Trump’s Broken Windows

The incoming Trump administration is planning to spend $1 trillion on ‘infrastructure’, and it does seem that this will happen. Most Republicans have gathered obediently behind Trump and the choir is now constantly reiterating how great it will be to spend private money on roads and bridges. Democrats love spending private money too, so there’s no problem there. New jobs. Great economy. Non-crumbling roads and bridges. Win-Win.

Or is it? Actually, spending of this kind is mostly zero-sum: what is spent on a road, is not spent on something, anything else. The government taking $1 from you to spend on Product A means that you have $1 less to spend on Product B. The faint glimmer of hope is that the government will magically determine exactly what spending will create a net benefit to society, and then spend your money in a most frugal and prudential way.

Is this the case? In other words does the government’s decision to purchase Product A with your dollar create a better economy that you purchasing Product B with your dollar? Is this what experience tells us – that governments make much better spending decisions than people spending their own money, and that the government will purchase goods and services in a much more economic, effective and efficient manner than you using your own money?

That a certain amount of ‘common’ spending is beneficial is correct, but this does not mean that massive spending is massively beneficial. Here’s a timely reminder of the Broken Window Fallacy from Frédéric Bastiat and Henry Hazlitt, as America it seems is determined to embark on massive government spending. Once again. And quaint notions of limited government and private property meanwhile have been quietly pushed to the side. Once again.

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