ObamaWorks: A 'Compelling' Investment

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Barack Obama has really worked the public with
his new public works program. He will offer states a "compelling"
investment: he will compel them to use citizens' "precious
tax dollars
" to "invest" in massive public works
projects — or risk losing the money. This is a type of "investment"
worth opting out of. Except that it is not
an investment at all
— it is merely government consuming people's
tax dollars. It is the equivalent of a thief telling you: "Don't
worry! I'll be investing your money. And other people will
be using it for their benefit. Don't be so selfish anyway."
There is a lot of falsehood to unpack here but let us focus mainly
on the destructive transfer of private sector resources to the public
sector.

Obama plans
to create
"the largest public works program since President
Dwight D. Eisenhower created the federal interstate system in the
1950s" that will probably have a (nominal) cost of at least
$700 billion. After all, this is the "main street"
bailout (literally since the plan includes the maintenance of roads),
which will most certainly have to match or "one-up" the
(nominal) $700 billion amount for the "wall street" bailout.
The money will be used to create 2.5 million jobs that will repair
roads, bridges and public transport facilities, expand broadband
technology, and create many new "green" jobs, in addition
to possibly "guaranteeing
every American a college education
."

Governments create incredibly perverse incentives.
Obama has said that states must accept the money quickly and get
started immediately or they will risk losing the money altogether.
What governor would not accept the money? If you offered almost
anyone the option of spending billions of dollars on something —
anything — they would very likely do so. And so we
read
, not surprisingly, "Governors praised Obama’s proposals,
saying their states stand ready with billions of dollars’ worth
of road and school projects that could be started quickly with an
infusion of federal cash." Politicians are now jockeying for
taxpayers' money, manipulating
numbers
to show how "needy" each state is in order
to receive the money. Suddenly the more unemployment a state has
the better, and the worse its infrastructure, the more likely it
will receive the money.

Part of these funds will be used as a "massive
effort
" to convert federal buildings into more energy-efficient
buildings by "replacing aging heating systems and installing
efficient light bulbs." So the joke becomes: How much does
it cost to change a light bulb? Seven hundred billion dollars! Taxpayers
are "investing" their tax dollars so that government gets
new heating systems and light bulbs? How about just shutting off
the power and closing down the building (for later auction to the
private sector) as a way to save billions of taxpayers' money? How
more apparent can the difference be between the government (the
State) and the rest of "society"? The government would
have us fund the improvement of their buildings at the expense of
our homes!

Yet Obama says "we
need action — and action now
,"
not something you want to hear from a politician in power
and in control of your money. We do not need politicians acting
urgently or quickly — unless it is getting out of the way for private
enterprise and voluntary production and exchange. The less politicians
do the better.

The relationship between those employed through
Obama's public works scheme and those forced to subsidize them creates
a needless conflict — created by government — where one group lives
off another. In a free market, those who are unemployed and on welfare
and who later find jobs actually take a burden off of those who
were already employed; those who were unemployed and not on welfare
and become employed also help the currently employed, by increasing
the labor supply and possibility of a further division of labor.
In addition, the newly employed worker still has their dignity intact
and knows they are not part of a government welfare scheme, albeit
one aimed at employment.

The reality is that labor has the opportunity cost
of foregoing leisure. Anyone can be engaged in labor to the extent
they are not engaging in leisure. In other words, if labor, or employment,
is the goal, any task in which one is employed will qualify. In
the private sector the goal is not "jobs," which merely
please the worker, but the efficient use of resources to better
satisfy workers and consumers. The private sector could be
termed the service sector and the public sector the parasitic sector.
We can measure how efficiently resources are being used in the private
sector by whether a business is making a profit or loss. In the
public sector this is not the case; indeed, almost the opposite
is true: A money-losing government program (or do I repeat myself?)
usually receives more money! The public sector is gauged by how
much it spends, whereas the private sector is measured by how much
it receives — ask (by pleasing your customer better than your competitor)
and ye shall receive (their money) in the private sector; or coerce
(the populace with rhetoric, propaganda, and empty promises) and
ye shall deceive in the public sector. The public sector cannot
be productive, as it merely subtracts from the private sector!

Public works will become public waste in the sense
that resources will be diverted from the private sector — where
they are engaged in voluntary production and exchange — to the public
sector, where they are engaged in a form of involuntary production
and coercive exchange. If roads are being built, raw materials will
be diverted from current, more efficient uses to less efficient
uses. The structure of production will also be manipulated as capital
goods in higher stages of production will be necessary for heavy
construction projects. It will likely be the case that others who
were engaged in different areas of production will lose their jobs.
Already, the shares of construction
manufacturers
and oil
and copper
have increased since the announcement. The current
uses of those resources, including labor, will either be switched
to new uses, or not be used — unemployment, the unintended consequence
of a government employment program!

Finally,
the jobs will most likely be unproductive, or at least counterproductive.
There will be more diversion of resources towards public waste,
including more money and bureaucracy. Rothbard is once again most
clear on this topic:

Forcing taxpayers to subsidize employers or to provide busy-work
for unproductive “jobs” is worse than keeping welfare recipients
idle. There is no point to activity or work unless it is productive,
and enacting a taxpayer subsidy is a sure way to keep the welfarees
unproductive. Subsidizing the idle is immoral and counterproductive;
paying people to work and creating jobs for them is also crazy,
as well as being more expensive.

Obama said that this crisis is the “opportunity
to transform our economy." He just didn't finish the sentence:
into full-scale Socialism. It is what Rothbard termed the
Long March toward Socialism. And Obama's leading the way.

December
10, 2008

Chris
Brown [send him mail]
is a lecturer at the Australian Graduate School of Entrepreneurship.
He also centrally plans the Austro-libertarian
blog.

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