Debate: Is big government is stifling the American Spirit

The motion at the Intelligence Squared debate of October 26 was "Big government is stifling the American spirit."

Laura Tyson is an economics professor and a member of President Obama's Economic Recovery Advisory Board. She ridicules the blaming of government in our democracy, suggesting perhaps that we should blame each other. She says that the American public should be willing to pay for what it wants from government. What we have to discuss, she says, is "not some sort of fantasy about size of government." She believes we should discuss "the particulars of the big programs that are driving the government debt." She adds:

This is not a size of government problem. It's an arithmetic problem. If we never had the great financial crisis of 2008 and ’9, we didn't have it at all, we would still face unsustainable deficits and debt driven by our programs that are the most popular programs with Americans.

Tyson supports the bailout of the financial system:

There was a run on the financial system. Capitalist economies cannot run without finance. I'm saying the government had to act. It had to get bigger. We can debate the cause, but we may as well deal with the reality. That was the reality.

Tyson is concerned about income distribution:

I think it's important to know that the last time the income distribution was as unequal in the United States as it was in 2008 was 1928...now about a quarter of our children live in poverty. This is about the kind of society one wants. It’s not actually about freedom or lack of freedom.

Tyson sees government -- the people's representatives -- as intending to do things for common people as a group and that individuals should think about a common good as well as their own individual interest. She believes that most Americans want to live in a fair society.

Her debating partner was Nouriel Roubini, a professor of economics and international business at New York University, whom the moderator described as having "famously predicted the housing bubble and then predicted the crisis that followed."

Roubini began by describing his debate opponents, Phil Gramm and Arthur Laffer, as "the two high priests of supply-side economics, what is also referred to as voodoo economics... It’s a religion because it’s based not on facts or science but on faith. He ridiculed a list of ten commandments of the faith. "There is absolutely no evidence," he said, "that reducing taxes increases revenues."

He described the origins of the debt and financial crises.

First of all, it happened because we had totally unsustainable tax cuts in 2001, 2003. Two, we had these laissez-faire policies that led to the worst economic and financial crisis and we had to bail out the banks.

Everybody agrees we need entitlement spending reform. We have to restructure social security, Medicare. We have to cut entitlement spending.

Is American spirit stifled because of big government? Not at all, because tax revenues today are the lowest level they have been in the last 50 years: 15 percent of GDP. It used to be an average of 20. In Europe, they're around 40, 50 percent.

Arthur Laffer praised President Kennedy, President Reagan and told the audience about his support for Clinton. He voiced numerous agreements with Laura Tyson. He repeated his view that the the economy works best when you keep taxes low enough to incentivize businessmen. And he said that "The only bail outs you should do are for individuals."

Phil Gramm, a former senator from Texas, spoke to the American spirit, suggesting the big government was endangering opportunity for common people. He said:

To me the American spirit is a belief that based on your own merit, based on your own hard work, no matter who your daddy was or who he wasn't, or who your mama was, that people are going to judge you on your ability, and that you have it within your power to succeed. Now, obviously it's better to be -- it's better to be clever, and pretty, and rich. But being plain, and ordinary, and poor, those things are not insurmountable obstacles in America. And it's that belief of what we can do, but you can't have unlimited government and unlimited opportunity. You have to make a choice.

Nobody was speaking in favor of unlimited government, and Laura Tyson spoke of support for education as a means of opportunity.

My bias must be apparent. It is my opinion that points made by Tyson and Roubini overwhelmed Gramm and Laffer. It's my guess -- half joking -- that anti-Obama conservatives in the audience were shrewd enough to vote undecided before the vote. The vote then was 38% for, 44% against and 29% undecided. The big swing was to the yes side from the undecided. The vote at the end of the debate was 49% for, 43% against and 8% undecided.

Debate: Big Government and the American Spirit