Unlike FDR’s wage and price controls, destruction of agricultural crops, and massive cartelization schemes, the New Deal’s make-work spending actually left something to show for the effort. Ed Quillen, neglecting to review the most obviously destructive aspects of the New Deal, points to the “infrastructure” projects that continue to enhance our lives. He pushes his point: “The post- World War II population growth along the Front Range couldn’t have happened without those Depression-era water projects.”
Letter writer Cora Scherma praises Quillen’s analysis and New Deal make-work: “[P]erhaps the neocons and libertarians among us should consider the following: Don’t attend concerts or religious services at Red Rocks; don’t enjoy IMAX films at Phipps Auditorium; avoid sections of the Denver Zoo lest you be tainted by big government…”
But Quillen and Scherma commit a basic economic fallacy. Henry Hazlitt explains in Economics In One Lesson:
There is no more persistent and influential faith in the world today than the faith in government spending. Everywhere government spending is presented as a panacea for all our economic ills. Is private industry partially stagnant? We can fix it all by government spending. Is there unemployment? That is obviously due to “insufficient purchasing power.” The remedy is just as obvious. All that is necessary is for the government to spend enough to make up the “deficiency.”
An enormous literature is based on this fallacy… [A]ll government expenditures must eventually be paid out of the proceeds of taxation; that inflation itself is merely a form, and a particularly vicious form, of taxation. …
I am here concerned with public works considered as a means of “providing employment” or of adding wealth to the community that it would not otherwise have had. …
For every dollar that is spent on the bridge [or other public work] a dollar will be taken away from taxpayers. … Therefore, for every public job created by the bridge project a private job has been destroyed elsewhere. … [Consider also] the unbuilt homes, the unmade cars and washing machines, the unmade dresses and coats, perhaps the ungrown and unsold foodstuffs. (1979 edition, pages 31-34)
Of course an artificial boom or bubble — such as the modern one caused by federal easy credit policies — necessarily triggers a consequent recession, which tends to generate temporary unemployment. If the government has imposed wage controls, including wage floors and union favoritism, this will dramatically exacerbate unemployment, as it did during the Great Depression clear through the late ’30s. The solution is to remove the political impediments to economic activity and allow a recovery. Federal make-work may soak up some of the unemployment, but only at the costs that Hazlitt reviews. These funds are desperately needed in the market economy; they will instead be diverted to politicized projects.
Quillen errs also in imagining that government is the only entity capable of conducting certain projects. But there is no reason to expect that a market cannot provide water as it provides so many other goods and services.
Scherma adds a double error to the above. First she suggests that the only ones to oppose federal make-work are “neocons and libertarians”; I am neither. Second she implies that, when politicians force people to fund projects, those most opposed to that use of force should also refrain from benefiting from that which they were forced to fund. But that would only add a second injustice to the first, first stripping people of their wealth, then of even any marginal benefits of it.
The seen, as Hazlitt puts the matter, consists of the projects funded by politicians with other people’s money. These projects are visible, and their use is obvious. They offer something tangible for which the politicians can take credit. The unseen are all the investments and expenditures prevented by the forced wealth transfers. Politicians can take little credit for allowing individuals to produce without their “help.” So the next time you read about New Deal spending, or federal spending under Obama, consider not only the jobs and projects created, consider also the jobs and projects prevented.