Friday, September 9, 2011

American Jobs Bill: Takes money from those who could create wealth and gives it to those who consume it.

The President gave a very effective speech....if you listened only to what he said and ignore what he didn't say. He continues to operate from the erroneous Keynesian perspective that the economic problem to solve is not enough consumption, ignoring the fact that without efficient production of real value, there is nothing to consume. Consumers must first produce value if what we want is wealth-creating, win-win exchanges. Instead, what President Obama offered last night is more wealth redistribution: take money from those who know how to create wealth and give it to people who know how to spend it. It's a recipe for continued economic stagnation.

Our country is in an economic pickle after decades of massive public funding of economic goods such as roads, bridges, education and health care. It is all too easy to see what currently exists and ask for more. It is much more challenging to see what could have existed if government had stuck to its proper limits and allowed the market to supply these goods. What we need is a president with more confidence in freedom, a better understanding of the benevolent benefits of capitalism and a greater appreciation of the destructive effects of central planning.


Helen Bratko said...

Very interesting. Thanks for your thoughts.

Khartoum said...

I have a question: The President wants to spend $35 dollars to prevent layoffs of teachers, cops and firefighters, spend $25 billion to modernize schools and spend $50 billion in roads, rails and airports?

How is he going to fund all of this? By using the tax payer's money? By inflation?

Does all of this go back to the chapter in Economics in One Lesson about more public works meaning higher taxes (or inflation)?

I am planning to write about it in my college paper. Any help would be greatly appreciated. Thanks!

HaynesBE said...

You have understood the point exactly.The money has to come from some where. It is a combination of ignoring (or disbelieving, or misinterpreting) Say's Law that production must precede consumption, and failing to take into consideration the complete effects of the policy--what is seen and what is not seen. The direct effects of the spending are seen--teachers hired, roads built etc. Not seen are the private businesses which never come into existence because the government has increased the cost of business, or taxed away necessary the capital, etc.
I'd love to read your paper when you're done.

Khartoum said...

Another question: How is spending by the government to create jobs any different from the spending of private enterprises to create jobs?

If the President refrains from spending all that money and allows private industry to spend, would it not amount to a mere transfer of funds thereby creating equal jobs?

I can dimly see why it would not be a mere transfer of wealth. The bureaucrat is not as efficient as the businessman since there is no self-interest involved. Or creating jobs without reference to production would mean inefficiency.

But I still don't clearly understand why the jobs created by building a school would be inferior to the jobs created by businessmen.

I would love to hear your view.

HaynesBE said...

I hope others chime in but here's a start.

Governments do not produce wealth, they only redistribute it.
Who do they take wealth form? Those who have produced it.
Who do they then give it to? Those who have not been able to obtain it through voluntary exchange.
Why haven't they obtained it through voluntary exchange? Because people have valued other things more highly. So if you want to have resources put to use in the most valued, most efficient manner, you need to allow them to be distributed by choice not by force (ie politics)

That's the simple answer. Economists will justify government intervention to correct "market failures" but if you look closely at what they are calling market failures, it always boils down to some group not liking the way resources have been distributed voluntarily.

That's the practical argument. More important is the moral argument---it is wrong to deprive a person of their property through the initiation of force. The end can not justify the means. Any value which creating schools, roads etc could have had is undone by the fact that they were brought into existence by violating individual rights.

If the President leaves the money in the hands of the rightful owners, that is a moral good and a prerequisite of civil society. Also, the jobs created by private industry are far superior to jobs created by government because they will arise from true demand, not political expediency.

Without the free market, there is no way to know the real price, the actual demand relative to supply. All a central planner can do is make an educated guess-- which even if it is right for a moment, it will be too high or too low in the next moment.

Hope that helps.

Khartoum said...

Yes it does! Thanks a ton!

Khartoum said...


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