franklin Delano Roosevelt to be elected to the presidency twice in a row. How did he do it? He had to win over Republicans. (Source)
Clinton pulled off a pretty amazing feat in even getting to be president, considering his inauspicious origins. He started his first presidential campaign, in 1992, as the governor of a small state (Arkansas), and not many people thought he would be able to upset incumbent George H.W. Bush, who was carrying on the conservative legacy of the very popular Ronald Reagan. But Clinton sold himself as a moderate Democrat, rather than a liberal one, and ultimately got enough votes to take over the White House.
By the time 1996 rolled around, and Clinton was running for his second term, Congress was dominated by Republicans, who were itching to boot Clinton out of office. A gifted politician, Clinton knew he would have to become even more moderate to win reelection. So while pitching his plans for welfare reform in the 1996 State of the Union Address, he declared "the era of big government is over."
Even though it was kind of a sound byte, with a little more style than substance, the quote is remembered to this day. Like Roosevelt, Clinton took his party in a new, more conservative direction, which continued to affect political life years after he left office. The era of big government may have been over, but the era of big political upheaval was still going strong.