Anyone following the news finds daily stories of the public sector under assault.  Across the nation and in Oklahoma, cuts to state government continue into their third straight year, while in Washington, the rhetoric around budget cuts has reached a fevered pitch, much of it couched in terms of the need to downsize government to allow the private sector to thrive. We thought this an opportune time to re-post a blog entry that we first ran last summer that takes aim at the idea that cutting government jobs and spending  best serves the private sector.

Last month I gave a presentation to a meeting of the State Chamber of Commerce along with a representative from another state policy organization.  I was struck, and frankly dismayed, by the extent to which my co-presenter  spoke as if government and the private sector were opposing forces pitted against one another in a  zero-sum competition. In this view, taxes assessed on businesses and households extract dollars away from productive consumption and investment in the private sector in order to “grow government”.

It is certainly true that a vibrant private sector will always be the main engine of economic growth in a capitalist economy. Public spending can at times crowd out private investment, although, as economists like Brad DeLong argue, during times of sluggish economic growth like the present,  government spending can be vital for keeping the economy from grinding to a halt and for incentivizing private investment. But more fundamentally, this polarizing conception of “government versus the private sector” misses the important ways in which businesses, as well as families and communities, cannot thrive without a strong and effective public sector. You cannot have a vibrant, productive private sector without state and local government helping to:

• Educate our children and train our workforce;
• Police our neighborhoods, investigate crimes, and detain lawbreakers; Read the rest of this entry »

Last month I gave a presentation to a meeting of the State Chamber of Commerce along with a representative from another state policy organization.  I was struck, and frankly dismayed, by the extent to which my co-presenter  spoke as if government and the private sector were opposing forces pitted against one another in a  zero-sum competition. In this view, taxes assessed on businesses and households extract dollars away from productive consumption and investment in the private sector in order to “grow government”.

It is certainly true that a vibrant private sector will always be the main engine of economic growth in a capitalist economy. Public spending can at times crowd out private investment, although, as economists like Brad DeLong argue, during times of sluggish economic growth like the present,  government spending can be vital for keeping the economy from grinding to a halt and for incentivizing private investment. But more fundamentally, this polarizing conception of “government versus the private sector” misses the important ways in which businesses, as well as families and communities, cannot thrive without a strong and effective public sector. You cannot have a vibrant, productive private sector without state and local government helping to: Read the rest of this entry »

Matt Miller, writing for the TPM Book Club on a new book by Justin Fox called The Myth of the Rational Market,  provides a thoughtful reformulation of  the “government vs markets” debate:

…we’re too often peddled a phony choice between “big government” and “free markets.” A wise society should be looking to find the right balance of both to serve its goals – and asking private and public sectors to focus on what each does (or could do) best. Government should set the right “rules of the game” in terms of creating incentives within which competition, greed and so forth work their invisible hand magic. Government is also good at cutting checks, so income supports like Social Security that serve social goals make great sense. And only government can make the public investments that support growth (via infrastructure, basic R & D, etc). The private sector is good at creatively optimizing financial outcomes whatever the rules may be, and at innovating endlessly to offer better products and services at lower prices. Most of our political life is the story of the fight over the proper balance between these forces in intelligent governance…

I might add that the opposite of “anti-government” isn’t “pro-government”. It’s better government.