I recently came across this article in the Deseret News on how wonderfully well the state and local governments are flourishing, economically speaking. While this is generally not the news throughout the country (many state and local governments are, in fact, struggling financially), this certainly has a bad flipside that’s not really covered in the article. This is one that Henry Hazlitt brought up continually in his masterful and recommended book, Economics in One Lesson.
It is this: there are things seen and things unseen. We see the visible benefits that our invested taxdollars have created: we see the jobs, the military equipment, the schools, the public works projects, etc. We do not see what could have (and would have) been made had these taxes not been levied in the first place. In other words, we do not see the alternate uses for the money which the government has appropriated. Those items do not exist, and may not have even been conceived.
While yes, it’s true, that government spending can create jobs, it’s also true that prisons do a good job of providing full employment (occupying all bodies), and it’s also true that the market, if let to itself, will use capital much more efficiently and humanely (meaning voluntarily).