Magic Works Until The Unseen Is Revealed


barack-supermanKurt Bouwhuis, Mackinac Center Intern

I came across this text in the article cited below – “The White House estimates the $787 billion Recovery and Reinvestment Act that Democrats pushed through Congress with little Republican support will create or save 3 million to 4 million jobs by early 2011.”*  If the government can create 3 – 4 million jobs, why not create 10 million?  Or better yet, 320 million?

“The fact is, the state does not and cannot have one hand only. It has two hands, one to take and the other to give.” – Frédéric Bastiat, The State, 1848.  For every job the government creates, it must first destroy jobs someplace else.  The $787 billion “stimulus” has taken a large portion of credit out of the financial markets.  This is credit private entrepreneurs could have used to start new business, or expand operations.  It is credit consumers could have used to buy a new car or a new home.  It is credit that could have been used to create a positive savings rate for the country.

The $787 billion also takes money from current profitable businesses and consumers.  The money taxed away could have been used by businesses to employ more workers, buy new equipment, or just earn profits and stay in business (rather than closing down because of a heavy tax burden).  Consumers could have used the money to buy new televisions, books, furniture, toys, decorations, grills, clothes, etc…

A simple story may help – “If a thief goes from bank to bank, stealing all the cash he can get his hands on, and then spends it all at the local shopping mall, you wouldn’t be thorough in your thinking if all you did was survey the store owners to conclude that this guy stimulated the economy.” – Seven Principles.  The same is true with government.  If all you do is focus on the jobs created, and not look at all the jobs destroyed, you are not being thorough in your analysis.

Essentially, the taking hand of the state directs resources and capital away from productive activities where everyone purchases what they desire.  The giving hand of the state moves this capital and resources into unproductive activities, which results from political decisions with a limited number of people deciding what is best for everyone.

In short, the government is made up of real people who do not wield magical powers.  Entrepreneurs seeking profits have a greater incentive than government to create productive jobs.  Productive jobs give people what they value most – Unproductive jobs do not.  The government may be able to “create jobs” with its giving hand, but we must remember that the taking hand is destroying more jobs in the process.

*Source: http://www.reuters.com/article/marketsNews/idUSN0833333820090608
Reffered to me by Eric Imhoff, Mackinac Center Intern

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