Wednesday, December 10, 2008
Good Government is a Myth, Part 2: Government Employment
Wednesday, December 10, 2008 | 
Posted by
Chris Waner
This week Obama again emphasized his goal to stimulate the economy. His plan, simply put, is job creation. How does he plan to get people back to work? By implementing two techniques: job training and public works projects.No one denies the value of education in promoting long-term employment; but as a short term goal, it makes little sense for most people. The job lost today is needed today, but training takes not only time but also money. Foregoing employment puts a great stress on families of the unemployed, especially when the cost of education is so outrageously high. For most people, education means less money coming in and also going into debt to pay for it. Americans are already strapped with debt. To help, Obama is promising tax relief.
Tax relief is an unbelievable claim given part two of his get-back-to-work initiative: public works projects, which can only properly be paid for with taxes. Obama plans to employ workers on the Federal, State, and local level in various infrastructure projects like laying roads, building bridges and schools, as well as beautification projects. Where will all the money for this come from?
Surely, one of the great myths about government is that it can employ people for the betterment of the economy or in this way help the economy through tough times. Henry Hazlitt perhaps said it best:
Every dollar of government spending must be raised through a dollar of taxation . . . the bridge has to be paid out of taxes . . . Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else . . . All that has happened, at best, is that there has been a diversion of jobs because of the project. [source]
The government cannot spend a single dollar which does not have some negative effect on the economy. Truly, we put up with much in the hope that everyone will be better off, but such faith is largely misplaced. I've said before, using tax dollars to pay workers is like eating your stomach to stave off starvation; it's shortsighted and ruinous. In addition to the chronic inefficiency (see this article), the taxation and/or printing of money to expand public works sends damaging waves through the economy.
Money pulled out of the free and open market means that you and I, and the companies we own or work for, have less money to work with. And these public works projects are particularly bad because they inevitably go over budget, which requires money that was not budgeted for. That volatility in the market is horrible for business because companies are forced to be cautious as they see an ever-increasing number of unknown variables in the market--variables like confiscatory tax rates, government competition for what would normally be private sector jobs, and, as we'll see, the prospect of inflation.
The worst part of it is that, in truth, Obama has no intention of significantly raising taxes to pay for education or for paying workers to carry out public works projects. He plans on letting Congress issue treasury bonds so that the Fed will simply print the money needed. If it can be imagined, this is worse than taxation. Unlike taxation, which is somewhat out-in-the-open (even if much of the taxation is designed to be subtle, the information about the tax is readily available if one cares to look), the Fed promotes a largely invisible "inflation" tax that occurs when too much money floods the market, making each dollar worth less. The money printed from nothing is inefficiently used, sends false signals into the economy because the money isn't "real," and causes inflation.
The fact is that this recession is the best thing for the economy. The natural laws of free-market economics are in the process of correcting the current financial disaster, putting the unemployed in jobs that are actually needed in the economy, readjusting all the mal-investment, encouraging savings instead of run-away consumer debt. The medicine doesn't necessarily taste good, nor does it work immediately, but it does begin working immediately, and, honestly, it's the only thing that will actually fix the problem.
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Part 2b
http://www.rickandsusanna.com/2008/12/11/good-government-is-a-myth-part-2b-government-employment/
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