# Government Spending, Not Free Markets, Drives American Economic Discontent
Norbert J. Michel contends that populist movements across America misidentify the root cause of economic hardship, blaming free-market capitalism when government intervention and excessive spending deserve the scrutiny.
Michel's argument challenges a central narrative in contemporary populism. Populist politicians and movements, spanning both parties, have argued that unfettered markets created wage stagnation, wealth inequality, and declining opportunity for working Americans. They propose solutions ranging from tariffs to government price controls to expanded regulations. Michel rejects this diagnosis entirely.
The real culprit, Michel argues, lies in federal government spending and regulatory overreach. When government manipulates markets through subsidies, tariffs, licensing requirements, and other interventions, it distorts prices and creates winners and losers. These distortions benefit connected interests while harming ordinary workers. Populist movements then attribute the resulting economic pain to free markets rather than the interventions themselves.
This debate carries real policy consequences. If populists correctly identify the problem, then solutions like industrial policy, trade barriers, and stricter regulations make sense. If Michel proves right, those same policies would deepen the damage by adding more government intervention to an already intervention-heavy system.
The economic data supports competing interpretations. Wage growth has lagged productivity gains since the 1980s, real purchasing power has declined for many workers, and wealth concentration has increased. Populists point to these trends as evidence that capitalism has failed the middle class. Michel would note that these same decades saw unprecedented government spending on entitlements, wars, and corporate subsidies, alongside the growth of the regulatory state.
Michel's position aligns with classical liberal economics, the view that truly free markets allocate resources efficiently and benefit consumers broadly. Populists reject this assumption, arguing that unregulated markets concentrate power in the hands of large corporations and wealthy elites. This foundational disagreement shapes everything that follows.
The practical politics matter here. Republican populists, led by figures who champion tariffs and industrial policy, argue government must actively manage the economy to protect American workers and businesses. Democratic populists push for expanded social spending and stricter corporate regulation. Both groups share skepticism of free markets, even as they diverge on solutions.
Michel's rebuttal holds that both approaches expand government power in ways that ultimately harm the people they claim to help. Price controls reduce supply. Tariffs raise consumer prices. Subsidies benefit politically connected firms, not struggling workers. Regulatory barriers prevent new competitors from entering markets and challenging incumbents. The result: less opportunity, higher costs, and slower growth.
This debate will shape American economic policy for years. If populism continues gaining strength, expect more government intervention, trade protectionism, and industrial policy. If Michel's critique gains traction among policymakers, expect movement toward deregulation and reducing government spending. The stakes are high because the diagnosis determines the cure.
The tension between these worldviews reflects a deeper question about American capitalism itself. Populists believe the system is rigged against ordinary people. Michel believes the system appears rigged because government has rigged it through intervention. Both cannot simultaneously be right, and both camps claim empirical support for their position.