Well before this century people have been in conflict over how much regulation the government should be allowed to impose. In the 18th century, Jean-Baptiste Colbert coined the term laissez-faire; it represents a situation of freedom from government intervention. It was later discussed extensively by Adam Smith, who was responsible for giving the motto laissez-faire much more conceptual clarity. Throughout the years, each president has differed with respect to how much control the government should have in monitoring the market. For example, Ronald Reagan believed that “only by reducing the growth of government, can we increase the growth of the economy” (Niskanen). President Obama, on the other hand, is clearly more supportive of government intervention, as he has worked hard to garner support for his stimulus package (i.e., The American Recovery and Reinvestment Act of 2009), which he believes will counteract the effects of the economic downturn. Government regulation has once again become an important topic as the Tea Party has begun to receive more attention. In this essay, I would ultimately like to show that regulation is, to a certain extent, a necessary responsibility of the government.
Because of the tumultuous economy that people around the world are feeling the effects of, many are beginning to think deeply about what role the government should play. In this essay, I will use specific examples to examine how government intervention affects businesses.
The examples that I will use to give validity to my argument will come primarily from an evaluation of policies that have been implemented over the years and the far-reaching results of the economic recession that we have experienced most recently (i.e., the automobile industry crisis and the housing market crisis).
Smith’s laws of the market are simple; under the right circumstances, the outcome of the market can be predictable. Why then have we experienced so much randomness in our economy? When Ronald Reagan took office, he had a plan in mind: to “cut income taxes from top to bottom, reduce the size of the federal government for the first time since the New Deal, and make the U.S. military Number One in the world” (Edwards). These initiatives were based on a speech that Reagan had delivered to the International Business Council of Chicago where he had outlined his goals, “strictly controlling the rate of government spending, reducing personal income tax rates, revising government regulations, establishing a stable monetary policy, and following a consistent national economic policy” (Edwards). Despite intense opposition from Democrats and complaints from big businesses that Reagan’s tax cuts weren’t doing enough for them, in August 1981, he signed the Economic Recovery Act (ERTA) into law. Proponents believe that this act was the major reason for the unparalleled economic expansion. Businesses prospered from the plan; they produced nearly $20 trillion worth of goods and services between 1982 and 1987 (Edwards). In addition to big tax cuts, Regan was quite focused on loosening government regulation on business. For example, the Civil Aeronautics Board (CAB) led to the largest public utility, the American Telephone and Telegraph Company (AT&T) breaking up, which created more competition amongst businesses. As we can see, a central theme during Reagan’s presidency was relaxing government regulation of business. Thus, government regulation should be minimalized. Or should it?
Many of his supporters are blind to the fact that Reagan’s ideas about bureaucratic regulation are behind the economic mess that is unstable markets in the United States and around the world. Reagan, known for being the country’s “greatest modern champion of deregulation, perhaps…contributed more to today’s unstable business climate than any other American. His long-standing campaign against the role of government in American life, a crusade he often stretched to...
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