Many so-called “conservative” talking heads are giddy over the election of Donald Trump and his proposed economic platform. Within Trump’s economic agenda include raising protectionist barriers to international trade (a disastrous policy, particularly in today’s times; the U.S. economy is much more reliant on international trade) and, surprisingly enough, public works projects. Conservatives such as myself have spent eight years raising hell over Barack Obama and the Democrats attempting to constrict the flow of international trade and ramping up the federal government’s budget. And yet, with the election of Donald Trump, it appears as though the concern held by these so-called “conservatives” (or rather, cheerleaders) over the national debt and the size and scope of government has virtually vanished. If one had to define Trumpian economics succinctly, it could be done by imagining the minds of Pat Buchanan and Paul Krugman transfused into one brain.
The Donald proposes to boost employment via spending billions upon billions of dollars on public works projects – building roads, bridges, hospitals, schools, airports (the favored example by Trump), and what not. Public works projects aren’t so public after one considers that the almighty State is merely confiscating wealth created privately from elsewhere to funnel into the boondoggle – dollars that could be put into other alternative uses. Let us examine this point more thoroughly in the style of Hazlitt and Bastiat.
Upon first sight, the project might appear to be successful – as you drive over a newly built bridge, you observe dozens of workers hired by the State to build a brand new marble road, all constructed by billions of taxpayer dollars. You can hear a politician over the radio claim that the project was a success, that government had created wealth and brought employment to a community whereas free enterprise had failed to do so. This, as Hazlitt and Bastiat would write, is what is immediately seen. Upon observing beyond stage one, however, one finds that there are consequences that remain unseen. In order for the State to act, it must first have the funding to do so. Anything that the State does originates in the Treasury, and only through the act of taxation can the Treasury contain the means for the State to carry out its activities. In order for the State to begin public works projects, the populace must first be plundered of its wealth in order for it to carry out its desires. Whenever one hears the phrase “public works projects”, one should brace their wallets, for it is about to plucked by the government – it is nothing more than taxation shrouded in a coercive veil.
The tax dollars surely employed those who partook in the project. However, the populace – each individual citizen – now has less money than they did before as a result of the taxation required to fund the project. Each individual citizen is unable to purchase the same amount of goods and services as they were able to beforehand. There is less purchasing power available to sustain effective economic demand for other goods and services – cars, groceries, clothing, etc. – and thus, there is less business for firms providing those said goods and services. As a result, there is less employment for these firms. For every new bridge, there are fewer suits, cars, houses, and whatever else. The community is made poorer as a result; the dollars taken via taxation could have been put to much more efficient alternative uses in the market. Public works projects do not boost employment; rather, as Hazlitt wrote, public works merely divert employment. When public expenditures rise, private expenditures merely fall as a result. For every dollar the government spends, there is one fewer dollar available to the populace – for every government job created, one job is forsaken in the competitive marketplace, and so on. The emphasis on mere money is misguided; wealth in real terms is seen in the ability of one to exchange his own goods and services in return for his desired goods and services. Money is simply a medium of exchange. Only after the act of production can consumption logically follow, for one cannot exchange without having produced anything.
Public works projects are ideas proposed by egotistical politicians that desire to do nothing more than centrally plan the life of millions of Americans from their office. Fiscal stimulus is not how economic growth is achieved; legal plunder by the hands of the State does not produce employment, no matter how many times it is tried.
by Tyler Coleman