The National Review is a conservative publication. It's unfortunate that an interesting hypothesis -- our society is no longer innovating and advancing as much as it used to -- is backed up by obviously conservative partisan points that are loosely based in fact at best, or otherwise complete fabrications. I was actually tempted to flag this post but instead, I think it will be more productive to respond.
The power of government over private enterprises is the ability to guide innovation that may not provide any benefits in the short-term. There is a line of thinking that any spending on government projects is wasteful and inefficient, and for established technologies, that's true. I wouldn't want to have a government search engine instead of Google/Bing/Yahoo/DDG/et al all pushing themselves to get better and better. But do they exist without ARPANET? Does SpaceX exist without NASA? I doubt it.
Also, for government spending on technology projects, the ROI is not based on the single project's performance but any ancillary benefits as well. Even if you think spending billions of dollars just to put a man on the moon is a waste, I doubt you can argue with the other technological innovation that spawned as a result (often by the private sector), such as LEDs, artifical limbs[0].
And for Thiel to address stagnant wages without mentioning income equality is so completely disingenuous. This graph -- http://en.wikipedia.org/wiki/File:IncomeInequality7.svg -- represents exactly what Thiel is talking about, except notice how two of the lines didn't plateau but increased quite dramatically. Did Thiel's wages only increase 0.7% per year? Again, I doubt it.
My opinion is that the dramatic tax cuts starting in the 1980s have fed this income inequality, because the current design of our private sector is pretty much optimized to concentrate wealth. As a software engineer, if you've delivered a project that brought them thousands or millions of additional profits with little to no impact on your paycheck, there ya go. For our profession we're wisening up to not tolerating this (such as Patrick McKenzie's blog posts[1]), but other people aren't so lucky.
For some sobering data points, look at these two graphs showing average Fortune 500 CEO pay from 1989 to now, and the value of the S&P 500 from 1989 to now -- http://www.forbes.com/lists/2011/12/ceo-pay-20-year-historic... https://www.google.com/finance/historical?cid=626307&sta.... The S&P 500 is up about 550% during this time, and so is CEO compensation. So our executives have had their paychecks increase exactly as much as the value of their companies, and the typical worker gets their annual 2.7% raise that barely beats inflation and gets fucked. Stagnant wages have nothing to do with the "end of the future," they have to do with executives getting paid in stock, thus need to optimize quarterly profits, thus have a direct incentive to pay their employees as little as possible because that would decrease profits, and thus their stock price. Henry Ford paid his employees well above the market rate at the time because he wanted them to be able to buy his cars -- that brand of capitalist is pretty much endangered now, and now a CEO sharing $3 million with his employees is considered big news[2].
Lastly, how does Thiel not mention the impact of corporate donations to political campaigns as hamstringing innovations? You think all the oil companies are just twiddling its thumbs, assuming at some point we'll stop wanting to run on our cars by burning prehistoric goo and they'll just shut down the business and go golfing? No, they're making sure as many politicians as it can will protect its interests, and that means pretty much blocking any government investment in renewable energy whenever possible. Do you think Mitt Romney is against Obama's new car MPG efficiency standards because of "onerous regulations," or that it will lead to less profits for his Republican friends at Haliburton?[5]
Obama's much maligned "stimulus" -- the American Recovery and Reinvestment Act of 2009[3] -- allocated $27 billion towards renewable energy. While Bill O'Reilly and Sean Hannity smugly bring up Solyndra every time they can, they don't mention how the US increased the total amount of renewable energy production more in 2009-2011 than it did from 2002-2008[4]. Makes me wonder how much farther we'd be if we still lived in the days where we lauded the government for for making major technological bets that paid off with things like nuclear power, space travel, and the internet, instead of calling it "out of control government spending" in order to justify more tax cuts.
Sorry to go all Rachel Maddow on you. For what it's worth, I'm not a communist or a socialist. I believe strongly in the free market and private enterprise. In the technology sector, we see countless examples of free market principles and competition giving us faster software, smarter phones, and cheaper computers.
But I've always seen this as complementary to innovation funded by government. If VCs as we know them today existed in the 1960s, can you imagine one of them scratching his chin and saying, "So you want to put a man on the moon. How are you going to make money? Actually, don't worry about that, I'm sure it'll be awesome, here's billions of dollars."
I tried to write a TL;DR here trying to sum up my points in this wall of text, but the TL;DR itself ended up being -- yep, too long -- so I'm just going to go with this:
TL;DR: There's a lot of misinformation in Thiel's article that ended up reading to me as mostly conservative partisan bullshit, and I already get enough exposure to Fox News every time I visit my wife's parents.
[0] http://spinoff.nasa.gov/Spinoff2008/tech_benefits.html
[1] http://www.kalzumeus.com/2012/01/23/salary-negotiation/
[2] http://abcnews.go.com/blogs/business/2012/07/ceo-of-lenovo-g...
[3] http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestm...
[4] http://en.wikipedia.org/wiki/Renewable_energy_in_the_United_...
[5]http://thinkprogress.org/climate/2012/08/28/744811/romney-op...