'Big Government' Has Pulled Us Back from the Brink of Disaster
Paul Krugman does a nice job today raising an observation that's easily lost in the shuffle: we came pretty close to a catastrophic failure of the economy, and "Big Government ... saved us."
So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.
Probably the most important aspect of the government's role in this crisis isn't what it has done, but what it hasn't done: unlike the private sector, the federal government hasn't slashed spending as its income has fallen. [...]
From the beginning, I argued that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, was too small. Nonetheless, reasonable estimates suggest that around a million more Americans are working now than would have been employed without that plan -- a number that will grow over time -- and that the stimulus has played a significant role in pulling the economy out of its free fall.
All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution.
And aren't you glad that right now the government is being run by people who don't hate government?
Actually, yes, I am. Krugman noted that in March, House Minority Leader John Boehner (R-Ohio) declared that since families were suffering, "it's time for government to tighten their belts and show the American people that we 'get' it." I'd add that Boehner was hardly alone. Congressional Republicans demanded a five-year spending freeze as a response to the crisis. South Carolina Gov. Mark Sanford, who was considered a rising-star in GOP politics, insisted during the stimulus debate, "When times go south you cut spending. That's what families do, that's what businesses do, and I don't think the government should be exempt from that process."
If we'd had a Republican president, working with a Republican Congress, this Hoover-like approach to government may have pushed our economy over the edge.