Today we launch a new initiative and a new conversation about the purpose and possibility of government in the lives of Americans.
The discourse about the positive purposes and possibilities of government has been barren for a generation in America. What discussion there is has been dominated by proposals and philosophical disquisitions on how to make the most of less government, but rarely about new avenues for government action or new possibilities for social improvement. Since the Reagan years, there has been almost no new social policy that required a substantial outlay of money. George W. Bush’s program for drugs for the elderly was the one major exception, and it was riddled with concessions to the private market. Obamacare is a second. Both are clouded in controversy that is in good measure ideological.
Even the conventional language about the “role” of government is misleading. Do we talk about the “role” of parents in their children’s lives, or the “role” of children in their parents’? One doesn’t exist without the other. You don’t talk about the role of water in swimming or the role of the ball in soccer.
In short, there is no economy without government; there is no America without government. If all this seems a little elementary, it serves a point. The language we use suggests at the outset an assumption that government should be limited. Note we don’t talk about the role of business in America. Business is generally assumed to be the senior partner.
Let me make this one point clear: There is no capitalism without government, either. Like Keynes, I’d like to enable the country to enjoy the benefits of capitalism but also the benefits of government safeguards, investments, and efforts to develop everyone’s “capabilities” to benefit, if they so choose and if they do their share, from a full life.
America started losing its way, I’d argue, precisely when it began to lose so much faith in government back in the 1970s. Why this happened is complex. The nation has always been individualistic in its orientation, given its history as a rebel against totalitarianism and its small population compared to available resources, including an open frontier. But community action and responsibility also had a larger part in America’s development than current mythology suggests. Trust in government is at a low today, but surveys suggest it started to fall rapidly under Lyndon Johnson after the surge in such faith after the New Deal and World War II. It fell further under Nixon during the Watergate scandal.
But the nation was still moderately confident in government. In the early 1970s, many new regulatory agencies, such as the Environmental Protection Agency, were started, Social Security was expanded, and welfare programs were expanded. A tax revolt in California led by Ronald Reagan was put down in early 1973.
But the economic devastation from 1973 through the early 1980s seemed to be a primary catalyst in causing Americans to doubt government. Americans were confused, frustrated, and angry. By 1978 there was a major tax revolt. Soon talk was all about cutting taxes, reducing social programs, and freeing business of regulations. Anti-trust became an almost archaic term. In ensuing years, few economists of any political stripe argued against undoing Glass-Steagall, which had separated investment and commercial banks in the 1930s. Higher unemployment rates were thought to be the ideal path for controlling inflation. The Democrats began talking about how free markets can supply social goods more efficiently than government. Unions increasingly were thought of as villains, not the providers of a middle class for workers. Hard-won gains on Social Security and Medicare were readily sacrificed in the name of fiscal responsibility, while raising taxes in the almost lowest-taxed rich nation in the world was considered anathema.