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