The Myth of Infrastructure Spending

Austrian Economist Henry Hazlitt said that “[t]he bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.” This could not be more relevant today.

Obama gave a jobs speech recently and spoke of building bridges as a way to help create jobs. One does not need to be an expert in Economics to see the problem with this way of thinking. Big government types just refuse to understand that it is impossible for the government to have a net positive effect on job creation by directly “creating” jobs.

When the government employs contractors to build bridges, it must first take money from some other place, to pay them. The bad economist, as Hazlitt calls him, points to the contractor jobs that are “created” as a result of government spending, but completely ignores the jobs that it destroys.

This is the Broken Window Fallacy. If you believe Obama and his economic “experts,” you should be able to create jobs by walking down the street and throwing rocks at all the windows you see. This would force those who own those windows to have to replace them, so by breaking them you are helping the companies that replace windows, get more business. Would you be helping the economy in this case? If you think like a bad economist, you would say yes. However, we cannot ignore what the owners of those windows were going to do with the money had you not forced them to spend it on new windows. Maybe some were planning to buy new suits, or TVs, or whatever. All you would have succeeded in doing, in this case, is transferring jobs from TV makers, suit makers, or whomever else, to the window makers. No new job is created.

If you have money saved and decide to replace your kitchen counters, that’s great, but don’t pretend you are helping your economic situation by doing so. Infrastructure spending is not a way to help the economy, it actually has a negative effect on it, which is why it should not be done with borrowed money, and it should not be done unless it is actually necessary.

It is a scary thought that those who run the country fail to understand this basic fact. The government cannot create new jobs, it can only transfer them. I know this is tough to swallow for those who really believe their job is to run everything, and that the country would just fall apart without their actions. It is their arrogance that prevents them from looking at the whole picture. They would rather lie to themselves and keep the illusion that they are helping, than to realize that maybe we would all be better off without them.

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  • ___j___

    Most voters have internalized the victim-mindset. They believe what Obama and Cheney fundamentally need them to believe, namely, that money in the government-kitty actually BELONGS to the feds. The truth is that taxdollars belong to the taxpayers, and that the proper role of government is *not* redistributing the wealth.

    When some politician abuses the federal-level taxdollars to hand out a bailout to their preferred corporation (Obama to Solyndra + Cheney to Halliburton + both of them to Goldman Sachs), they want the benefits of their corruption: gigantic campaign donations… past / present / future. Free stuff to wealthy corporation-owners includes tax loopholes, pork-barrel spending, and public-private partnerships… plus favors like indefinite extension of copyright-monopoly. Bribes to the wealthy, in other words.

    Similarly, when some politician abuses the federal-level taxdollars (which — as we must constantly remind ourselves — actual belong to the taxpaying citizens and not to their hired help the policitians), and redistributes the wealth to their favorite ‘charity’ causes, such as Obama and free Pills of obamacare, or Cheney and free meds of Part D, they again merely want the benefits of that corruption: young women voting for dems, and elderly folks with health problems voting for repubs.

    The idea of political bribery has been around forever, but recently it has become the ONLY point of politics in the USA: whatever party is in power knows that they can abuse the taxdollars, because they know that the voters don’t really believe the taxdollars belong to the taxpayers. Most of our politicians nowadays are so good, they can bribe the rich *and* the everyday voters simultaneously.

    When Obama talks about ‘creating jobs’ with new bridges, he knows very well that he means creating new *union* jobs, as a bribe to his union constituency, and creating new unionized-construction-industry jobs as a bribe to his wealthy corporation-owners, plus as a bonus giving plenty of loan-business and insurance-business to various powerful financial services corporations.

  • ___j___

    Elsewhere, you talked about reasons that voters might vote against their own true beliefs, such as repubs voting for a big spenders, and dems voting for assassinations. Unfortunately methinks that your suggested reasons of groupthink, projection, self-deception, and prioritization (psychological reasons all of them) are often trumped and/or encouraged by crass bribery.

    Sometimes the bribery is pretty direct: Sandra Fluke voted for Obama, as did many of those Ohio union-members who directly benefited from the oh-so-specific form of the auto-bailouts. Other times, bribery is indirect: Obama got massive campaign-contribs from universities, because he promised to pay off student-loans with taxdollars (bribe to students *and* to universities) plus boost research-grants (semi-direct bribe of universities and professors and the corporations that benefit from ‘free’ research done for them).

    Importantly, however, much of the bribery is very indirect, and thus relies heavily on the psychological mechanisms you mentioned among the electorate to work. TPTB want permanent tension in the middle east, which means drones and assassinations and stuxnet and sanctions and eventually war. Who benefits? Defense contractors, of course. But also oil-n-gas, which is way more profitable when we are on the brink of war with Iran. Less obvious but absolutely true, big banks and big insurance firms get more profits, directly caused by the tension — think of all the loans & insurance policies that are made to military budget + defense contractors + oil corps + shipping industry + ancillary services… indirect yet massive benefit. Mainstream media also very indirectly benefits (from the news!).

    There are not that many individual *voters* who benefit from near-wars like this… but the owners of the military-industrial complex, energy giants, big banks, insurance corps, and big media… well, *they* benefit in subtle but tangible ways. And they have other big-ticket policies that they want to see, besides the Iran policy that both twin-party establishment presumptuous-nominees Romney and Obama shared: keep the Fed, support future bailouts, increase the police-state, keep ponzi welfare, and so on. When you look at it that way, keeping the big military budget and keeping the tensions high in the middle east almost seems like small potatoes!

    To make all those things happen, they have to influence individual voters, through the media and through the twin-party hierarchies. This is where the follower-mindset and the psychological-blindness of the average citizen comes into play, and where ownership-control of the mainstream media is key. They have to *make* Romney the nominee of team red, even though the majority of everyday repubs did NOT want him.

  • ___j___

    TPTB are not all-powerful, of course, and they make mistakes: see the sudden Santorum-surge in the final three weeks of December, which took him from his steady-until-that-point-4% support up to 20% in the polls, funded by half a million bucks provided by ‘other’ donors than his campaign or his PAC. My suspicion is that they sudden influx of cash was no accident: either Team Romney itself, or their backers amongst TPTB, were responsible for Santorum’s sudden rise. They need not rig the polls. Most people do what the teevee tells them, because they are followers. Simply providing the half-a-mil, and *not* blacklisting Santorum, would be enough.

    As it turned out, Santorum managed to get nearly all of the undecided voters in the Iowa polling booths, beating out Mitt by a few votes… though of course Iowa was reported for many weeks as a Romney win despite that outcome… becoming a thorn in Mitt’s side through January, February, and March. Lack of funds, and inability to control the power-hierarchy of the repubs (Santorum tried to convert Texas to winner-take-all at the last minute), eventually caused Santorum to drop out, deep in debt.

    However, TPTB really were not concerned whether Mitt won, or Obama won, since essentially they only differed on whether PBS was or was not Too Big Bird To Fail, right? At the end of the day, as long as the two hand-picked nominees have the same core policies, who among TPTB actually cares which one of them wins?

    Big spending is driven by this special sort of bribery-corruption. Constant state of war is driven by the same thing. The welfare state is *founded* on a lot of different things, material and philosophical, but I would argue it is maintained — against all serious cuts — by this sort of bribery. One of the big losses of 2012 is that, since Obamacare is going to start directly bribing voters in 2014, actually getting it repealed in 2016 is going to be much harder. (Mitt would have immediately replaced it with RomneyCare2 of course… where Rand would be willing to repeal-n-replace-with-nothing… but by the time November 2016 rolls around, voters may well be locked in.)