The Case for Big Government

This morning, walking dogs, I ran into a neighbor who works for a well-known fashion company. "Business is dead," she said. "I wanna complain about how they're treating us. But I better keep a lid on it."

I couldn't have agreed more -- business is dead. Holding a job is the priority.

But then she went on. "You know," she said, "there's nothing a president can do about it."

That got to me. That's the victory of a simplistic ideology that's dominated America since Ronald Reagan and really got its start in the 1970s. Government is at best a necessary evil. It is the problem not the solution. That we don't have any control over our fate. And on it goes.

In truth Reagan introduced the real age of limits. He told us time and again what American society could not achieve.

And that is why I wrote a new book, just published, called The Case for Big Government, put out by Princeton University Press.

I deliberately term the anti-government attitude an ideology because it is not based on evidence; it is in fact faith-based.

Economists and policymakers roll out the platitudes. High taxes undermine growth and incentives to work and invest. Government spending is a dead loss to the economy and undermines productivity growth. Government does nothing right.

This book is not about theory but about the hard, empirical evidence -- there are plenty of good theoretical arguments for government intervention in a market economy. And the evidence says the case again government is dead wrong.

1. Statistical cross-county comparisons show that countries with higher taxes and more social spending do not grow more slowly than the U.S. Many have higher productivity and pay manufacturing workers more than America does.

2. American history is also on government's side. American government had a big part in the economy since the beginning: in land regulation, canal financing, public schools, sanitation and sewer systems, central banks, the highways, health research and even the internet.

3. While the free market ideology dominated since the 1970s, the American economy on balance did poorly. If the ideology was right, why didn't we at least equal our former performance? Sure, we had the internet and cell phones. But wages performed remarkably poorly over this period. In the past, we had great new products along with rapid wage growth.

And the financial crisis is a direct result of ideological deregulation, of Washington looking the other way, of a national mindset described by of all people Bill Clinton when he pronounced back in 1996 that "the era of big government is over."

So I told my dog-walking friend that of course the president could do something about it. We needed a bold stimulus plan, a strong plan to stop defaults on mortgages, and smart re-regulation of finance.

And then we have to address areas of such profound neglect that we must climb back a long way: our healthcare system, our infrastructure, our public schools, our energy dependence, and on.

I told her I had a new book out. It's about the value robust pragmatic government. But she said she got the idea.

"Don't you believe me?" I asked.

"I do , I do, but I'm cutting back on expenses," she answered.