Government intervention takes many forms in different situations from taxation, regulation and legislation to providing food subsidies, child welfare, housing and other financial assistance programs. Reasons for government intervention may include citizen protection, promoting social responsibility or paternalism, which happens when government attempts to manage the needs or control the conduct of individuals. Government intervention has its price, not only the financial costs of the intervention, but may include losses of individual freedoms and unintended consequences.
It can be of benefit when government intervenes to protect "open access resources" such as water and air. The University of Michigan explains that these resources are not owned, therefore no one entity has incentives to restrict pollutants. Environmental pollutants reached crisis proportions by the 1970s, resulting in the creation of the Environmental Protection Agency by December 1970, and the U.S. Congress passing the Clean Air Act of 1970 and the Clean Water Act of 1972. Since then environmental policies have been criticised as a cause for companies leaving the U.S. While at New York University's Graduate School of Public Service, Renna Hanna reviewed U.S. Department of Commerce data from 1966 to 1999. The conclusion of the findings were consistent with and supported the common viewpoint that companies chose to move capital and jobs abroad to avoid federal environmental regulations.
The global financial crisis of 2007 to 2008 brought about numerous interventions by governments. In the U.S., debate grew heated regarding government intervention in the market system, as intervention can cause disruptions, including extending a recession or depression, as the market has a tendency to adjust naturally equalising inadequacies. All the while Congress approved bailouts to financial institutions including Fannie Mae, loans to keep auto manufacturers out of bankruptcy and an £552 billion economic stimulus bill. The goal was to stabilise the markets, reverse high unemployment and prevent the Second Great Depression. On June 22, 2011, the non-partisan Congressional Budget Office released the long-term projections for U.S. financial stability. The CBO noted current federal debt as unsustainable, partially due to "higher federal spending related to the recent severe recession." The disadvantage of government intervention in the crisis has costly long-term effects on the economy. In the rosier of two possible scenarios the interest on the federal debt will devour one-sixth of federal revenues by 2035.
The biggest advantage of government intervention is preparing for disaster situations, with the ability to deploy manpower and resources immediately. In the United States, disaster preparedness is executed at the municipal, county, state and federal level. The response to the terrorist attacks on Sept. 11, 2001, stands as a good example of how authorities work together in an impossible situation, though Hurricane Katrina in 2005 provides examples of poor planning and lack of communication among authorities. Although computer models and researchers had predicted devastating flooding since 2001, local authorities were not properly prepared for preliminary evacuations or the aftermath. The biggest downside of government intervention in disasters is a mindset of government dependency on the part of residents that results in not taking responsibility for their own disaster or evacuation plans.
The U.S. government provides a number of programs to aid individuals in transition such as Social Security, unemployment insurance and health insurance programs. There are also welfare programs created to assist the poor by "equalizing resources" such as Food Stamps, housing and other assistance programs including free cell phones. On the surface providing essentials such as food, housing and other benefits to the poor is a noble philosophy, and a society should have safety nets in place for its most vulnerable citizens. However, Star Parker, the author of "Uncle Sam's Plantation," criticises government intervention in trying to solve economic problems of the poor. She states that "government welfare socialism" creates inevitable moral and spiritual problems as individuals abandon responsibility for their own lives. Rather than seeking paths out of poverty, individuals tend to look for ways to stay within programs.
- University of Michigan: The Economics of Pollution Control at the Local and Global Levels
- Environmental Protection Agency: The Origins of EPA
- DRI at New York University; "U.S. Environmental Regulation and FDI"; Renna Hanna; March 2006
- Pearson Higher Education: How Excessive Regulation Hobbles Development
- Merriam-Webster: Definition Paternalism
- U.S. Congress; "CBO's 2011 Long-Term Budget Outlook"; Congressional Budget Office; June 21, 2011
- Pearson Higher Education: Chapter 20: Reasons for Government Intervention in the Market
- UCLA Newsroom: FDR's Policies Prolonged Depression by 7 Years; Meg Sullivan; August 10, 2004
- ReadTheStimulus: £552 Billion, 1588 Pages, and Counting... Somebody Needs to Read It!
- PBS Frontline: The Storm - Analysis
- PBS Nova: The Man Who Predicted Katrina
- TownHall: Back On Uncle Sam's Plantation; Star Parker; February 9, 2009
- US News Money: 10 Reasons to Whack Obama's Stimulus Plan; James Pethokoukis; January 27, 2009
- AIM: The Cause of the 2008 Financial Crisis; James F. Davis
- Heritage Foundation; "The Global Contagion and Recession";J.D. Foster, Ph.D.; October 2009
- Library of Economics and Liberty: Against the Big Stimulus; Arnold King; January 5, 2009
- Getty Thinkstock