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The Seen and Unseen of Obama's Stimulus Plans


This post is one in a series entitled Posthumous Refutations. Previously in this series: Safeway and Consumer Sovereignty in Oakland, CA.

After doubling down on Afghanistan, President Obama is proving a profligacy to rival that of his predecessor as he announces that he’s going to double down on fiscal stimulus as well (h/t Spideynw in the Mises Forums).

President Barack Obama outlined new multibillion-dollar stimulus and jobs proposals Tuesday, saying the nation must continue to “spend our way out of this recession” until more Americans are back at work.

Without giving a price tag, Obama proposed a package of new spending for highway, bridge and other infrastructure projects, deeper tax breaks for small businesses and tax incentives to encourage people to make their homes more energy efficient.
“We avoided the depression many feared,” Obama said in a speech at the Brookings Institution, a Washington think tank. But, he added, “Our work is far from done.”

Actually, what we avoided was a recovery many thought would be impossible without government intervention. The deceptively “stabilized” situation, is the only thing to be seen for someone like Obama with no conceptual theory with which to achieve understanding of recent history (see Ludwig von Mises’ Theory and History). The unseen that students of Austrian economics can see, however, is the unsustainability of the present “recovery”, and the true recovery which would already be under way if not for the intervention of the Federal government and its bank.

This failure to see the unseen in the mind’s eye (see That Which is Seen and That Which is Not Seen by Frederic Bastiat) in Obama’s analysis of the present situation extends to his program for the future. He would build infrastructure and create jobs that can easily be seen. It is easy to see a bridge and a bridgeworker. But there is a whole world to which Obama, as a non-economist, is completely blind.

In Economics in One Lesson, chapter 4, part 1, Henry Hazlitt explains the blindness implicit in all plans for fiscal stimulus.

Two arguments are put forward for the bridge, one of which is mainly heard before it is built, the other of which is mainly heard after it has been completed. The first argument is that it will provide employment. It will provide, say, 500 jobs for a year. The implication is that these are jobs that would not otherwise have come into existence.

This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $10 million the taxpayers will lose $10 million. They will have that much taken away from them which they would otherwise have spent on the things they needed most.

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, television technicians, clothing workers, farmers.

But then we come to the second argument. The bridge exists. It is, let us suppose, a beautiful and not an ugly bridge. It has come into being through the magic of government spending. Where would it have been if the obstructionists and the reactionaries had had their way? There would have been no bridge. The country would have been just that much poorer. Here again the government spenders have the better of the argument with all those who cannot see beyond the immediate range of their physical eyes. They can see the bridge. But if they have taught themselves to look for indirect as well as direct consequences they can once more see in the eye of imagination the possibilities that have never been allowed to come into existence. They can see the unbuilt homes, the unmade cars and washing machines, the unmade dresses and coats, perhaps the ungrown and unsold foodstuffs. To see these uncreated things requires a kind of imagination that not many people have. We can think of these nonexistent objects once, perhaps, but we cannot keep them before our minds as we can the bridge that we pass every working day. What has happened is merely that one thing has been created instead of others.

Dan Sanchez is a libertarian writer and an editor at the Foundation for Economic Education. He is a contributing editor at Antiwar.com, where he writes a regular column, and an independent journalist at Anti-Media. His work has frequently appeared at such websites as Zero Hedge, the Ron Paul Institute for Peace and Prosperity, and David Stockman's Contra Corner. His writings are collected at DanSanchez.me.

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