In the decades after the Civil War, federal taxes and spending in the U.S. were about one-sixth or one-seventh as high as they are now as a percentage of gross domestic product. But that doesn’t really mean government was only one-sixth or one-seventh as big as it is now.
For one thing, the U.S. government gave away hundreds of millions of acres of federal land in those days in small grants to homesteaders and giant ones to railroad companies — big expenditures of government resources that don’t show up in the spending statistics. For another, the second half of the 19th century was a heyday in the U.S. of what Stanford historian Richard White calls “fee-based governance.” Here’s a description of the practice from White’s “The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865-1896,” a 2017 book that I’ve already gushed about in this column:
It used fees, bounties, subsidies, and contracts with private individuals or corporations to enforce laws and implement public policy. In the immediate wake of the Civil War, what might superficially look like a bureaucracy in the General Land Office, the Office of Indian Affairs, or the Treasury Department really amounted to a collection of agents who lived on the fees they collected and the economic opportunities their jobs presented. Where fees and bounties did not suffice, the federal government routinely delegated governmental functions to corporations, churches and a variety of other independent actors. The net result was an unwieldy and inefficient system that required few taxes but was ubiquitous and often intrusive.
White then goes on to describe three adept practitioners of fee-based governance, New York Collector of Customs (and later president) Chester A. Arthur at the federal level, Erie County Sheriff (and later president) Grover Cleveland at the local one, and legendary lawman Wyatt Earp, who managed to hold federal and local offices simultaneously while relentlessly squeezing fees and bounties from both. “The system combined great legal authority, limited administrative control, and wondrous corruption,” White writes. “It contributed to the declining legitimacy of institutions.”
What got me thinking about this history was an article this week by Reason’s C.J. Ciaramella about the Chicago Police Department’s practice of aggressively impounding the vehicles of drivers suspected of even the most minor of offenses.
The program impounds cars when the owner beats a criminal case or isn’t charged with a crime in the first place. It impounds cars even when the owner isn’t even driving, like when a child is borrowing a parent’s car.
The Chicago Police Department does this because the city has big budget problems and has turned to fees, fines and auto sales to make ends meet. This isn’t quite the same as the fee-based governance of the 19th century, since individual police officials aren’t pocketing the cash (at least they’re not supposed to!), but it does seem similar in spirit.