http://www.nybooks.com/articles/22390
Madrick makes clear, the effect of all this government intervention
was to enhance the country's overall rate of growth even as it
helped equalize income and wealth distribution. Government
legislation helped create an educated workforce and build crucial
infrastructure, guaranteed enforceable contracts, reduced
corruption, opened new markets domestically, sponsored scientific
and technological research and development, and globally, through
expanded trade agreements and gradually reduced tariffs, made
America an international economic giant.
The Great Depression began a substantial shift from a predominantly
regulatory state to a revenue state. The public's demands for
economic security meant that government would need to invest large
amounts of money in the economy to assure stability and near-full-
employment growth. In consequence, the government's 7 to 8 percent
share of GDP at the start of the century tripled over the next fifty
years. As Madrick explains, our vastly overheated debates about
today's "big" versus yesterday's "small" government rarely focus on
that simple fact: since the late 1950s, American government —
federal, state, and local—has annually spent approximately 30
percent of GDP, and neither Democrats nor Republicans have altered
that by more than a percent or two, upward or downward. Indeed, the
size of government, as a share of GDP, reached its greatest extent
since World War II not under Kennedy, Johnson, or Clinton, but under
Ronald Reagan, and on average has been higher under Republican
presidents. (Long the champion of "fiscal responsibility," GOP
presidents since Eisenhower have not been able to balance the
federal budget.)
Having carefully established the long-running and generally
beneficial effects of "big" government, Madrick turns to the
intellectual claims of figures such as Milton Friedman, whose work
was central to creating the new "small government is better
government" consensus. In fact, Madrick writes, the Chicago
economist "offered much ideology but little evidence" that big
government undermined economic growth. Friedman claimed in the 1970s
that the corrosive rate of inflation at the time was caused by
rising public spending and the growth of the money supply. In
reality, however, the government's share of GDP didn't rise during
this time, and far larger budget deficits under later Republican
presidents produced no noticeable increase in inflation.
International comparisons likewise have shown that big government
does not undermine a nation's ability to produce more efficiently.
Citing the economist Peter Lindert, who spent years compiling his
data on the effects of the welfare state on economic growth, Madrick
writes that there is a stark "conflict between intuition and
evidence" on this topic. As Lindert wryly observed, "It is well-
known that higher taxes and transfers reduce productivity. Well-known
—but unsupported by statistics and history."
--ravi
--
Support something better than yourself ;-)
PeTA => http://peta.org/
Greenpeace => http://greenpeace.org/
If you have nothing better to read: http://platosbeard.org/
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