Blogs For Victory

Mish’s links to the best illustration of what is wrong with tax and spend liberalism I’ve seen:

…“Cash for clunkers” was touted as a huge success, with cars tearing out of auto showrooms, the program running through its $1 billion appropriation in one week…

…With success like that, why limit the rebates to $4,500? Why not give everyone a $10,000 or $20,000 rebate to turn in an old clunker? And why stop at the cars in the garage when you could get rid of a garage full of accumulated junk, with the government providing rebates to households for unloading what they’ve been meaning to get rid of for years?

A reductio ad absurdum, to be sure. Sometimes reducing a proposition to absurdity is the easiest way to expose its flaws…

…Transferring money from taxpayers to car buyers is exactly that: a transfer. The money taken from taxpayers can’t be used for something else.

This is the lesson of Frederic Bastiat’s essay, “That Which is Seen, and That Which is Unseen.” Bastiat, a 19th century French political economist, tells the story of a shopkeeper who has to hire a glazier to repair a broken window, providing work and income for him in the process. That’s what is seen.

What is unseen is what the shopkeeper would have done if he didn’t have to pay the glazier. He might have bought shoes for his children, providing income for the shoemaker, who in turn could buy leather to produce more shoes. The glazier’s gain is the shoemaker’s loss. There is no net gain, no job or income creation, from this transaction…

The “broken window fallacy,” as it is known, can be applied to all government spending. The $787 billion fiscal stimulus enacted in February transfers money from taxpayers to the government to allocate as it sees fit. The effect of the government’s expenditures shows up as growth in gross domestic product. Auto manufacturers produce more cars to meet the juiced demand, adding to GDP. This is what’s seen.

What is unseen is what would have been produced by the private sector had the government not confiscated future revenue via taxation.

We can only get out of this economic mess by creating wealth – moving the wealth around won’t do the trick. Think of it like this:

The United States is the largest importer and exporter in the world. We have vast amounts of goods coming in and out of our country every day. A very large percentage of this trade arrives and departs by sea. And yet the US flagged merchant fleet totals a mere 465 ships. The Chinese merchant fleet is more than triple that size. What this means is that while we have this insatiable maw for imported goods, we don’t bother building the ships we need to fetch them from foreign lands. Real economic stimulus would be to make ship-building tax free for the next ten years and cut port fees and taxes by 50% for US built merchant ships. This would encourage people to build ships in the US, including foreign people who want to export to the US and don’t want to pay the premium for coming in to our harbors. We do need “stimulus” – but it has to be stimulus in the service of creating wealth, or its not stimulus at all. Its wealth redistribution – a zero-sum game.

On and on we can go with this – various incentives to build new transportation means, rather than just refurbishing what we’ve already got. Incentives for people to start manufacturing at least some of the things we import. Incentives to start and expand farms. Incentives to start and expand mines. Providing a spur for people to invest their time, money and sweat in making new wealth.

If all we’re to do is have government take money from one hand and place it in another, then we’re not doing anything – at best, we might provide a temporary boost for those areas favored with government money. But in the long run, everything has to be paid for – and we’ll pay for the Spendulus by not having money to do what we’d prefer. Obama might be happy. The GM employees might be kicking up their heels. The people who got the 4,500 in swag are pleased…but for the rest of us, it will hurt more and more as time goes on.

The sooner we get at making, mining and growing things the faster our wealth will start growing – and the faster we’ll be able to pay off these insane debts we wracked up (and note, liberals, I say “we” – because we all did it…its not Bush’s fault, its not Obama’s fault…its all our fault). The longer we keep to this dimwitted tax and spend liberalism, the longer and deeper will be this economic depression.