In a recent Wall Street Journal news story titled “New Climate, Tech Bills Expand Role of Government in Private Markets,” senior writer Jon Hilsenrath notes that with two recent bills, the Biden administration “has grown the federal government’s imprint on major sectors of the US economy—including semiconductors, energy, and health—and further buried the idea once widely held in Washington that private markets should be left alone, without government involvement.”
Hilsenrath is correct that Biden has grown the federal government and he correctly identifies the domestic areas in which he has grown it the most. (I’m leaving out Biden’s “imprint” on foreign policy in Eastern Europe.) He’s also correct that Biden has further buried the idea that private markets should be left free of government intervention. But is he right that the idea of refraining from intervening in free markets was “once widely held in Washington”? If “once” referred to, say, the first decade of the twentieth century, he might have had a point, although even then we were well into the Progressive era. But Hilsenrath is referring to the 1980s and 1990s. While the rhetoric in the 1980s and 1990s was more pro–free market, the follow-through was tepid. Government grew in the 1980s and 1990s also, but just more slowly than it did under Bush II, Obama, and Trump.
I’ve followed Hilsenrath’s reporting in the Journal for many years. He has traditionally been good at sticking to facts, although now, as a senior correspondent rather than a reporter, he gets to put more of his interpretation on the facts. And in this article, that’s where he gets into trouble.
This is from David R. Henderson, “Rhetoric Aside, ‘Big Government’ Only Gets Bigger,” Defining Ideas, August 25, 2022.
Hilsenrath’s absence of evidence:
Consider Hilsenrath’s evidence for his claim that the idea of leaving private markets alone was widely held in Washington in the 1980s and 1990s. It consists of only three pieces of evidence. First, Milton Friedman’s case for small government was “taken up by Mr. Reagan and the Republican Party.” Second, Friedman’s case was embraced by middle-of-the-road Democrats, including Bill Clinton. Third, Clinton “declared in a 1996 State of the Union address that the era of big government was over.”
That’s it. That’s his evidence. What’s missing? Any evidence that politicians in Washington, either in the 1980s or in the 1990s, actually followed through on those views. If a bank robber told us yesterday that he had reformed but a camera caught him stealing from a bank today, we would say that he hadn’t reformed. Similarly, to make the case a view was embraced, you need to show evidence that the “embracers” acted on it. Hilsenrath doesn’t. He doesn’t even try.
Read the whole thing.
READER COMMENTS
David Seltzer
Aug 26 2022 at 5:12pm
It seems lot of data was available to support or reject Hilsenrath’s hypothesis. Increased government intrusion into free markets via regulations can be measured. Data regarding department budgets is available from the OBM. Were taxes increased to fund the EPA, HUD, and Reagan’s SDI? If government grew, how were individual liberties affected?
Jose Pablo
Aug 26 2022 at 6:37pm
Governments intervene markets because this intervention help them to win elections.
And this happens because “people” has a clear anti market bias (See Caplan’s “The Myth of the Rational Voter”)
Government intervention intensity follows the ebbs and flows of this bias (from a lot of additional intervention to a little. You are right, never less that a little more intervention).
But, then, the main question is:
Why the layman (and many experts) has this very well-developed anti market bias?
and how can this be “corrected”?
(And “more education” is not an acceptable answer, since it has been tried for many years and is not working. Basically, the same reason why an IMF rescue is not the right answer to Argentina woes)
Dylan
Aug 28 2022 at 9:17am
I haven’t read Hilsenrath’s piece, but there are two comments I’d like to make on the leaving private markets alone in the 80s and 90s.
Rhetoric is important in government. In fact, I think in some cases it is even more important than direct action because it has the power to sway public opinion.
I’d say the 80s and 90s are full of examples of governments moving in a more free markets direction, even if the overall size of government never decreased. I’m thinking of things like NAFTA, the Clean Air Act that established a pollution trading system, tax reform in the 80s, welfare reform in the 90s, etc…
None of this was a push to get government completely out of the way, but there did seem to be a general feeling that you could utilize markets to get better outcomes at lower cost than you could with more command and control type policies. That general sentiment seems far less common today. I know you shouldn’t take too much from reading online comment boards, but there has been a marked shift in a number of places I have frequented over the years in an anti-market direction.
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