The government isn't hindering the recovery

Friday's unemployment report, while not as strong as some had hoped, was quite notable for one very important reason: All the private-sector jobs lost during the recession, plus an additional 100,000, have been recovered. It's a part of the report that did not get nearly the attention it deserves, because many remain fixated on just how unsatisfying this economic recovery has been.

There are many who argue that U.S. policies — and the Federal Reserve in particular — are hampering the nation's recovery effort.

Pedestrians pass the U.S. Capitol.
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Pedestrians pass the U.S. Capitol.

But I think that the government HAS gotten out of the way, with a notable impact on the economy.

The federal budget deficit has fallen sharply in recent years, from a peak of $1.4 trillion to $680 billion last fiscal year. It is expected to fall further. My very good friend, and astute Washington-watcher, Greg Valliere of the Potomac Research Group, says that we might even see a small budget SURPLUS in the next two years, owing to rising tax receipts and stronger-than-expected growth in the private sector.

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That may come as a shock to some who continue to insist that monetary and fiscal policies are a disaster when, in fact, they have been quite effective at stimulating growth and tax receipts in the last few years.

But, it hasn't all been positive for short-term growth.

The declining budget deficit, coming down partly as a result of the termination of two wars, and partly as a result of the sequester, has been a drag on the economy over the last year. Some economists estimate that it shaved off over one full percentage point from GDP growth last year.

In other words, the economy would have grown north of 3 percent were it not for belt-tightening in Washington.

Unemployment is elevated also, in part, because of layoffs in the nation's capital, not because of government largesse. There are other structural factors, keeping unemployment higher than it would otherwise be, but they have nothing to do with the big hand of government interfering with the proper functioning of the economy.

The Fed, as I have long maintained, did more than just keep the economy from crashing into a depression in 2009. Its zero interest-rate policy (ZIRP) and quantitative easing (QE) reliquified the system, reflated the economy and substantially aided the rebound in both stocks and real estate.

That, in turn, took GDP, retail sales, household net worth and auto sales to, or above, their 2007 peaks.

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I do not think that the Fed's policies will cause some great future calamity, a spike in inflation, a significant decline in the value of the dollar and an associated explosion in interest rates.

None of those things has materialized. Indeed, inflation remains stubbornly below the Fed's 2-percent target, while the dollar and rates remain range bound. If anything, the Fed needs to remain stimulative in order to avoid the deflation trap that Japan has been caught for decades and that is threatening Europe today.

It has been suggested that the U.S. perhaps follow France's lead and lower tax rates. I disagree for two reasons: 1) Europe's growth, at best, is muted and 2) The only reason French President Francois Hollande is trying to lower tax rates is because of the backlash when he raised them in the middle of a recession — and how high he raised them (he proposed 75 percent for those earning 1 million or more.) This prompted an exodus of individuals from Paris, and a crushing defeat for Hollande's party in recent local elections.

While I agree that the U.S. is in dire need of comprehensive tax reform, I don't agree that it's as simple as cutting corporate tax rates.U.S. corporations have the highest marginal tax rate in the world, at 35 percent, but a very low effective tax rates, owing to vast government corporate welfare programs and holding taxable income in offshore accounts.

Our tax code needs reforming. Our government needs to be intelligently streamlined and made more efficient, but Europe is hardly the model.

The U.S. is making great strides in counteracting the effects of the biggest financial crisis since the 1930s.

The Fed is being appropriately easy, while Washington tightens its fiscal belt.

The economy is strengthening, day by day, week by week, month by month and year by year.

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It's easy to complain that government remains the problem. But that is a misguided view of economic realities on the ground, in my humble opinion.

If anything, other countries should follow our lead in using policy tools to revive their economies instead of consigning them to decades, not just years, of subpar growth.

Ron Insana is a CNBC and MSNBC contributor and the author of four books on Wall Street. He also delivers a daily podcast, "Insana Insights," and a long-form weekly version, both available on iTunes and at Follow him on Twitter @rinsana.