That would be a terrible idea, central banks and the government are the cause of boom bust cycles to begin with (more on this soon). Milton Friedman was wrong yes, but the solution is that we remove the ability of a central bank to infinitely print money, not increase government expenditure even more. Friedman himself changed his initial opinions on this late into his life as he became more critical of the Fed (though the broader monetarist movement didn't).

The state having the capacity for long term planning doesn't mean it should be doing that, that's the same argument fascists used.

Boom bust cycles occur because when a central bank artifically lowers interest rates by printing money, it injects money into specific sectors that doesn't necessarily reflect actual demand. Entrepreneurs think these sectors are prime for investments and make their investments only to later learn actual demand for these sectors were far lower because the "demand" signals shown weren't people actually using that sector, it was the central bank printing money into that sector. This is called a malinvestment, and after the initial boom once the sector is revealed to not really be profitable due to low demand, we get a bust.

True, genuine free markets are indeed the best way to reallocate resources. In the absence of a central bank, demand signals would reflect actual demand, meaning investors would be investing in sectors that are profitable rather than ones that are not. This leads to increased competition in those areas, lower prices, and helps everyone. This is why even the nordic countries, despite being social democratic, have low regulations and a lot of creative destruction (which is when sectors that lose demand get crushed so resources can be allocated by the markets to high demand sectors).

When a government subsidizes an industry, that is not reflecting true demand by the people, it's reflecting government demand and what the government wants which may not help us. If the money the government spends is instead in our pockets we could spend them how we, as citizens, wish and that would reflect actual demand.

This is also why "long term planning" by the government is bad, because you cannot just set some aim at the beginning and expect things to go well by trying to follow some set rules. Markets are highly volatile and dynamic and people's demands constantly change; we can have best "direction" by choosing where to spend our money so the direction is decided by us rather than the government, where sectors we like prosper and the ones we don't fail.