What Is Seen and What Is Unseen: Government “Job Creation”
Barack Obama says his roughly $800 billion American Recovery and Reinvestment Plan could save or create between three and four million American jobs by 2010. Many of these proposed jobs—building or repairing roads, bridges, and buildings—recall the New Deal. There is a modern twist, of course, with the promise to develop “alternative energy sources” such as wind farms, solar panels, fuel-efficient cars, and the like. “The jobs we create will be in businesses large and small across a wide range of industries,” Obama promised, “and they’ll be the kind of jobs that don’t just put people to work in the short term, but position our economy to lead the world in the long term.” (emphasis added)
First, one may ask: how can Obama and his economic advisers know what kinds of jobs will position our economy to “lead the world” in the long term? Indeed, how can we expect anyone to know what kinds of jobs will be able to offer such a guarantee of wealth and security, considering the enormous complexity of our world? Billions of individuals are constantly making decisions based on their own expectations about the future. Potential ideological shifts and their inevitable changes to policy funding and support complicate matters further. This is without considering technological advancements that can turn the best-laid central plans into white elephants. There is little an individual or group can possibly know or predict for the future, particularly on such a large scale as three to four million jobs.
However, assuming Obama and his advisers are right—that his plan will indeed save or create that many jobs—what proof do we have that it will leave us better off than if it’s not implemented at all?
In his essay “What Is Seen and What Is Not Seen,” the French classical-liberal economist Frédéric Bastiat explained that there is a tendency to recognize only the intended consequences of an action (what is seen). However, there are often other, subsequent effects that are not perceived as connected to the action (what is not seen). Furthermore, the short-term effects of an action can sometimes be quite different from the longer-term, unseen consequences.
In the case of public works, Bastiat explained that government produces nothing independent from the resources and labor it diverts from private uses. When government borrows money to create jobs, what is readily seen are people employed and the fruits of their labor. However, what is generally not considered are the many things that could have been produced if the capital had not been removed from the private sector to fund the government programs in the first place. Such policies necessarily benefit some (the favored workers) at the expense of others (those who would have had the jobs that were not created) and eventually the taxpayers, who have to repay the debt.
What is Seen
New Deal public-works projects provided plenty of evidence for Bastiat’s theory. They not only failed to help lift the economy out of the Great Depression but also served to make it “great.”
First, many jobs created under FDR benefitted few besides those employed—in things like studying the history of the safety pin, collecting campaign contributions for Democratic Party candidates, chasing tumbleweeds, and cataloging 350 different ways to cook spinach. (See Lawrence Reed’s Great Myths of the Great Depression, www.tinyurl.com/7eecje.)
In addition, much of the “job creation” was directed according to political preferences, rather than where jobs were arguably needed most. For instance, a disproportionate amount of public relief went to western “swing states” expected to help Roosevelt win votes in future elections, rather than to the poorest states, such as those in the South, which were already solidly Democratic during this period. Relief and public-works spending also seemed eerily to increase during election years, and it has been shown that votes for FDR correlated closely with jobs and other special government benefits given. (See Burton Folsom’s New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America.)
What is Unseen
New Deal job-creation projects also impeded productivity by discouraging private firms from adopting new technologies. A prime example is a government farm in Arizona where a dairy crew discovered that it could turn a profit only by using milking machines, rather than milking by hand, and eliminating some jobs. But that would have violated the terms of a government loan. So the machines were not brought in, and the staff members who made the suggestion were fired. (Amity Shlaes tells the story in “The New Deal Jobs Myth.”)
Roosevelt is still celebrated for his job-creating measures because the people who gained employment were easily seen. However, what wasn’t (and isn’t) so easily recognized is that to pay for his public-works experiments, the government sucked up much of the available capital by selling bonds and collecting taxes, including a 5 percent withholding tax on corporate dividends and ever-rising income taxes. The top income tax rate hit a staggering 90 percent. Thus the New Deal had the unintended consequence of prolonging the Great Depression by diverting resources that could have been used to create wealth.
Barack Obama and his advisers should take a lesson from history. The New Deal and its public-works projects were a disaster, and it would be remiss to think they should be given another try. As Bastiat explained, government doesn’t create wealth; it only diverts it. When government controls wealth it inevitably tends to serve political ends rather than consumers. FDR’s New Deal policies are a testament to that, and if they are repeated in response to our current economic crisis, it will only hinder the recovery.
Pingback by Unemployment Hits 9.8 Percent | Foundation for Economic Education on 2 October 2009:
[...] Timely Classic “What is Seen and What is Unseen: Government “Job Creation”” by Larissa Price Sheldon Richman is the editor of The Freeman and "In brief." He is a contributor [...]
Comment by Richard Smith on 27 October 2009:
Thought you’d be interested in this recent U.S. Jobs Creation Plan presentation.
Go to
http://www.smith-trg.com/createjobs.html
or
http://electronics.wesrch.com/pdfEL1GP9A5CAIWY
Pingback by One-Year “Stimulus” Report Issued | The Freeman | Ideas On Liberty on 17 February 2010:
[...] Timely Classic “What is Seen and What is Unseen: Government “Job Creation”” by Larissa [...]
Comment by Drik on 22 February 2010:
Arrogant, dismissive, even derisive. Got a nice ring. Wish it didn’t apply even more now than when Presbo trotted it out. This is not a kind of person that learns from history or even from experience. His agenda continues regardles of what the country wants or needs. His definition of fairness as dreamed by his socialist dad. Kenya rid itsef of his father. Would that we could so easily shed ourselves of his father’s leavings.
Comment by Charles W. Kadlec on 7 June 2010:
What we can see is that the extraordinary increase in government spending over the past 15 months has led to a 500,000 increase in government employment and the loss of 1.4 million private sector jobs. Now, three Harvard Business School Professors’ breakthrough study shows the unseen is how the private sector retrenches as government spending increases. See: Government Spending Crowds Out Private Sector.
http://www.freedomworks.org/truthinjobs/?p=816
Comment by Charles W. Kadlec on 14 July 2010:
A new website, TruthinJobs.com has been created so that individuals and businesses can report the formerly unseen consequences of government spending programs. When compared to the Reagan era strategy of stimulating the economy through across the board reductions in tax rates, our research reveals that the Obama Administration’s reliance on spending, tax rebates, tax credits and the like has cost the American people 10 million jobs. http://www.freedomworks.org/truthinjobs/blog/the-10-million-jobs-gap/
Comment by Manfred on 2 September 2010:
Mr. Kadlec, or Mr. Down 100,000 by 2020, is saying why should we believe the President?
i guess we hope the public has a short memory.
Pingback by Obama Wants New Stimulus Bill | The Freeman | Ideas On Liberty on 18 August 2011:
[...] Timely Classic “What Is Seen and What Is Unseen: Government ‘Job Creation’” by Larissa [...]
Pingback by Obama Will Ask for $300 Billion Jobs Plan | The Freeman | Ideas On Liberty on 7 September 2011:
[...] Timely Classic “What Is Seen and What Is Unseen: Government ‘Job Creation’” by Larissa [...]
Comment by England Patriots Season tickets on 4 February 2012:
I truly wish I had not witnessed this particular as I really want just one right now!
Comment by a3370505 on 5 February 2012:
I’ve said that least 3370505 times. SCK was here
Comment by Beachfront Rentals in Siesta Key on 5 February 2012:
We wish to thank you yet again for the lovely ideas you offered Janet when preparing a post-graduate research as well as, most importantly, pertaining to providing all of the ideas in a blog post. Provided that we had been aware of your website a year ago, we’d have been rescued from the unwanted measures we were implementing. Thanks to you.
Comment by InterCredit.co.uk on 6 February 2012:
Incredible! This blog looks exactly like my old one! It’s on a completely different subject but it has pretty much the same page layout and design. Outstanding choice of colors!
Comment by kent electricians on 6 February 2012:
Wow! This can be one particular of the most helpful blogs We have ever arrive across on this subject. Actually Excellent. I am also an expert in this topic therefore I can understand your hard work.
Comment by london photocopier on 6 February 2012:
I¡¦ve learn a few just right stuff here. Certainly worth bookmarking for revisiting. I wonder how a lot attempt you set to make any such fantastic informative site.
Comment by fotografia slubna bydgoszcz on 6 February 2012:
Thanks for being a photographer that embraces off-beat and non-conventional weddings (found you via “off-beat bride”) it’s nice to work with vendors who celebrate diversity and not just the traditional, often times cookie cutter wedding. The veil in this contest is absolutely gorgeous! Thus i am submitting my name into the contest My partner and I are both avid feminists working to have an egalitarian, meaningful, and Jewish wedding. We gave up trying to plan our ceremony and reception in CT (where we live) so are now working on a destination wedding idea in Mexico, where we can explore the rich culture and history of the land and lounge on the beach (do you travel to shoot destination weddings??? haha). ANyway, thanks for this contest! And if i do win, i’d like the veil in white rather than ivory Galina
Comment by Jenna Gossi on 6 February 2012:
Great post, you have pointed out some excellent points , I likewise conceive this s a very excellent website.
Comment by cheap hotels in auckland city on 6 February 2012:
Hi. I learn a couple of of your other posts and wanted to understand if you happen to would be interested in changing blogroll links? http://www.pentlands.getlisted.co.nz/cheap-hotels-in-auckland-city
Comment by buy sell and loan on 7 February 2012:
After study several with the content inside your internet website now, and I actually such as your means of blogging. I bookmarked it to my bookmark web site list and will also be checking back soon. Pls look into my web page likewise and tell me what you think.
Comment by MBTシューズ販売店 on 7 February 2012:
I like this post, enjoyed this one appreciate it for putting up.
Comment by Medical Answering Service on 7 February 2012:
I was recommended this internet web site by my cousin. I’m not confident whether this post is written by him as nobody else know such detailed about my trouble. You are amazing! Thanks!
Comment by get rid of bad breath on 7 February 2012:
Hey! Do you know if they make any plugins to assist with SEO? I’m trying to get my blog to rank for some targeted keywords but I’m not seeing very good results. If you know of any please share. Kudos!
Comment by office photocopier on 7 February 2012:
I’ve been browsing on-line greater than three hours lately, but I by no means discovered any interesting article like yours. It¡¦s beautiful worth enough for me. Personally, if all webmasters and bloggers made just right content as you did, the internet might be a lot more helpful than ever before.
Comment by seo in kent on 7 February 2012:
Great ¡V I should definitely pronounce, impressed with your site. I had no trouble navigating through all the tabs and related information ended up being truly easy to do to access. I recently found what I hoped for before you know it in the least. Reasonably unusual. Is likely to appreciate it for those who add forums or anything, site theme . a tones way for your customer to communicate. Nice task..
Trackback by stop spam plugin on 7 February 2012:
Stop Spam…
[...]Sites of interest we have a link to. Their service is self explanatory[...]……
Comment by Angeline Decroo on 7 February 2012:
You made several nice points there. I did a search on the issue and found the majority of people will go along with with your blog.
Comment by Tomeka Salloum on 7 February 2012:
Wow! This could be one particular of the most helpful blogs We’ve ever arrive across on this subject. Actually Excellent. I am also an expert in this topic so I can understand your effort.
Comment by ffice decoration on 7 February 2012:
Hey. Cool article. There’s a problem with your web site in chrome, and you could want to check this… The browser will be the market leader and a huge component of other individuals will omit your wonderful writing because of this problem.
Comment by Plamy na sloncu kazik pobierz on 7 February 2012:
Thank you for your entire effort on this website. My mum take interest in setting aside time for investigation and it is easy to understand why. My spouse and i learn all relating to the lively medium you give invaluable tips on this website and even recommend contribution from other people on the theme so my daughter has been becoming educated a great deal. Take advantage of the remaining portion of the new year. You are always doing a dazzling job.
Comment by Shirleen Capehart on 7 February 2012:
I really believe that a foreclosures can have a major effect on the client’s life. Foreclosures can have a Several to ten years negative relation to a client’s credit report. A borrower who’s applied for a mortgage or just about any loans even, knows that your worse credit rating is definitely, the more difficult it is to have a decent mortgage loan. In addition, it may possibly affect the borrower’s power to find a really good place to let or rent, if that turns into the alternative real estate solution. Interesting blog post.
Comment by hosting coupons codes on 8 February 2012:
Glad to be 1 of several visitants on this awful web website : D.
Comment by pawnbroker on 8 February 2012:
I admire the beneficial facts you offer inside your articles. I will bookmark your weblog and also have my children verify up here often. I’m really confident they’ll learn plenty of new items appropriate here than anybody else!