What 50 Years of Weakened State Capacity Means for Progressive Policy Wins

President Biden took office after half a century of neoliberal rule, during which conservatives deliberately dismantled the government’s ability to easily do the things progressive ambitions demand and act to solve pressing problems at scale. This has made moving beyond neoliberal policy solutions not only a political challenge but a technical one. To create a more equitable, democratic, and sustainable future—one that addresses crises from climate change to persistent inequality—we need to prioritize reversing some of the key steps behind this dismantling. We need to:

1. Rebuild our state capacity;
2. Reform and strengthen our tax code; and
3. Reinvigorate the public’s policymaking imagination around what the state can and should provide.

Last week’s State of the Union speech included elements of all three, outlining work that has happened over the last four years, and the work yet to come. The president called attention to the tens of thousands of new infrastructure projects underway and spoke about empowering Medicare to negotiate drug prices, examples of robust—and popular—use of the state’s capacity. He laid down markers on the tax code, making the case for increasing taxes on corporations and the very wealthy; as he explained, “A fair tax code is how we invest in the things that make a country great . . . .” And he began outlining some of the ways this money should be invested in new public programs, including universal 3-K and pre-K and paid family leave.

In the coming weeks, I will do a deeper dive on each of these key pillars of reform. Today, I want to focus on the question of state capacity.

Over the last three years, we have seen a marked shift in the approach to policymaking that rules Washington. Neoliberal approaches that centered on market mechanisms and minimal government intervention have been displaced from their status as ruling orthodoxy. Many progressives have experienced this shift as simultaneously exciting and deeply frustrating. We have seen the administration attempt to do things we could not have imagined four years ago would make it to the White House agenda, and we have watched how those efforts are weakened not only through the legislative process and by the courts but also through the hurdles of implementation.

State capacity is the ability of the government to carry through on its decisions. As political scientists Theda Skocpol and Kenneth Finegold once wrote, “There is no law guaranteeing that governmental authorities will attempt only those interventions that they really can execute. The administrative organization of government is crucial, especially when policies calling for increased government intervention are to be implemented.” It is worth adding at this moment: We would not want such a law either. The nature of the crises we face demand we increase government intervention in critical sectors, even as we build government capacity to do so.

At the center of the challenges of the last four years lies the 50-year effort to weaken the government’s ability to act relative to markets. Neoliberals believed that market mechanisms were better at governing than the state and, accordingly, sought to weaken the state’s ability to act independently from them. Historian Gary Gerstle identifies three main strategies in this effort: First, using and growing state power specifically to protect free markets; second, extending market principles to all areas of human endeavor, not just production and consumption; and third, undoing the regulatory state, packaged as freedom from government control or individuals and markets.

These three strategies can help us understand what has happened to the capacity of the federal government over the past half-century. The number of nonmilitary, non-postal, employees in the executive branch of government has not changed in over 50 years, even as the country’s population has grown by well over 100 million and government spending quadrupled. In place of civil servants, the government has come to rely on private contractors or simply ceded responsibility entirely.

Attacks on government and state capacity have not only come from the Right. For example, as Paul Sabin has documented, a prominent wing of the Left—public interest advocates led by Ralph Nader—also critiqued the idea of government expertise. Nader and his allies conceived of the government primarily as an arbitrator between interest groups, and sought laws designed to bring more voices into the arbitration process they understood governing to be. While this critique was rooted in real and significant problems the government had neglected to address, it helped build a consensus that the government should have less power and therefore less capacity.

This consensus has had consistent material consequences. For example, early in the Biden administration, his IRS commissioner estimated that the agency was unable to collect almost $1 trillion a year in owed taxes because of lack of staff. The Inflation Reduction Act included $80 billion to begin to try and rebuild the capacity of the IRS, but some of that has been clawed back through subsequent budget fights.

The IRS efforts are emblematic of the difficulty of rebuilding state capacity. It’s not that we lack a vision for how to govern: It’s that executing on that vision requires step-by-step political fights to reverse 50 years of deliberate weakening of governance capacity.

Roosevelt has documented some of these fights, as well as the work left to be done. In the spring of 2023, we hosted a forum of Biden administration alumni discussing how industrial policy had been implemented from their various perches. For instance, former OIRA senior counselor Sabeel Rahman reflected on how to embed a commitment to racially equitable outcomes into the processes for determining public investments. More recently, we invited academics to reflect on how the experiences of other countries reveal tools of industrial policy—from new state financial institutions to public ownership—that have yet to be taken up by this administration. In the foreword to that collection, Roosevelt Director of Industrial Policy and Trade Todd N. Tucker wrote, “There is no shortcut to more state capacity.”

The lack of shortcuts does not mean we can take our time in rebuilding state capacity. It may take more than four years to reverse a half-century of work, but we do not have 50 years to spare. As we heard last week, the last four years have shown us that government can do big things. But they have also shown that many obstacles must be cleared to do them. The progressive vision for equitable governance requires a robust and capable state. One of our tasks at the Roosevelt Institute this year is to look closely at how capacity has been rebuilt across executive agencies over the last four years and what work remains to be done.