We live in disordered political times, when visceral antipathy to Barack Obama’s agenda drives even reasonable conservatives to say things they should know are not true. The reaction to the president’s unfortunate remark about the condition of the private sector is a perfect example. Speaking on Fox News Sunday, Gov. Mitch Daniels of Indiana said this: “He [Obama] does not understand where wealth and jobs come from. It comes from a successful private sector or not at all … Government does not create wealth or income. It just shuffles it around and charges a price, a cost for that service or disservice.”
Daniels is obviously right that a vigorous private sector is and must be the principal locus of wealth and employment. But he is dead wrong to suggest that government is simply redistributive or worse, a dead-weight drag on the economy. Throughout American history, government has made investments that have fueled economic growth. Is it really necessary to remind the governor of facts that young people used to learn in high school? Is he not familiar with the historic role of the public sector in catalyzing the construction of canals, railroads, bridges, and roads—indeed, every aspect of the infrastructure that ensures the mobility of raw materials and finished goods? What about human capital—public schools, land-grant colleges, student grants, and loans? Surely the governor understands that individuals’ ability to earn a decent living, and America’s ability to compete in the global economy, depends more and more on the education and training of our workforce. And what about basic research, which helps replenish the well of ideas from which so many commercially viable products and processes are drawn?
The concept of “public goods” is hardly the creation of liberal ideologues. Standard economics tells us that market mechanisms tend to undersupply investments that benefit those other than the investors. Although we would all be better off with a better-trained workforce, each business has reason to believe that others could end up enjoying the fruits of its own training expenditures. The aggregate of individual decisions, each of which is rational, yields an inadequately trained workforce. When government acts to fill the gap, it is neither redistributing income nor charging for a service. It is playing its appropriate role in helping to create income, wealth, and jobs.
Yes, liberals and conservatives will argue about the extent to which redistribution is a proper function of government, and about the extent to which the private sector can deliver services more efficiency and responsively than does the public sector. But to move from those legitimate arguments to Mitch Daniels’ outright dismissal of government is to throw American history down a memory hole. If only I had the power to summon the ghosts of Alexander Hamilton, Abraham Lincoln, and Dwight Eisenhower to haunt the governor’s mansion in Indianapolis.