In short, through such actions as providing for the defense of the country, exploring space, protecting the environment, and developing public health programs such as immunization, the government is fulfilling its function of providing public goods. If the air quality is preserved, it is preserved for all of us. And so, preserving the air quality (a public good) raises the problem of free riders and is thus undertaken by government.
Promoting the General Welfare
Beyond these two essential functions of providing a basic network of protective laws and security and providing public goods, however, government can also do more. Recall that in addition to establishing justice, ensuring domestic tranquility, and providing for the common defense (things only a government can do), the authors of the Constitution wanted the government to “promote the general Welfare.” The general welfare can be promoted through various government services, and almost all governments do provide some benefits beyond the basic requirements. The American government performs each of the following services:
providing infrastructure
regulating the economy to ensure that it operates fairly
providing support to people in vulnerable positions
redistributing income to improve the lives of citizens with less wealth
regulating behavior
Providing Infrastructure
Many other services that people feel are important as a basis for the economy and society, such as education, highways, and parks, are not public goods; in principle, they could be provided only to those who were willing to pay for them and withheld from those who don’t. For example, all education could be offered by private schools and all highways could be offered to users on a toll basis (essentially the way railroads are). However, these are basic and important services that most people think government should provide because they constitute the underlying infrastructure for everything else; certainly, in the United States, the government provides such services.
Regulating the Economy to Ensure That It Operates Fairly
This function of government goes beyond maintaining order by enforcing contracts. As part of ensuring the fair regulation of the economy, the government regulates many financial transactions to make sure that everyone involved has enough information to make intelligent choices. The sale of stocks is regulated, for instance, to require companies offering stock to disclose full information so that those buying the stock know what they are getting. Drug companies must submit potential drugs to the U.S. Food and Drug Administration to make sure they are safe before they are offered for sale.
Providing Support to People in Vulnerable Positions
By providing money and services, the government can make sure that members of the society who are in an economically vulnerable position have reasonable support. The government provides support through the Social Security system to retirees, to children who have lost a parent, and to disabled people. The government also provides unemployment insurance, offers disaster relief, and in many other ways tries to help those who are either temporarily or permanently in a vulnerable position.
When Hurricane Maria devastated Puerto Rico in 2017, the federal government was accused of not fulfilling its duty to provide disaster relief and thus contributing to the death toll of more than 3,000 Americans.
AFP Contributor / Getty Images
Redistributing Income to Improve the Lives of Citizens With Less Wealth
Through the federal income tax system, and through the design of certain programs such as the pension system in Social Security, the government tries to lessen income inequalities in American society.
Regulating Behavior
Beyond the need to maintain public order, the government also passes laws to regulate people’s behavior (examples include laws against obscenity, public nudity, and the use of various drugs) and uses its police to enforce those laws.
Controversies About Government Functions
We put the discussion of government functions in the previous sections in order according to how much public consensus exists for government action in each. Few dispute that the government should maintain social and economic order, though of course there are often lively disputes over how the government does this. (No one disputes the need for police forces, for instance, but people often disagree about how the policing should be done.) Certain public goods, such as national defense and diplomacy, are similarly uncontroversial, at least in the sense that people agree that the government should provide these public goods. There is a good deal of consensus around the need for government to provide for infrastructure as well—especially for elements such as education and highways. However, as we go down the list of functions, there is less consensus for a government-regulated economy.
Furthermore, within any of the areas of government function, people often disagree about how active the government should be, even if they generally concur that the government should be involved to some extent. How much is the right amount to spend on national defense? And what about environmental protection? Although considered a public good, it is surrounded by controversy: Should the government take actions to reduce human contributions to the warming of the earth’s atmosphere? And of course, in areas such as redistribution of income or regulation of behaviors, the extent and nature of government activity is also often quite controversial, leading to questions such as whether the government should eliminate the tax on inherited wealth (the estate tax or “death tax”).
Governments around the world differ in how active they are. In general, the United States government provides fewer goods and services, and spends less on them, than most other wealthy countries. National and local governments accounted for 37 percent of all expenditures in the United States in 2015—evidence of a large and active government, it is true. But governments in the United Kingdom (also often called Great Britain) and Sweden account for more of their countries’ expenditures—42 percent and 50 percent respectively.12
We see in Figure 1.2 that the United States, the United Kingdom, and Sweden all had relatively small government presences at the beginning of the twentieth century, but that their governments grew as a result of the two World Wars and the Depression in the first half of the twentieth century. In 1936, for instance, government spending in the United States accounted for only 16 percent of expenditures. The United States continues to have a smaller presence of government than the other two countries, however, despite its growth over several decades.
Figure 1.2 Growth of Governmental Activity in the U.S., the United Kingdom, and Sweden
Government’s expenditures as a percentage of all economic activity grew in all three countries, but less in the United States than in Sweden or Great Britain.
Sources: Vito Tanzi and Ludger Schuknecht, Public Spending in the 20th Century: A Global Perspective (New York, NY: Cambridge University Press, 2000), 6; “General Government Spending,” Organization for Economic Cooperation and Development (OECD), 2018, https://data.oecd.org/gga/general-government-spending.htm