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The Public Policy
Visible Projects, Hidden Destruction
The real cost of government efforts at job creation.
Today’s crop of central planners and big spending politicians could learn a thing or two about economics from Henry Hazlitt’s classic bestseller, Economics in One Lesson, published in 1946. Common sense doesn’t have an expiration date.
“There is no more persistent and influential faith in the world today than faith in government spending,” Hazlitt wrote. “Everywhere government spending is presented as a panacea for all our economic ills. Is private industry partially stagnant? We can fix it all by government spending. Is there unemployment? That is obviously due to ‘insufficient private purchasing power.’ The remedy is just as obvious. All that is necessary is for the government to spend enough to make up the ‘deficiency.’”
With “public works” viewed primarily as a means of “providing employment,” explained Hazlitt, an endless array of projects will be “invented” by the government. The “usefulness” of the final product or the likeliness of success of a project, whether it’s a bridge to nowhere or a bankrupt solar panel company, “inevitably becomes a subordinate consideration.”
In fact, once creating jobs is viewed as the chief purpose of government spending, said Hazlitt, a project with more waste and more inefficiency in its implementation, and less labor productivity, will be viewed as superior to a less wasteful project. The “more wasteful the work, the more costly in manpower,” he explained, “the better it becomes for the purpose of providing more employment.”
A key fallacy in this thinking, Hazlitt explained, is that it ignores the incomes, wealth and the jobs that are “destroyed by the taxes imposed to pay for that spending.” What’s visible is the new school or new road, but what is unseen are those things that were lost through higher taxation, the unbuilt homes and unbuilt cars that don’t exist because of the money that was redistributed away from those who earned it in order to pay for inefficient make-work projects. What is unseen are the unbuilt stores and unbuilt factories, the uninvested funds and the new enterprises that would have been created.
And so we end up with politicians cutting ribbons at new $500 million per mile tunnels, acting as if they’ve created something. No one at the celebratory event sees what is invisible, what has been destroyed. No one sees how the tunnel’s funding and taxes created disincentives to entrepreneurial risk-taking and investing. No one sees the tunnel as an obstacle to economic growth, a job killer.
Rep. Don Young (R-Alaska), for instance, likes the idea of the rest of us paying $315 million to build a useless and costly bridge in rural Alaska to an island with only 50 residents, an island that’s already sufficiently accessible via a 7-minute ferry ride.
Giving a free $2 million yacht to every man, woman and child on the island would have been $215 million cheaper than the bridge, but Rep. Young was Chairman of the House Transportation and Infrastructure Committee, not the owner of a yacht company.
Economically nuts as it was, the U.S. Department of Transportation approved the useless bridge in Alaska project is 2004. Funding was later cancelled, but the bridge, like the irrepressible Jason in Friday the 13th, received funding again in the 2011 federal transportation bill. Rep. Young is currently the senior Republican on the House Transportation and Infrastructure Committee.
“We can see the men employed on the bridge,” wrote Hazlitt, discussing visible benefits and hidden costs. “We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence.”
About the Author
Ralph R. Reiland is the B. Kenneth Simon professor of free enterprise and an associate professor of economics at Robert Morris University in Pittsburgh.
Letter to the Editor View all comments (38) | Leave a comment
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POST American| 10.19.11 @ 6:26AM
"Government has NO business
being in the 'jobs' business at all.
Governments have NO business
borrowing money from ANYONE
-----------EVER!
-----This is an UTTER CON-----
This is about long term strategies
of control ----and EUGENICS."
-ALAN WATT
(essential online coverage)
-------------------------AMEN----------------------------
TrueBlue| 10.19.11 @ 11:40AM
Other than what seems to be your mandatory eugenics plug, you actually said something intelligent and mostly easy to understand PA.
DTOM| 10.19.11 @ 12:37PM
Sometimes, I wish POST's alarm clock wouldn't go off. Other times I'm glad it did. This is one of the latter.
Mr ED| 10.19.11 @ 6:48AM
And the suspension of disbelief - willfully ignoring history and reality - only works for so long. Thats why the Left seeks at all costs to dominate the media. Thats the only way they can sculpt and craft their professional lies, portraying the disasters of enacted Leftist policies as the result of mysterious invidious forces which must be sought out and destroyed.
Reality may be a merciless handmaiden, but if the Leftists get to tell the story she will look as bright and beautiful as Durantys Ukraine. Reality, after all, is so overrated.
Doctor_X| 10.19.11 @ 7:21AM
Dr. Reiland,
You are more upset over that damn tunnel to the North Side than I am! And I'm not about to get you started on the baseball and football stadiums we voted down TWICE that were still built with public money.
I'd love to know what you think of the Smart Grid that the goverment is pushing and G.E. and IBM are backing.
Sam Vaughn| 10.19.11 @ 7:40AM
Doctor_X - I'll weigh in on smartgrid. It's the dumbest idea I've ever seen. It doens't produce more energy, it allows the forceful imposition of rationing, make no mistake, SmartGrid is not about making things more efficient, it's about control.
Melvin| 10.19.11 @ 8:44AM
After being in the Marine Corps during the latter part of my career I had to do some traveling with commercial aviation, and all the accoutrement that go with it.
We used to save all of our receipts, hotel, taxi, etcetera, and turn them into the travel clerk at the completion of our business.
Then the government went to a government VISA card. I remember when the clerk handed me this new piece of plastic, the first words were, "Get that thing away from me." Reason being, I didn't want to the government coming after me with unauthorized charges.
Old habits I guess, I still collected receipts, but the point to all this is, this government credit card thing caused people to go absolutely buck wild, purchasing gifts, traveling, buying pianos, and pool tables and the government wasn't going after them or garnishing their pay to recoup the unauthorized charges.
This VISA/tax payer funded card became like Crack. It got to the point and for the most part still is, millions of dollars in unauthorized purchases are allot like what is happening with politicians. The more they spend the more no body cares or follows up on.
Nobody, other than the taxpayers is saying, "NO, Stop you cannot do this."
Politicians and they're cronies are running around with their carpet bags filling them up with taxpayer cash,before the crash.
No one is minding the store anymore, Congress is just a cash clearing house with Congressmen and Senators skimming of their percentage for facilitating bogus legislation that has to be funded.
Those individuals in Congress and the Senate are not honorable men and women, they're White Collar Criminals. I would like to lower it a bit more and call them Petty Thieves, but when we're dealing with trillions of dollars, it has ceased to be petty.
So how do we solve this problem. Well, the Italians had it right in what they did to Mussolini and his wife, when justice finally caught up with them.
DTOM| 10.19.11 @ 9:34AM
Melvin,
Maybe you missed this early lesson.
There are only two thoughts in politics:
1. The purpose of politics is to take your money and give it to my friends.
2. Where's mine?
Simple, eh?
Semper fidelis, sir. And, thank you for your service.
TrueBlue| 10.19.11 @ 11:52AM
What's worse is when you do what you're supposed to, only use the card for approved purchases (air fare, hotel fees, cab fare, meals when the galley isn't available) and then they don't pay you the funds to cover those purchases within a timely manner, so you end up with two choices. Pay the fee from your own pocket (given some of the charges for long-term trips this gets difficult as an enlisted), hoping they pay you back sometime before the end of the century; or, don't pay it, get on a delinquent list with your command, get yelled at by your First Sgt for not paying the card on time, and get a major hit to your credit as the payment becomes 30, 60, 90 days overdue. Every time that happened to me I kept hoping I'd reach that 90+ deliquent date so the card was revoked and I wouldn't have to deal with it anymore. Sadly no such luck, and with 2 kids the odds of me having $6k+ lying around are slim.
I much preferred the old system of paying it yourself for a month, sending the receipts back via fax, or going to the nearest pay office, and then getting paid back in your next scheduled paycheck.
DTOM| 10.19.11 @ 12:39PM
Actually as a civvie, I used my business expenses as a savings program, saving the reimbursements. But then, (no surprise) I had kids. They are worth it.
Merlin| 10.19.11 @ 8:55AM
Great article.
Three words convey most of what you need to know about economics:
"Production is Wealth."
In the private sector someone has to want whatever you produce enough to trade some of their production for it. In the public sector . . .
Moe Blotz| 10.19.11 @ 9:31AM
So is the bridge to nowhere finally going somewhere?
Petronius| 10.19.11 @ 9:57AM
These days people want to be insulated from the market and the word that strikes terror into their hearts and paralyzes their feeble minds: Competition. At the root of this is the last of FDR's four freedoms; freedom from fear. In a business, they would be required to satisfy the people who really pay them. These people are called customers. The worker bee is therefor beset with worry and trepidation. He'd rather be a bureaucrat with his eye on the clock and his mind on amusements.
TrueBlue| 10.19.11 @ 12:00PM
It all starts with those youth leagues not keeping score for fear of hurting somebody's feelings. Kids are insulated from competition until midway through high school in some cases, and sometimes all the way through college. When they get out to the workforce they don't know how to deal with it, so you get the Occupy crowd.
TrueBlue| 10.19.11 @ 12:02PM
I really don't know why the Occupy crowd is bothered by thieves. I mean, you'd think they would just view it as redistribution to those who needed the items more than them. Shouldn't the very act of theft garner sympathy from those folks?
Oh wait, it's only okay to take something someone has earned when it isn't their money.
DTOM| 10.19.11 @ 12:40PM
As Maggie said, 'it works until you run out of other people's money.'
Resistanceisfutile| 10.19.11 @ 10:34AM
I can only add that Frederick Bastiat, who, sadly, is not a familiar name these days, wrote in the 1850's about these subjects. In fact, one of his works is called (I think) "That Which is Not Seen". Worth reading.
cicero| 10.19.11 @ 11:41AM
What made America the greatest economic powerhouse in the world was not the ability to produce, but the ability to consume. It was not the assembly line, but the $5.00 day that sent the auto industry soaring. By taking wealth out of the private sector, no matter what government does with it, you limit the earners ability to consume - purchase. The fact that the government mostly spends our wealth on government enployees, and friends who help friends get reelected, means that the money sits in fewer hands.
TrueBlue| 10.19.11 @ 12:05PM
It didn't hurt that we didn't have to buy a ton of our products from other countries too. That just gives the federal government more power to determine what is available for us to purchase, and what it costs us.
George S| 10.19.11 @ 12:08PM
Visible projects, visible votes. Which is why it is Senator Don Young who goes to Washington instead of Senator Henry Hazlitt.
Solo| 10.19.11 @ 2:40PM
Exactly! The masses don't want to vote for someone who is telling them what it is they CAN'T have!
DTOM| 10.19.11 @ 12:44PM
Ralph,
You should really 'fess up and admit that you've just used your economics lecture on opportunity cost and apply it to government spending. Would that be double dipping? HeeHaw.
That you 'got away' with it shows how little understanding of economics is afoot and wandering around our world...
Solo| 10.19.11 @ 2:38PM
Government spending, simply explained, is taking a bucket of water out of the deep end of the pool..and then pouring it into the shallow end of the pool--while spilling most of it outside the pool along the way.
But....the author is correct. Human nature, being what it is, only recognizes the new bridge or the new High School while remaining blissfully oblivious to those things destroyed and wasted in the process.
Plus....NOW the new bridge and new High School need government maintainance and staffing in perpetuity. More government expense!
RND| 10.19.11 @ 4:49PM
What becomes of this Alaska ferryman and his assistant(s)? Their families? Their livelihoods? And the repairmen who do maintenance on this ferryman's boat? Less fuel purchased.
Why do we think it right/just to make a man living in Greenville, South Carolina pay for a bridge he will never see nor have the opportunity to cross?
If Alaskans living in that part of the state want it, they choose it and they pay for it.
uncle curmudgeon| 10.19.11 @ 4:24PM
Bastiat also shattered (hoho!) "The Broken Window Fallacy", explaining why make-work creates poverty. He was a very smart guy but, alas, no Commie so he has nothing useful to say to the sophisticates in charge. Vote the bums out!
aware| 10.19.11 @ 5:05PM
An article mentioning Hazlett and 2 posters talking about Bastiat. I'm stunned and amazed! Maybe there is hope.....
PattyMor| 10.19.11 @ 4:36PM
Well we are at the tipping point. The really sad thing is only a few in Washington seem to notice and even fewer care.
The problems started accumulating when they breached the walls of the Constitution. For if it doesn't constrain the pols, what purpose does it serve? How long do you think your rights will survive under really big government?
I'm consigned to the fact that the government will crash sometime soon. Just hope it isn;'t on BHO's watch.
aware| 10.19.11 @ 5:09PM
Absolutely, and it will be epic. Almost feel sorry for whoever is in next. Cosmic clusterf*** of a s***storm coming right up.
RND| 10.19.11 @ 4:39PM
So the GOP is the party of salvation for the nation, eh?
From Mr. Reiland's article above:
"Rep. Don Young (R-Alaska), for instance, likes the idea of the rest of us paying $315 million to build a useless and costly bridge in rural Alaska to an island with only 50 residents, an island that's already sufficiently accessible via a 7-minute ferry ride."
I see a "R" after this pug's name.
I guess he didn't understand the 2010 midterms?
I guess he doesn't keep a debt clock on his House office desk? (No problem, we'll tatoo one on his forehead)
This turd
Do just 50 people live on this island? If that stat is correct and there isn't about to be an iminent 4000% increase in island population, then we need to dog and harass Representative Young for the rest of his life.
Every day. Relentless scrutiny.
He's getting money. Bribes. Kickbacks. Call 'em what you will. He's getting a sweet deal on a private plane. A vacation cabin. Home improvements. A fishin' boat. Maybe a little bit of all the above.
Investigate.
aware| 10.19.11 @ 5:02PM
One party(the Party of the State) with a left and a right wing. Now does it make sense?
RND| 10.19.11 @ 5:02PM
Can anyone post a link for a Sarah Palin "take" (viewpoint) on this issue?
Where's Mrs. Red Rogue on this issue? Would she be candid?
It is issues like this that reveal what a person really is. Maybe Palin is being silent because she knows what real salt of the earth Tea Partiers would say?
Am. Spectator staff, please get Mrs. Palin on the record for what should be done about this Alaskan bridge. Thank you.
Ned Ferguson| 10.19.11 @ 7:39PM
Right on!
POST American| 10.19.11 @ 10:58PM
---------------------BOTTOM LINE---------------------
ALAN WATT has the absolute bottom lines
on the unfolding UN Globalist-RED China sellout,
TREASON and EUGENICS OP.
Buffett and Soros are mere front men for
the Rockefeller-ROT-child cabals operating
through RIIA/CFR/Trilateral/ the UN
--thousands of USURY enriched, TAX FREE
foundations, NGOs and fronts.
SO, drop the 'RE----ASS--SURING' tones
of FOX 'News', STOP worshipping your
Rockefeller wreck-doms ----and follow WATT
and ALEX JONES online.
-----------HUAC meets NUREMBERG 2012---------
REAL history is about to be made...
Tenn Slim| 10.20.11 @ 9:19AM
Make Work Employment. A panacea to Cloven Piven standards of living. A mud hut for all.
Article is spot on.
Semper FI
ReasonableViews | 10.20.11 @ 1:58PM
Median wage at its lowest since 1999. Job growth was almost nonexistent for the last decade. Stock prices are down from 2000 still. Let's face it: that was a lost decade.
It seems to me that we've done an awful lot of government spending. Gov't has grown to be 40% of the economy, double what it was 60 years ago. Maybe we need to change course. But first, we need to gain some perspective to understand the economic situation we're in. We have already had the lost decade! Let's not have another.
http://bit.ly/qniScP
POST American| 10.21.11 @ 12:27AM
-------------------BOTTOM LINE-----------------------
---KEY word for this entire blog,
this entire POST American land
------'RE----ASS----SURE----ANTS'------
TOXIC ---re--ass--sure----ants.
HokenTaka| 12.9.11 @ 12:21PM
It is absolutely amazing how you right- wing fanatics can be so blinded by your outright hatred of Obama that you can actually dilute yourselves into thinking that everything he does is wrong and harmful to the country Dating Online
Irish22| 12.14.11 @ 11:46AM
I like the idea of hounding Rep. Young for the rest of his life. Better yet, just un-elect him, a fate worse than death for a politician.
Anyone in Alaska listening???