Henry Hazlitt and the “Stimulus”

Since the “stimulus” was enacted into law in February 2009, the economy has lost a whopping 2.2 million jobs. Despite President Obama’s promise that the so-called “stimulus” would keep the unemployment rate below 8 percent, the Labor Department reported today that June’s unemployment rate unsurprisingly remained high at 9.5 percent. It is important to note that the unemployment rate does not factor in the now 1.2 million discouraged workers that have given up searching for employment. While the unemployment rate slightly fell from last month, an additional 625,000 out of work Americans lost hope in finding a job in June.

Once again, libertarians must heave a sigh and say “I told you so.” It seems that we have this magical power that allows us to foresee crises before they even happen. In other words, we have a firm understanding of economics. Unfortunately, 64 years after Henry’s Hazlitt’s Economics in One Lesson was written, politicians still attempt to live in a fantasy world that disregards the principles of economics. As Hazlitt brilliantly exclaims,

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

All too often, we look at what can immediately be seen without analyzing the secondary consequences of a policy that may be less visible to the eye. For example, everyone is easily able to visibly see the construction worker whose pay is funded partly by the “stimulus” working to widen the highway. Most Democrats are quick to claim that this must mean that the “stimulus” has been successful at “creating” jobs. To refute this claim, we need to think beyond what we can visibly see.

Where did the money to pay for the massive $787 billion “stimulus” come from? Taxpayers. The passage of the “stimulus” took $787 billion directly from the pockets of taxpayers. Ever wonder what those taxpayers might have bought with their own hard-earned $787 billion? Due to the passage of the “stimulus”, taxpayers lost countless items. For example, perhaps one student would have used the money to pay for his education costs, a mother would have use her money to pay for her daughter’s ballet classes and another family would have saved it with the goal of buying a safer car. Where is the compassion for these people and their losses? Unfortunately, Obama who does not know your personal preferences arrogantly believes that he can somehow spend your money better than you can.      

Wait a second. People buying more education, ballet classes, cars and numerous other items or services that they desire actually create jobs. Since the “stimulus” took $787 billion out of the private sector through taxation, less people are able to pay for these goods and services. As a result, businesses lose massive amounts of money and cannot afford to create jobs by hiring new employees. Therefore, for every single job that the “stimulus” supposedly “created”, one private sector job was never created. We just cannot visibly see the jobs and opportunities that were not created because of the  indirect consequences of the “stimulus.” 

Henry Hazlitt’s one lesson is timeless.  Government through any “stimulus” program cannot recovery the economy. Instead, private sector growth is the only key to economic recovery. Remember, every cent that the government has was first coercively taken away from a taxpayer.  To quote Thomas Sowell, “The only person toward whom there is no compassion is the taxpayer.” It’s time to put an end to these flawed “stimulus” programs that harm taxpayers while destroying potential jobs in the private sector.

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