Economic Lessons and Public Works Projects

In 1946, The 20th century writer and economist Henry Hazlitt wrote the famous book,  Economics in One Lesson, challenging the conventional wisdom of New Deal social and economic policies.  The lessons taught in Hazlitt's book are as true today as they were in 1946, particularly because elected leaders are still pursuing many of the same flawed policies.  One of the selling points that proponents of the DRIC/NITC bridge is that it will create new jobs, in the construction, operations and maintenance of the new bridge.  Governor Snyder said himself that his decision to embrace the DRIC/NITC was "about jobs."  But, this opens the door to a serious discussion about how jobs are actually created.

Hazlitt's fourth chapter is titled "Public Works Mean Taxes."  In this lesson, Hazlitt admits that a "certain amount" of government spending money on infrastructure is necessary, but to beware of politicians making the case for government spending as a means of solving issues of economic stagnation or unemployment.  He writes "I am here concerned with public works considered as a means of "providing employment" or adding wealth to the community that it would not otherwise have had."  Hazlitt continues, "when providing employment becomes the end, need becomes a subordinate consideration. "Projects" have to be invented. Instead of thinking only where bridges must be built, the government spenders begin to ask themselves where bridges can be built. Can they think of plausible reasons why an additional bridge should connect Easton and Weston? It soon becomes absolutely essential. Those who doubt the necessity are dismissed as obstructionists and reactionaries."

It's remarkable how relevant these old passages remain, particularly in regards to the DRIC/NITC project.  Selling the bridge, funded by American and Canadian taxpayers, as a means of "job creation," Hazlitt reminds us, must be done through taxation or borrowing.  Taxation takes money directly out of the private sector, while inflation, Hazlitt reminds us is "merely a form, a particularly vicious form, of taxation."  While proponents of the DRIC/NITC continue to tell the public that the bridge will not cost a dime to "Michigan taxpayers," they continue to leave out the fact that they estimate that  $1.3 billion from the US Federal government will be required to complete the customs plaza.  Where does that money come from?  

Hazlitt admits there may be legitimate cases for such projects.  He writes, "If it is built to meet an insistent public demand, if it solves a traffic problem or a transportation problem otherwise insoluble, if, in short, it is even more necessary than the things for which the taxpayers would have spent their money if it had not been taxed away from them, there can b e no objection."  Here too, the DRIC/NITC plan falls short.  While proponents would have us believe that bridge traffic is on the rise, a decade of Ambassador Bridge figures tell a different story.  A decade-long recession (in Michigan) and increased border security after 9/11 may also be a strong indicators as to why traffic is down.  Moreover, the phrase "otherwise insoluble" applies specifically to this issue.  When taking into account that a private company, (the Ambassador Bridge) has plans to build a second span to the existing Detroit-Windsor crossing, without any expense to the taxpayers (of any country,) the argument for a new publicly funded bridge is rendered even weaker. 

This wisdom of Henry Hazlitt's simple economic lessons can be applied to so many of our public policy issues today, yet many politicians continue to buy into economic fallacies.