An Anomaly in the Warfare-Welfare thesis?

As many may know, there is a strong correlation between the size of government and the occurrences of wars and emergencies. Looking solely at American History, major wars and "emergencies" result in bigger government:

• The Global War on Terror - Big Government "Conservatism", Bush-style. Non-defense spending is skyrocketing and we have the largest new entitlement program, the Medicare Prescription Drug Act
• Vietnam - "Guns n' Butter"; The Great Society
• Korea - Death of the Old Right ( the birth of "Buckleyism"); New Deal programs cemented into permanence
• WWI - Progressivist programs, such as the Income Tax, the Federal Reserve, and the 17th Amendment
• WWII/Depression - The New Deal, price controls, income tax withholdings
• The Civil War -- Legal Tender laws, the Income Tax, centralized banking, etc.
• The War of 1812 - Hyperinflation, price controls
• The Revolutionary War - Hyperinflation, price controls
  

What is missing from this list is the Mexican-American War. The Polk Administration radically reduced the size of the government in domestic affairs (an independent Treasury, a massive tariff cut, etc.) while at the same embarking on a period of massive imperialist expansion. If the more hawkish members of his administration had gotten their way, Western Canada, Baja California, and Cuba would all be part of the US.

Furthermore, we saw a progressively-freer economy emerge from 1840 - 1860. The US experienced a hard money standard (harder than it had been), the Walker tariff enacted in 1846 paired with British repeal of the corn laws had a strong liberalizing effect on trade, and the Tariff Act of 1857 further reduced taxes and liberalized trade. So, the beginning of war in 1846 sparked a progressively liberalizing effect on the domestic economy for 15 years. According to Scott Trask at the Ludwig von Mises Institute, commodity prices only rose 4% from 1847 to 1860. This is all the more amazing with the California gold rush (and the Australian gold rush) going on; the US should have experienced hyperinflation, but instead experienced nearly flat prices.

So, how did it go wrong? Well, the still-Jeffersonian Democratic party suffered a period of massive instability from 1854 to 1860. They lost almost 1/2 of their House seats and the majority in 1854, only to recover half of those lost seats and the majority in 1856. The Democrats used the 1856 recovery to pass the last gasp of the Jeffersonian Democrats: The 1857 Tariff. In 1858, the Democrats lost all of their seats they gained in 1856 and suffered an even more stunning loss in 1860. Liberalization and de-liberalization nicely coincide with the power of the antebellum democrats.

But what does this tell us about the link between warfare and the size of government? Before the Civil War, periods of warfare, whether they were associated with wartime liberalization or de-liberalization, always followed a liberalizing trend after the war ended. It was only after the Civil War that the Warfare-Welfare link really materialized.

Here's my explanation: prior to the Civil War, there were enough Constitutional limits on the Federal Government that the States and the People were able to reign in the Federal Government after the Fed's wartime power spasm. After the Civil War, peripheral sources of power were not strong enough to counter expanded national government.

In fact, the more centralized the government is, the more likely it is for wartime government expansion to stick around. That's why more WWI measures stuck around (or were re-created) than the Civil War, and more WWII wartime measures stuck around afterwards than in the previous conflict. The pattern fits, IMHO.

So, the axiom should not be that "warfare permanently increases the size of the federal government". Instead it is that "short-term increases in Central Power, whether it be wartime or emergency measures, recede over time as long as peripheral powers have the ability to counter them. The weaker peripheral powers are, the more likely wartime/emergency measures are to stick around".

Based on the hyper-centralized structure of the current United States, it is highly probable that measures taken during the Global War on Terrorism will be made permanent, or at least be with us for a long, long time.