All Commentary
Thursday, May 20, 2010

The Case for Big Government

Could it be that our already immense government is still too small? That’s what some people, including economic journalist Jeff Madrick, would have us believe.

The first sentence of The Case for Big Government reads, “It is conventional wisdom in America today that high levels of taxes and government spending diminish America’s prosperity.” While this is, indeed, wisdom, it is hardly conventional, at least in our national and state capitals, and that wisdom has not had a meaningful role in policy for over 80 years.

From that sentence on it’s all downhill. The book’s theme is that principled calls to limit government’s power to benefit the few at the expense of the many are nothing but rigid ideology, which must now make way for “pragmatic solutions.” Of course, such “pragmatism” has long been a cover for removing all restraints on government power and trusting that those who wield it will do the right thing. To prove my point, Madrick favorably cites Alexander Hamilton’s view that laissez faire “was to be respected but to be violated when necessary.” Translation: It is to be routinely violated.

The book is divided into three parts. The first recaps how well “pragmatic” government has served us in the past (according to Madrick anyway); the second avers that change is inevitable and sees more government power as the only way to deal with it; the finale lays out the specific policies the author believes will cure our ills. Naturally, all call for further expansions of government power to tax and control us.

What passes for analysis in this book is an embarrassment. Inconsistencies abound. For instance, the author correctly asserts that flexible labor markets are indispensable for economic growth, yet two pages later he endorses a higher minimum wage and the reinvigoration of labor laws to facilitate the spread of unions into new industries. He also demonstrates difficulty distinguishing free-market rhetoric from free-market policies. He correctly points out that the Reagan and Bush administrations practiced Keynesianism, yet blames their nominally laissez faire policies for our recent stagnation. Since Keynesian policies are the antithesis of laissez faire, one cannot logically blame problems originating from those policies on laissez faire.

Madrick invariably fails to appreciate the implications of the things he does get right. For instance, he admits that the post-World War II demobilization spurred a recovery rather than the relapse into depression unanimously expected by those who relied on Keynesian analysis, yet he doesn’t acknowledge that this is strong evidence of just how mistaken that analysis is. He also admits that governments err and that the programs they create tend to live forever, but he gives them a pass since businesses too make errors and are as hard to shut down. Not only is that last statement factually inaccurate—faltering businesses are much easier to shut down than wealth-draining government programs (56 percent of new businesses fail within four years; the number of government programs that have ever been terminated is miniscule)—but the examples he gives, such as Chrysler, are still in business only because of government bailouts. The attempt to equate business fallibility with government blundering is absurd.

In setting forth his wish list in part 3, Madrick asserts that giving the federal government control over an additional 5 percent of our GDP will do no harm—in other words, it has no opportunity cost. He offers no theoretical basis for that assertion. Much of the evidence he cites in support of particular programs is provided by some of the likely beneficiaries. Madrick sees only the nice hoped-for results and never realizes that politically connected big business and big labor groups will gain the most from mushrooming government.

Worst of all, however, Madrick is blind to the fact that expansion of government means contraction of liberty. The big-government policies he advocates won’t just waste resources; they will also further whittle away at our freedom. Look at the authoritarian details of the recent “health care reform” legislation, such as the mandate for individuals to purchase insurance whether or not they want it, and you see that big government is not a kindly uncle.

I could go on, but that should suffice. The underlying problem not only of this book, but also of would-be central planners of every stripe, is the denial of the primordial fact of scarcity. Madrick’s frequent denunciations of “the age of limits” can mean nothing else. Since scarcity and the human actions to deal with it are the ultimate foundations of economics, the case for big government is based not on economics but rather on special pleading devoid of principle and logic.