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The Growth of Government Since 1980

Celebrating the 30th anniversary of Milton Friedman’s Free to Choose television series, PBS is airing highlights of the series followed by relevant panel discussions. George Mason University Economist Bryan Caplan appeared on one such panel with, amongst others, former economic advisor to President Obama and current University of Chicago Economist Austan Goolsbee.

During the ensuing discussion, Goolsbee remarked that when Friedman’s series originally aired in 1980 he agreed that government was too big and intrusive; however, Goolsbee maintains that today it no longer remains the case. Yesterday, Caplan wrote that he was unable to fit a major point in during the discussion rebutting Goolsbee’s line of reasoning:

 …If Friedman was right then, he’s right now.  Check out Table 15.3.  (Update: Broken link fixed).  Federal spending as a percent of GDP in 1980: 21.7%.  In 2009: 24.7%.  Goolsbee emphasized the shift toward Social Security and health spending.  But so what?  Friedman’s critique is truer than ever.  Government continues to spends a ton of money on people who aren’t even poor.  Much of this spending – especially health care – is pure waste.  And the problem’s only going to get worse.

Goolsbee also emphasized that Social Security and Medicare enjoy strong public support.  Right he is.  So were most of the programs Friedman attacked back in 1980 – and he explicitly admitted it.  Friedman’s point then, and my point now: The public is wrong.  Indeed, the public is delusional.  It’s crazy to tax everyone to provide “free” pensions and health care for everyone.  And it’s logically impossible for benefits to permanently grow faster than GDP.

Goolsbee also argued that government growth isn’t so bad if it’s only temporary.  I wish I’d asked him, “And isn’t ‘temporary’ precisely what price controls on energy were supposed to be?  If Reagan hadn’t been elected, price controls could easily have been as long-lived as rent control in New York.”  I’m afraid the new regulations and spending that the U.S. embraced in 2008 will work the same way.  You can call them “temporary,” but unless a staunch ideological opponent somehow gets elected, the new statism here to stay.

Image via flickr user PeterGuo

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