06/15/2012 08:53 am ET Updated Aug 15, 2012

The Role of Government

The president and Governor Romney gave dueling speeches in the swing state of Ohio yesterday, laying out broad economic themes, so it is incumbent on me to look under the hoods. Here's what I've got.

It is, of course, impossible for politics to be anything but deeply political right now.

By that cryptic statement, I mean that it's actually hard to listen to the core of what the presidential candidates are saying through anything like an objective lens. It's all positioning, framing yourself and your opponent, capitalizing on their gaffes while walking yours back, presenting plans but assiduously avoiding key details. And with the media, understandably, in full horse-race mode, an actual substantive analysis of the candidates' positions may be nigh impossible.

But I'm going to try anyway.

Their main argument is far less than you'd think about jobs records, the role of private equity, who best understands the economy, how much better/worse things would be if Congress would just cooperate. Such issues are obviously relevant and they'll be in the mix until Election Day. But I find it hard to believe those arguments will change many minds -- that they'll change the vote of someone who's already leaning toward one side or the other.

Their main argument is about the role of government in our lives. Neither believes that government should be a dominant force -- both stress the primacy of the private market in a capitalist economy. Both recognize that absent market failures, the incentive structure of the private sector will provide the best opportunities and allow people to make the best choices, in the sense of promoting the most well-being for the most people.

But the president sees more market failures, market barriers, inherent instabilities, inequalities and inefficiencies than does Governor Romney. And in this regard, he sees more of a role for government. He has taken to citing Lincoln on this point, as he did yesterday: "through government we should do together what we cannot do as well for ourselves."

I doubt Mitt Romney would disagree with that. But he would draw the line in a very different place.

For example, he has been extremely critical of the stimulus package, and, as Jonathan Cohn notes here, would not try to temporarily replace the lost demand in a recession-a clear market failure-through Keynesian stimulus. When it comes to health care, he does not view the "individual" market -- where people shop for health insurance on their own as opposed to as part of an employer or government group -- as part of the problem. He views it as part of the solution, and would provide individuals with a voucher to shop for coverage. He would not have rescued GM and Chrysler.

He does not see a federal role for safety net programs like Unemployment Insurance or nutritional programs -- he would turn these over to the states. That loses their countercyclical function, but it's also consistent with his position against trying to mitigate recession with government programs.

Similarly, he would reduce financial aid and cut back on Head Start (at least, those are the implications of budget cuts he has advocated).

This is the agenda of someone who, in reference to the above quote from Lincoln, envisions more people doing more things for themselves than they do now or than they'd do under President Obama's vision.

In the agenda the president spoke of yesterday, for example, government programs should help stimulate job creation in periods of high unemployment. It was in this spirit that he decided to rescue the auto companies, believing that absent government action at this time of credit market collapse (another market failure), no one other than the federal government would supply the needed capital.

Where he draws the "Lincoln line," market barriers like poverty block children from access to education. Left to their own devices, private firms will under invest developing technologies, like advanced batteries, and no firm could single-handedly undertake the R&D and interstate coordination of an updated energy-transmission grid. The market will fail to provide adequate, affordable health coverage. Financial markets will become increasingly unstable and will expose taxpayers to large losses.

The implications of these different visions for government will get a lot more attention than the visions themselves. If you believe in a lot less government, you can cut a lot more taxes (at least you can if you're really serious about all those spending cuts -- otherwise, you'll just have much higher deficits). And vice versa -- if you plan to offset large market failures, like millions of uninsured, you'll need more revenue.

So we'll continue to scrum around with jobs created and regulations and small business and tax cuts and deficits and fiscal cliffs and budget baselines.

But it would be better if we could get a lot deeper into this fundamental question of government's role, because that's the real substantive difference. That's what America is being asked to decide in the next election... not whose gaffes are more damning.

This post originally appeared at Jared Bernstein's On The Economy blog.