SC281: Shrinking Government Raises Unemployment???

Here's an article published yesterday in The Atlantic:

"How Our Incredible Shrinking Government Raises Unemployment and Hurts the Economy," by Derek Thompson.

It's always jarring to realize how completely different someone's basic outlook on the world can be from one's own.

I definitely lean toward small government.  People on the opposite end of the spectrum tend to highlight the positive effects that large government policies have had and point out the failures of supposedly small government policies to produce the benefits that its advocates are supposed to have claimed for it.  (That sentence was a mouthful.)  On the one hand, I don't have a firm grasp of the 'hard' evidence that either side is supposed to be citing in support of its respective position.  And on the other hand, I have a probably-overly-developed sense of skepticism toward all such appeals.  When jumps and dips in numbers are presented as definitively demonstrating that one side's or the other's policies were correct, I start to really wonder about the interpretations of that data.  Economics is such an enormously complicated field, and there are so many factors and variables that play into any particular economic event, it's hard for me to accept that analysts could know for certain that a particular policy was primarily responsibility for a particular change.  Of course my skepticism is probably the greatest toward those who hold the opposite view.

Locating myself within the spectrum of views is of limited usefulness.  Confessing my general ignorance is great, if it marks the starting point of a quest for hard data to support my postion.  We'll see what I find as time goes on.  The point of this piece is just to highlight the sharp divergence in views and, hopefully, prompt some reflection on this.

Derek Thompson writes, "[I]t's intuitive that expansionary public spending (including on people) following a private sector meltdown are useful to help the economy catch up to trend-line growth."

Really?  That's not intuitive to me at all.  Well... maybe I should nuance that more.  After all, there's quite a bit in that statement and in the larger article that I don't understand.  If our goal is to maintain "trend-line growth," then I suppose expansionary public spending following a private sector meltdown would be useful--at least in the short-term.  But my mind immediately jumps to questions like, Should trend-line growth be the bottom line?  While expansionary public spending might be useful for bolstering trend-line growth in the short-term, is it a wise long-term policy?  Are there long-term negative effects of the government swooping in to the rescue?

Certainly unemployment and its impact on individuals and societies are bad things.  But that doesn't mean that just any approach to "creating jobs" will solve the problem.  Would a society with 0% unemployment, in name only, be better than a society with a "published" or "official" unemployment rate of 11%?  Lots of questions.  Very few concrete answers at this point.  But I'll try to start thinking about this in a more public way.