The Big Government Cycle

March 6, 2026

Doug Leyendecker

Welcome to This Week’s Leyendecker View

Much of the social history of the Western world over the past three decades has been a history of replacing what worked with what sounded good.
– Thomas Sowell

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THINKING OUT LOUD

The Big Government Cycle
Change appears to be afoot

The history of American government has not been a straight line toward ever-greater centralization, nor has it been a permanent triumph of limited government. It has exhibited more of a long-term cycle of decentralization to centralization and now, quite possibly, back to decentralization or more of a new hybrid.

Before Franklin D. Roosevelt’s presidency, the American political tradition was anchored in suspicion of centralized power. This skepticism was written into our DNA, from the moment we threw tea in the Boston Harbor in protest of distant authorities taxing us without representation. Our Founding Fathers encoded into our Constitution and the ethos of the new nation they shaped the belief that liberty and local control were inseparable.

The government existed to secure rights, enforce contracts, and defend the nation, not to manage economic or social life. The country operated within a laissez faire system, reasonably wide open economically and socially, though still steeped in the Christian values of our founders.

Prior to the FDR era, markets were volatile, communities were unevenly prosperous, and hardship was real, but responsibility was understood to rest primarily with individuals, families, churches, and local institutions. The prevailing assumption was that government intervention was an exception, not the rule. Prosperity and progress were thought to arise chiefly from private initiative. When downturns occurred, they were painful but temporary, considered part of a natural economic rhythm rather than a moral failure of the system itself.

The system worked well enough to allow the country to grow economic strength and inspire innovation. But this rhythm lost meaning after the technological wave of the latter half of the 1800s to the 1920s, when innovation pushed change faster than legacy institutions could manage, and when wealth accumulated in too few hands. Fragility developed that ultimately led to the stock market crash of 1929.

The Great Depression shattered confidence in the laissez faire economic approach. Its scale and duration overwhelmed institutions and exposed the limits of decentralization. Personal responsibility could no longer adapt to the scale and pace of change. Unemployment, bank failures, and collapsing demand created not only economic despair but also a crisis of infrastructure legitimacy.

If markets could fail so catastrophically, many asked what justification remained for leaving them largely ungoverned. The psychological impact of the Great Depression was as profound as the economic one. Fear, uncertainty, and exhaustion prepared the public to accept solutions that would have been unthinkable a decade earlier.

Through FDR’s New Deal, the federal government moved decisively from guarantor of rules to manager of outcomes. Agencies multiplied, executive authority expanded, spending skyrocketed, and Washington assumed responsibility for employment, wages, prices, agriculture, housing, and retirement. This expansion was framed as a moral obligation and permanent solution to an excessively laissez faire system that led to collapse. The government was no longer a protector of liberty. It became the guarantor of security.

The New Deal spawned a new era, a cycle of big government. The Depression and WWII justified more government influence and control. Programs once introduced as stopgap measures became permanent features. Power centralized during an emergency proved difficult to relinquish once prosperity returned.

The administrative state developed its own momentum, defended by constituencies, “experts,” and moral narratives that equated government action with compassion. President Johnson’s War on Poverty and Great Society made FDR’s big government ambitions look almost modest. And the recent bureaucratic overreach makes Johnson’s efforts look paltry.

The effects of ever more Washington control were not merely economically constraining. Christian values were overcome by belief in government and reverence for the state narrative. Heavy-handed bureaucratic edicts and social dependency replaced personal responsibility and liberty. The rights of special interests became more important than the greater good.

Today, government largesse has produced debt to GDP that rivals the WWII peak. Just as the laissez faire economic system tipped into excess and delivered us to the fragility of the Depression, the big government system has tipped into excess and delivered us to another fragile point.

Our circumstances today are a reminder of how fear and faith trade places over time. Fear of markets yields to faith in government. Then fear of government rekindles faith in freedom.

Understanding this cycle matters because it cautions against permanent solutions to temporary crises. It reminds us that government expansion is often easiest when citizens feel least capable of self-governance and hardest to reverse when citizens have become ever more dependent on government.

America’s challenge has never been choosing between government and liberty. Rather, it’s remembering that each grows or shrinks in response to the other. The pre-FDR world trusted society more than the state. Since the New Deal, we have trusted the state more than society. The cycle continues, but history suggests a simple truth: When either reaches a point of diminishing returns, the trend will reverse. We are likely living in such a reversal right now.

THE RANDOMS

If only the United States would continue subjugating itself to the needs of the world, then there would be less suffering—except for in the United States.

The US and Israel bombed Iran, and the rest of the Middle East was quiet. What does that tell us?

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It seems a tragedy that today’s news can avoid neither political bias nor the reflex to sensationalize to generate attention and revenue. Or has it always been this way, and our longing for “better” journalism is naive?

The media seems aghast that our DHS secretary is relaxing rules on taking our shoes off at TSA. Really? This is big important news, or is this a good example of entrenched interests trying to protect their turf?

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ECONOMIC NEWS

Economy

January retail sales drop
Jobs report is bleak
Start-ups are the new hot thing
Iran war could mess up US economy
Workers are raiding their 401(k)s
US manufacturing activity is steady
US services activity is also steady
Auto dealers pick consumers’ pockets

Labor

AI—job displacement or job enhancement?
Don’t believe the job apocalypse hype
WFH set to make a comeback

The Lone Star

Rolex to teach Texans to make watches
Shipbuilding coming to Galveston

BUSINESS

Finance

Crypto stablecoins concern banks
Investors are ditching private credit funds
Blackstone has a private credit issue
Execs try to backstop fundraising
JPM has more credit concerns