The immediate effects of Obama’s policies are easily seen. We can observe the workers of which billions of dollars have been spent to employ. We are aware of the entitlement checks given by the pen stroke of congress. It is inferred that the recovery plan actually recovers. However, Obama’s legislative activism has farther reaching consequences. Unfortunately, this administration is not able to see beyond the immediate results of its policy proposals. It is the opportunities forgone, those that are not seen, which prove the truly destructive aftermath of such policies.
It was the classical economist Frederic Bastiat that famously distinguished the difference between a good and bad economist. He stated only one simple difference, “the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” The Obama administration boasts of the millions of jobs created by enormous government spending legislation such as The American Recovery and Reinvestment Plan. Though the instantaneous jobs generated are evident, the error is in neglecting the source of this funding and what its use would have otherwise been.
Lawrence Reed, president of the Foundation for Economic Education, states it this way, “Government has nothing to give anybody except what it first takes from somebody.” The government produces no wealth of its own—it must obtain it from individuals through either taxation or borrowing. This seems obvious, but the key is recognizing the forgone use of that money. The individual, keeping the fruit of their labor, would have efficiently used it as they saw fit.
This money, spent in the private sector, would have been used for millions of different purposes. From personal investment and debt reduction to researching new technologies and funding small business startups, the productive uses are endless in the hands of the American people. Every dollar the government spends is one less an individual could have used to further their business or even hire a new employee. It essentially boils down to this—the Obama administration believes it can spend your money more wisely than you can.
The late economist Percy Greaves, Jr. puts it well, “Money spent by governments cannot create any more jobs or produce any more wealth than it can when spent by private persons. In fact, it creates less… The shift of the money from private citizens to political spenders must result in fewer productive jobs, and thus a smaller amount of goods and higher prices than if the money had been left in private hands.”
Next time you see a sign on the highway stating “Project Funded by the American Recovery and Investment Act” remember that it comes at the expense of homes, hospitals, businesses, and factories that would have been erected if the money were in the hands of those from whom it was taken. With less money in hand, Americans necessarily must reduce the amounts they invest and spend—thereby employing fewer workers and creating less wealth. The popular adage is right—there’s no such thing as a free lunch. Everything comes at a cost.
It is a disappointment that the current administration has neglected the practice of sound economics. Unrestrained spending is not philanthropic but harmful to the economy. Policy makers must look beyond the immediate results of their policies and regard the actual costs to society. It is essential to consider the opportunities forgone. If Obama was aware of the true effects of his proposals, he would recognize the shortsightedness of such errors.
Gabe Rodriguez currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm