What are the limits to the role of government?

G overnment s are being asked to do a lot today, particularly in Europe: Spend m ore on education, healthcare, research, defence, justice, support for purchasing power, etc.; Take part in investments in the energy transition, other infrastructure and reindustrialisation. Because these are long-term investments with relatively low returns, it is difficult for the private sector to finance them; G uarantee a growing share of household savings, as households want to have liquid and low-risk savings and the economy’s borrowing needs are above all long-term and risky. So a model is emerging in which the government spends ever more, co-finances a growing number of investments with the private sector and guarantees a growing share of savings. But although widely demanded, is this model realistic? Without a significant increase in potential growth, public spending and investment cannot be increased without a matching increase in taxes. Would society accept this tax increase? It is sometimes claimed that new public investments and some new public spending (education, research, etc.) will increase potential growth. But it is important to bear in mind that investments in the energy transition do not increase potential production, even if they do reduce CO 2 emissions. There is also the question of whether the government is capable of picking the right investments; Last, the government does not have the capacity to take all the risks. If they materialise, it will have to borrow more and therefore increase taxes, transferring the risk to other economic agents. So what model should be implemented? A higher tax burden to finance the additional spending and investment? Incentives for households to take more risk directly?