Chris Brown at the blog of the Ludwig von Mises Institute takes a look at Barack Obama’s economic stimulus plan:
[T]here is no non-arbitrary way to determine whether a government program makes a profit or a loss. Indeed, government typically does not “talk” in those terms. If a private company is making losses for whatever reason, it must change and innovate in order to make a profit or it will continually make losses and go out of business. But with the government, if a program is labeled as failing, it receives more money—just think of FEMA, the current bank crisis, or, no doubt, Obama’s future jobs program.
In contrast, when private companies fail it is not a proof of market failure; on the contrary, it is proof the market is working. It is eliminating failure; in sharp contrast, the government promotes failure: if you want more of something, subsidize it.
(…)
Standards of living will decrease as there will be a shift from private production and exchange to political demagoguery, as well as taxes levied on the more efficient to subsidize the less efficient, but privileged, group. As with most government programs, this creates a caste conflict where one man or group benefits at the expense of another man or group. Thus we see government as the true originator of conflict in a society; whereas the market creates mutual harmony, the government engages in exploitation to achieve its ends.
Along the same lines, Krystal Slivinski at Tertium Quids points out that Obama seems to be forgetting a lesson from long ago:
Barack Obama said in yesterday’s weekly Democratic radio address that he wants to “create or save 2.5 million jobs” by rebuilding roads and bridges.
Nineteenth-century political economist Frederic Bastiat called this the broken window fallacy. He tells a story about how breaking windows looks like it “creates” jobs for the window makers, installers, and folks who may otherwise not have a job. Of course this is absurd. The people who are employed fixing windows can’t be employed elsewhere – like in a job that creates wealth, not simply restores lost wealth.
Obama’s plan commits the same fallacy. Yes, rebuilding roads and bridges makes work for those who don’t have it. But this is work that, when directed by government, takes resources away from one industry and routes it to another. This does not actually create wealth, it just moves it around.
And, I might add, it decreases the funds needed for private investment, increases the federal budget deficit along with the amount of Federal debt held by foreign counties, and in general is subject to the same fallacious reasoning that we’ve seen many times before.
