Don’t buy canard about spending

By Alan Cobb

“Canard” is a funny word.

It keeps popping into my head anytime I read another self-anointed do-gooder who claims that government spending leads to economic growth.

“Canard” means a false report — and we’ve got lots and lots of them about these claims.

If I take $20,000 from my neighbor and hire a gardener, the economy certainly hasn’t grown by $20,000. It’s simply been a shift of money. Rearranging the furniture in your living room doesn’t increase the number of easy chairs or TVs.

That’s what happens when your taxes pay for someone else’s salary, build a government building or pave a road.

We value good roads and good government. But that doesn’t mean those things cause economic growth. Arguments otherwise are either deceitful or horribly misinformed.

Many say that we don’t need to do anything but spend more government money and — voila — a land of milk and honey.

Given the Kansas highway lobby’s assertions, Kansas should do nothing but build roads and the Sunflower State will become the promised land.

Oh, if it were so.

As Margaret Thatcher said, big government doesn’t work because eventually you run out of other people’s money.

There’s also something never discussed by those wanting to line their pockets with what used to be in your pocket. The money doesn’t drop from the sky and it isn’t in your grandmother’s basement. It’s our money, and we taxpayers might do something more productive with it — though that is never measured. The citizens of Kansas might spend the billions the road lobby wants to spend on more roads (in a slow-growing state with great roads already) on something else, like starting new businesses, which would lead to growth.

The multipliers used by those pushing the canard, cooked up in a fantasy lab, make it look even better. Multiply the $20,000 gardener salary by three — sprinkled with fairy dust — and all of the sudden the transfer of $20,000 magically becomes $60,000. So anything is justified. Want $3 million in economic growth? Just raise taxes by $1 million. You don’t need Billy Mays to sell this stuff.

Add up all the multiplier studies and poof! Kansas’ economy is the size of Texas’.

In a recent Wall Street Journal commentary, a Stanford University economics professor dismissed this notion and said the government-spending multipliers are actually negative. Outlays by the government crowd out private spending and require future taxes.

Measuring the economic value of shorter commutes and fewer car repairs, accidents and fatalities is doable, but never done. Similarly measurable are the benefits of an educated populace, but the benefit is not the sum of teachers’ salaries plus the cost of the bricks in a school addition. Taking the input (tax dollars) and applying a castle-in-the-sky multiplier is not magical; it’s wrong.

Saying the Pizza Hut that moved from downtown to the new bypass outside town is “growth” is equally wrong — and dishonest. But that’s what we hear from those pushing the canard that government spending is growth.

There’s that word again.

2 Comments

  • Bob, I tend to agree with Cobb. Government spending creates little or no growth into the economy. It is simply recirculating money already on the system to stimulate a system that will only stimulate as long as the money keeps coming.

    On the other hand the creation of “new wealth” industries creates new dollars into the system. Raw materials are good examples. It costs the government little or nothing for their production since it is done thru the private sector. In turn jobs are created because of the necessity to turn raw materials into something usable for consumption by the public. from production to transportation to manufacturing to sale, each part of the process provides new wealth for a variety of industries necessary to get teh product to market.

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