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Argument: History shows economic gains from govt intervention

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Jeff Madrick. "How big government helps the economy take off." Boston Globe. September 7, 2008: "Contrary to the romantic claims about the nation's laissez-faire past, American history is a story of government intervening, time and again, to support growth.

Early America created a national bank to maintain its finances and currency, critical to a smooth-functioning modern economy, at the instigation of Alexander Hamilton, George Washington's treasury secretary. Under Thomas Jefferson, well-known for his laissez-faire sympathies, America bought the Louisiana territories in what amounted to a large federal spending program. He thus provided cheap land to farmers at federally controlled low prices, enabling them to feed themselves and the nation, but also soon to produce surpluses to feed Britain as well, adding to America's wealth.

State and local government were also vital contributors to growth. New York State issued bonds to finance most of the Erie Canal, opened in 1825. Other states followed suit with canals of their own, creating an efficient transportation network essential to commercial development before the Civil War.

Led by Massachusetts, the states built free and mandatory primary schools based on property and other local taxes, producing a literate and able work force. After the Civil War, the federal government donated tens of thousands of acres of land to states with the express purpose of starting new technical universities, which helped launch the University of California at Berkeley, the Massachusetts Institute of Technology, and Cornell University, among others. These research centers contributed vitally to American agriculture and manufacturing.

The federal government financed much of the railroad development of the second half of the 1800s through massive provisions of land. The tens of thousands of miles of railroad created the nationwide marketplace that made possible America's first industrial revolution. Similarly, in the 20th century, the federal government built roads, dams, bridges, and, after World War II, the interstate highway system, which were the building blocks for the huge commercial growth of postwar America.

It invested in research and development through the Defense Department, accounting for most of such spending in the nation in the decades after World War II. America sent its returning GIs to college, again raising the educational level of its workforce, and provided low-interest loans for their children to go to college as well. It aggressively subsidized medical research and education.

Throughout the 1950s and 1960s, taxes rose as a proportion of GDP, and the economy only grew more rapidly. Family income doubled in two decades, adjusted for inflation, even as more new social programs were funded. This was, in fact, true of all the developed nations of the West."

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