A history of government intervention in the economy might run something like the following. “Liberal” (small government, free markets, free enterprise, free trade, and devil-take-the-hindmost) economics dominated the world during the 19th Century. Then, from 1914 to 1945, a series of crises made this system intolerable to most in a democratic age. All advanced countries witnessed a dramatic expansion of government power and responsibility. From 1945 to 1980, a new system developed in which government managed the broad performance of the economy and insured against various individual catastrophes, while leaving markets free to do what they do best. Along the way, however, the state regulated and taxed more and more, while failing to master new problems. In the 1980s and 1990s, ideas and political interests came together to rebalance the relationship between governments and markets. Thatcherism, Reaganism, and Monetarism culminated in Britain’s “New Labor” and Bill Clinton’s “the era of big government is over.”
That didn’t last long. It ran counter to popular expectations whenever a crisis hit. The share of Americans who favored a more active problem-solving state rose from 32 percent in 1995 to 57 percent in 2020. The government responded to new problems by jettisoning the new conventional wisdom. On the one hand, the 21st Century began with a series of ever-greater economic crises. First came the bursting of the “tech bubble” almost the instant Clinton was out of the White House; then the bursting of the “housing bubble” and a huge financial crisis less than a decade later; and then the covid pandemic which derailed much of the world economy a decade after that. The government repeatedly flooded the economy with money (loans, credits) to stave off recession, bankruptcies, and high unemployment.
On the other hand, the increasing salience of more fundamental problems of American society and economy also pushed for bigger government. The Obama administration expanded the role of government by passing the Affordable Care Act in health care and pushing through a rationalization of the automobile industry. The rise of China as an economic rival led the Trump administration to impose, and the Biden administration to maintain, tariffs. The Trump administration spent prodigiously to pay for the development of Covid vaccines, while the Biden administration has added $280 billion of funding for the semi-conductor industry. Climate change has elicited a large government intervention ($234 billion) in the form of tax credits for “green” energy generation and consumption (electric vehicles). Similarly, the effort to roll-back the regulation-writing state also has gone by the boards. The annual average of “economically significant new regulations” has risen from 20 under Reagan; to 45 under Bush I, Clinton, and Bush II; to the low 60s under Obama and Trump, to the high 60s under Biden.
Industrial policy always turns into industrial politics. Established industries defend themselves against threatening new-comers. They have the deep pockets to lobby politicians for what they want. Political intervention can increase inefficiencies. “We’re going to have bad [economic] growth” warns one critic. Security and freedom can be antagonists.
 Jon Hilsenrath, “Recent Legislation Expands Role of Government in Private Markets,” WSJ, 13-14 August 2022.
 I’m a fool not to label the financial services industry as a “fundamental problem.”
 The use of tax credits forms part of another longer pattern. Adjusted for inflation, tax credits have risen from $729 billion in 1996 to $1.4 trillion in 2021.
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