In today’s Wall Street Journal Robert Barrow argues that the return on investment of government dollars is much less than today’s Keynsians suggest. He makes a fair point. No doubt there is a bit of wishful thinking in many of the promises being made about government spending in particular, and government action in general nowadays.
But isn’t the discussion too general. Are all government dollars created equal? Similarly, is it really unreasonable to have the government build major infrastructure projects that almost certainly won’t get built by the private sector? Whether it makes sense to hire private contractors to do much of the work, on the other hand, is another matter. Private contractors are easier to investigate and to fire when they do poor work, are corrupt, or mishandle public funds. Government employees and bureaucrats are much harder to invistigate and fire. Both will inevitably be incompetent and/ or corrupt sometimes. The question is what to do about that reality.
Whether using government money to fund science is a somewhat different question. Once again perhaps it depends upon the kinds of things being funded.
Barrow also argues for tax cuts. But are rates already low enough on capital? Is there really a bonus if we drop the capital gains rate below its current 15% (a rate established under Clinton and the Republican Congress, if memory serves). Might a tax simplification, after the model of the 1986 legislation be wiser. The fewer deductions, the more time businessmen spend figuring out what the market wants, and not how to game the tax code.
In short, as a rule these discussions of government v. business ought to be much more specific than they tend to be. Remember, President Reagan said in his first inaugural address "In this present crisis, government is not the solution to our problem; government is the problem." Not all crises are the same. Of course, to answer the question of government’s role, one must have an idea of what government is for in general. One cannot ask "what works" until one asks what end one wishes to serve with the work.