American companies had Western Europe frightened. They were
overrunning the Continent, displacing native enterprise. Anger
swelled at American imperialism. But a French journalist, J.J.
Servan-Schreiber, had a different explanation.
In passionate prose, full of respect for the United States, he
argued in The American Challenge, a best seller in 1968, that
America's success reflected a bold, innovative corporate sector
combined with generous government spending. The two reinforced each
other, generating expansion and prosperity. "This takes us a long
way from the old image of the United States -- a country where
business was not only separate from government but constantly
struggling with it," Servan-Schreiber wrote.
America is mounting another challenge, this time declaring war
against terrorism, and hastily resurrecting federal spending, which
had fallen into disrepute. As in the 1960s, federal spending now
seems important for the nation's success. Gone or suppressed is the
"old image," that government is by nature inefficient and should be
shrunk to accommodate a private sector insistent on functioning
Reacting almost overnight to the war and the incipient recession,
Washington is stepping up spending for the military and for security
at home. It is providing billions for repairs in Lower Manhattan and
to bail out the airlines. Two proposals would extend unemployment
benefits and subsidize health insurance premiums for workers who are
laid off. But once the crises subside, will government spending go
back out of style?
So far, the answer from Washington is yes. Fighting terrorism and
recession is likely to increase federal spending by $60 billion to
$80 billion in coming months. The emphasis is on the short term, to
deal with war and recession, not on the public sector's long-term
needs. Even Democrats in Congress who want to enhance government's
role in the economy do not talk publicly about doing so.
Some still hold to a view that was popular in the Clinton
administration, that balanced budgets and fiscal restraint are
better for the economy than repairing infrastructure. Other
Democrats are afraid of being called big spenders, "The ghost of
health care `94 and the larger specter of spending before that seem
to haunt them," said Robert B. Reich, President Clinton's first
secretary of labor. He is one of the few Democrats to argue that
federal spending, properly done, will pay for itself in rising
economic growth. …