Fallacies Government Should Stop Pushing


Passing money around grows the economy. Man is not made rich by the number of times a dollar passes through his hands, but by how much he can acquire. If he wants to acquire fairly, he will choose trade over conquest. That is, he will exchange four horses for an acre of land, rather than killing or enslaving all the current inhabitants. Since all the fair trade in the world would only leave him where he started, he must apply his time and talents to add value to the resources he owns if he wants to earn wealth.

Printing more money grows the economy. This is pretty much debunked now, but not too long ago, educated professionals were scrambling for their fair share of $800 billion in porkulus from the American Recovery and Reinvestment Act. Now that funds have been spent to study the shovel-ready effects of cocaine on monkeys and dig turtle tunnels; how’s it working out for you? Economics advisor Lawrence Lindsey has argued, “Since the beginning of the recession, the number of unemployed has increased by more than 8 million people. For $800 billion, we could have handed every one of these people a check for $100,000.”

People have to buy my junk. We often hear of artists who cannot sell their wares demanding government subsidy. It is not enough to create; some are good at creating monstrosities. That which grows an economy and society, invisible hand-in-hand, is the production of goods and provision of services that will be valued enough to be traded. When government subsidizes junk, it must first diminish the business of those in production of items enjoying demand, to make the redistribution.

Government should control prices. A price is what somebody considers fair trade. If government sets a minimum wage, it marginalizes those who might have been hired for just a little less, and those who must go out of business because they can’t pay a little more. If government fixes the price of housing, developers won’t build if they can’t turn a profit, the wealthy who can afford lawyers and accountants will find a way to game the system to their advantage, and a host of nightmares for affordable housing that have played out in California and New York will repeat.

Pay no attention to the man behind the curtain. Lobbyists are pitchers. They present legislators with only the side of the argument that favors their agenda. In the real world, where there is a give, there is a take. Anytime government gives a group money, it has first taken from elsewhere. What government does not take by direct taxation, it obtains by indirect taxes, either in the form of depreciation of the dollar with more printing or interest on debt.

The economy will always grow. Having just emerged from a housing bubble, and a dot-com bubble before that, the masses are getting wiser. However, ten years ago, governments were sold on the idea that economies had left their historical cyclical pattern to progress eternally to Nirvana. Tax increment financing allowed government to make loans to private enterprises, twisted into to the public interest with Kelo-like logic, using future taxes from the streets paved with gold as collateral. And thus we don’t have the Randy Parton Theater.

Corporate welfare is good for the economy. The economy has been tanking ever since government went overboard with corporate welfare. Though the correlation may be spurious, there is a question of fairness. Is it just that successful producers should be taxed more so the government can give one or two of their competitors a few million dollars? The question goes back to Frederic Bastiat’s commentary on “what is seen and what is not seen;” in particular the broken windows fallacy. Government press releases rave about the number of jobs that will be created and how many dollars will be invested in the community. They do not tell us about opportunity costs: what the taxpayers or government itself could have done with the money had it not gone to a favorite-son business.

Corporate welfare has magical multipliers. When the Buncombe County Commissioners are about to approve a multi-million-dollar incentives package for a large multinational corporation, Assistant County Manager Jon Creighton will flash the multicolor bar charts on the big screen showing that the investment will have ROIs close to 80 or something. The mathemagic is based on flawed software with optimistic input that considers direct, indirect, and induced economic multipliers. Creighton will explain that the new company will give its employees enough to go see the dentist, who can then hire another hygienist, who will go shopping in the department store, which will have to open up another location, which will have to hire construction contractors, who will be able to buy new cars, .etc., etc. What he doesn’t explain is why private-sector business investment does not have the same magic.

Government grants are free money. Local governments try to run like businesses when they do not produce anything. These bodies should not obsess like cut-throat capitalists over increasing annual profits. Leaders in city and county government gobble up for frivolous purposes grants from the teacher-starving state and the ridiculously in-debt federal government – then march at MoMoMo.

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