Starving the State: How Defunding Hollows Out American Democracy

Starving the State: How Defunding Hollows Out American Democracy

For decades, the United States has pursued a slow but deliberate project: the defunding of its own government. This trend, evident in federal revenue data and political rhetoric, is not merely a push for efficiency—it is the sustained erosion of institutions that uphold a functional democracy. Framed as a return to "limited government," the reality is institutional decay: agencies starved of resources, public services stretched to breaking point, and a widening gap between citizen expectations and government capabilities.

Defunding does not shrink government intelligently—it hollows it out. State capacity degrades through the attrition of experienced civil servants, chronic underinvestment in systems and staffing, costly privatization of core functions, and failure to modernize technology or retain talent. This is often misrepresented as fiscal conservatism when, in fact, it weakens governance without improving efficiency or effectiveness.

The Long Arc of Defunding

The modern era of defunding began with the Reagan Revolution, which recast government not as a vehicle for collective good but as an inherent obstacle to freedom. Tax cuts, politically popular and lucrative for donors, became default policy, while the consequences—crumbling infrastructure, understaffed agencies, and weakened safety nets—were deferred or ignored. The result was a paradox: a government expected to do more with less, its failures then cited as proof of its incompetence.

Since the 1980s, non-defense discretionary spending has fallen from about 5% of GDP to 3.3% today, accelerating institutional erosion. Infrastructure has decayed, schools have lost funding, public housing has languished, and health systems have grown brittle. Privatization and deregulation, touted as superior alternatives, have shrunk the federal workforce and reinforced the perception of government as bloated and inefficient. Rather than reforming institutions, policymakers responded to failures with further disinvestment, creating a vicious cycle: underfunding bred dysfunction, which justified deeper cuts.

Federal agencies, still burdened with broad responsibilities, now struggle with depleted expertise and morale due to chronic understaffing and high turnover. The consequences are tangible: slower crisis responses, increased errors, and eroding public trust. As competence declines, cynicism grows—fueling demands for further cuts. This self-reinforcing cycle has left the U.S. with fragile institutions and a diminished capacity to meet public needs.

The Role of Fiscal Policy in Hollowing Out

Central to this hollowing out is fiscal policy itself. The persistent push for tax cuts has not only reduced government revenue but also constrained its capacity to function. The shift in tax policy isn’t just a symptom of anti-government sentiment—it has become one of its most potent tools.

The 2017 tax cuts, which disproportionately benefited corporations and the wealthy, added $1.6 trillion to the deficit (2018–2027). Extensions of these cuts, along with new proposals like tax-free tips and overtime, could add another $2.4 to $5 trillion over the next decade. Historically, such deficits have been used to justify austerity, perpetuating the hollowing out of government.

This “starve the beast” strategy has devolved into a self-fulfilling prophecy. Chronic underfunding degrades services, fuels distrust, and justifies further cuts. Outsourcing and deregulation, often framed as cost-saving measures, frequently lead to higher expenses and weaker oversight. The true cost of defunding becomes starkly visible in crises: a pandemic response hobbled by a gutted CDC, infrastructure failures from deferred maintenance, and a federal workforce crippled by vacancies and politicization.

MAGA as Accelerant

The MAGA movement did not invent anti-government sentiment, but it weaponized it. From Reagan’s declaration that “government is the problem” to Steve Bannon’s call to “deconstruct the administrative state,” the shift in tone and intent is clear. Where Reagan-era conservatism sought to shrink government, MAGA’s approach is more radical: deliberate sabotage of governance itself.

The Trump administration’s deep budget cuts—targeting climate change, healthcare, public health, environmental protection, tax enforcement, and social services—reflect ideological hostility to federal governance. A 23% cut to the EPA, slashed NIH disease research, and gutted CDC staff and labs reveal disdain for science-based regulation, with these agencies framed as part of a “deep state.” Layoffs at the FDA (3,500) and CDC (2,400), along with cuts to surveillance capacity, further undermined expertise-driven institutions. IRS reductions targeting enforcement staff align with GOP resistance to taxing corporations and the wealthy.

The $900M–$1B rollback in USAID and global health programs, including HIV/AIDS and maternal care, echoes MAGA’s “America First” rejection of foreign aid. Meanwhile, increased spending on defense, border security, and fossil fuel subsidies points to ideological—not fiscal—priorities.

Attempts to reclassify civil servants under "Schedule F" threaten to replace expertise with loyalty tests. Agencies like the EPA, CDC, USAID, IRS, and FBI face not just budget cuts but active demonization, their failures amplified as proof of systemic corruption. This is not small-government ideology—it is anti-government nihilism.

By normalizing shutdowns, debt-ceiling crises, and attacks on nonpartisan institutions, MAGA has turned governance into theater of distrust. The apparent goal is not a leaner state but a weaker one—incapable of regulating industry, protecting public health, or ensuring fair elections, leaving power to flow to those with resources to fill the void.

Geographical Divides

The consequences of defunding are not evenly distributed. Cities, reliant on dense public-service networks, bear immediate strain: crumbling transit, underfunded schools, and overwhelmed housing systems deepen inequality, disproportionately harming low-income communities.

Yet rural areas present a paradox: despite anti-government rhetoric, they depend heavily on federal healthcare support. The roughly 12 states—nearly all Republican-led—that refused Medicaid expansion under the ACA turned down billions in federal funds, leaving about 2.2 million low-income adults uninsured. Those states experienced significantly higher rural hospital closure rates: non-expansion areas saw 62–84% greater risk of closure compared to expansion states, directly affecting communities that overwhelmingly voted for the politicians denying them these benefits.

Red states exemplify this contradiction. Mississippi, for example, receives about $2.73 in federal spending for every $1 paid in federal taxes—over 34% of the state’s revenue comes from Washington—yet its leaders block Medicaid expansion and reject ACA subsidies. Meanwhile, blue states like Massachusetts have pursued near-universal coverage, building on a 2006 healthcare reform and federal ACA aid to achieve one of the nation’s lowest uninsured rates (~2.4%), though doing so requires significant state-level funding that can crowd out other priorities.

The result is a fractured nation, where political ideology overrides evidence, and the social contract frays along geographic lines.

The Way Forward

The solution to defunding-led dysfunction is not destruction but targeted renewal. Several concrete steps could help reverse the damage:

· Repeal Schedule F through legislation like the Saving the Civil Service Act, protecting career officials from political purges. This would reinforce merit-based hiring, preserve institutional expertise, and depoliticize governance.

· End budget austerity by letting the 2017 tax cuts expire for incomes above $400,000, generating roughly $180 billion annually to rebuild the civil service and invest in public goods.

· Close the “carried interest” loophole, which allows hedge fund managers to pay a 20% tax rate on income taxed at 37% for nurses and teachers. This could raise $18 billion yearly, enhancing fairness and funding public institutions.

· Restore agency funding to pre-Trump levels at the EPA, CDC, and IRS, among others. The IRS, for example, had begun increasing audits of high-income filers and improving taxpayer services before funding cuts resumed.

· Block-grant Medicaid expansion to bypass state-level obstruction, ensuring equitable healthcare access regardless of geography.

These are not radical ideas—they are restorations of norms that once sustained American governance.

A functioning democracy requires robust institutions, not the false choice between big government and broken government. The true test of 2025 will not be whether taxes are cut again, but whether we stop mistaking sabotage for reform. If we fail, the losses will be measured not just in dollars, but in lives, trust, and the stability of the republic itself.

Bill Bowen