Economics in One Lesson:Book Notes and Stimulus Projects

I’ve started Economics in One Lesson by Henry Hazlitt.  This was the next book on Erick’s book list, and it has been a great read so far.  I am amazed how relevant this book is in today’s world.

I read the chapter entitled “Public Works Mean Taxes” last night.  Most of the chapter hit me like ice water in the face because of just how relevant the arguments against public works projects are to any discussion of the Stimulus bill and a purposed Stimulus Part Two.  Mr. Hazlitt opens the chapter with this paragraph:

There is no more persistent and influential faith in the world today than the faith in government spending.  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.”

Is there any paragraph that better captures the economic solutions Democrats and Republicans have put forward in the current economic crisis?  How many “economists”, reporters, and politicians have said that only the government can get us out of this crisis?  Isn’t this the reasoning for the stimulus package in the first place?  Only the government can save us, and we have to act NOW!

Further into the chapter, Mr. Hazlitt has a great explanation of just how wrong this theory is.  The word “bridge” in the following exert could be replaced with “any project from the American Reinvestment and Recovery Act.”  For brevity, “bridge” will work…

…the bridge has to be paid for out of taxes.  For every dollar that is spent on the bridge a dollar will be taken away from the taxpayers.  If the bridge costs $10 Million the taxpayers will lose $10 Million.  They will have that much taken away from them which they would have otherwise spent on the things they needed most.

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. {emphasis mine}

This is the core of the problem with the $787 Billion stimulus package.  This money was taken from the taxpayers and spent largely on political jobs.  These jobs have very little chance of pulling us out of any economic crisis when the $787 Billion had to come from the taxpayers in the first place.  The jobs this administration claims to have “saved or created” are met with a corresponding number of jobs that were never created (or even destroyed) because the $787 Billion was taken from the taxpayers and  not allowed to be used by them.

If voters can be taught the dangers of looking to the government to buy our way out of problems, many of them will become conservatives over night.  We need leadership that can communicate with the voters and tell them the problems with this line of thinking.  Short of that, we conservatives need to make the arguments with our friends, family, and everyone we meet.