Government Projects Do Not 'Create Jobs'

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Yesterday
while driving I heard an ad on the radio promoting more state spending
on roads. Besides being a bit overreaching ("Is my family really
safe with our current roads?") the idea of better managed and
maintained roads makes some sense and I thought the ad had a decent
point – especially as I rumbled over potholes and hoped not
to end up in a major traffic jam like last week.

There are potential
improvements that can be made to Michigan’s roads just by changing
how things are run (and who runs them) without necessarily increasing
road spending. Additionally, there are many ways the state could
do the same things for less money. (Check out this
Mackinac Center study
.)

The radio ad
made the point that better roads are safer – OK. Then it said
better roads make it easier for businesses to operate in the state
– fine. But it committed a logical and economic error when
it claimed, "State spending on road projects will create jobs
and boost our economy." That’s only half of the story.

State projects
may create jobs, but the proper question is, do they create wealth?
The state could easily reduce Michigan’s unemployment to 0% by mandating
that every unemployed citizen shovel dirt on some state project
without pay. Employment alone is not a good indicator of economic
success; overall wealth is. Even if state spending can "create
jobs," creating jobs alone does nothing for our state’s overall
prosperity or standard of living.

The question
then becomes, do state projects, as the ad claimed, "boost
our economy"? The answer is no.

Let’s say the
state spends $1 billion on road projects. It is easy to see all
the laborers and machinery employed to complete the $1 billion worth
of projects. It seems all those laborers and the manufacture of
all that machinery signify new growth in the economy. But where
did that $1 billion come from?

It came from
taxpayers. What use would that $1 billion have been put to had it
not been taken by the state and spent on roads?

Read
the rest of the article

August
20, 2008

Isaac
M. Morehouse [send him mail]
is the director of campus leadership for the Mackinac Center for
Public Policy. He lives in Vicksburg, Michigan, and blogs at www.mighigansfe.org
and www.theprometheusinstitute.org.

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