by Daniel Brackins
It never fails that on the radio or television we hear how the government needs to create new jobs. This is especially true in today’s economic climate. While it is undoubtedly good for new jobs to be created, often we only hear half the story from government job advocates. It is an error and a myth to claim that state spending will create jobs and boost the economy.
While government projects may create jobs, the real question is, are they productive jobs? That is, do these jobs create wealth? The State of Hawaii could easily reduce its unemployment rate to 0% by mandating that every unemployed citizen dig random holes with a shovel. Either with or without pay, the job of digging holes would eliminate unemployment. Therefore employment figures alone are terrible indicators of economic prosperity.
Even if State spending could create jobs, these jobs alone do nothing to increase the State’s overall prosperity. Let us assume that the State of Hawaii spends $6 billion on a transportation project. We can easily see the workforce and machinery that is purchased to complete the $6 billion project. However, where did the $6 billion come from? It came from taxpayers.
What would that $6 billion have been used for if it had not be taken and spent on transportation? $6 billion dollars divided by Hawaii’s population of about 1.3 million is about $4,615 per citizen. What could these people have done with the extra $4,615? Maybe they would have bought groceries, some clothing, or movie tickets. In this case every grocery store, retail store, and movie theater would have received more revenue. In turn they would have produced more goods, and hired more people to sell these goods. How much more productive would these businesses be? $6 billion.
Money left in the hands of individuals is spent on things they feel is a priority. These will send signals throughout the market about what should and shouldn’t be produced. This will produce competition among the producers and suppliers making them find better ways to create better products for a lower cost. This is how wealth is created.
In nearly every case government projects that are “for the good of the citizens” end up costing them more in the long run. This is why is hard to find any government enterprise with positive income, most are in the red and end up being subsidized by the taxpayer.
When government spends money, it takes it from one place and moves it to another and there is no wealth created. When private individuals spend money, there is always a potential to create wealth.
Source: Bastiat Insitute