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.”
