As part of his plan to revive the economy, President-elect Obama is promising the largest public-works project since the Interstate Highway System. I realize that some people get upset when comparisons are made to Adolf Hitler but wouldn’t we be remiss if we didn’t recognize that public works was one of Hitler’s core programs for Nazi Germany? And yes, I realize that just because Hitler embraced a program doesn’t necessarily make it a bad thing but shouldn’t it at least raise a red flag?
The Interstate Highway System was inspired by and modeled on Hitler’s massive public-works project know as the autobahn, which was designed to create jobs by building an extensive highway system across Germany. As U.S. troops were entering Germany during World War II, Gen. Dwight Eisenhower was so impressed by Hitler’s autobahn that he later constructed the Interstate Highway System, the biggest public-works project in history, when he became president.
While Obama can point to the Interstate Highway System as a glorious socialistic project (i.e., government ownership and management of highways), just as Hitler did with the autobahn, the dark little secret of this big public-works boondoggle is the large number of people who were damaged or destroyed by the project, either by eminent domain or by having their tourist-oriented businesses circumvented by the new federal highways.
I described some of those horror stories back in 1993 in an article entitled “Highway to Collapse: Spending on Infrastructure.”
I opened that article with the following sentence: “Bill Clinton believes that spending on infrastructure will bring jobs and prosperity to America — and, in the process, finally prove, after sixty years of failure, that the welfare-state, managed-economy way of life can be a success after all. But spending on infrastructure is just another highway to collapse. It will only result in higher taxes, more impoverishment, and greater destruction of people’s lives.”
Déjà vu, anyone?
Unfortunately, Obama didn’t clarify exactly how a public-works project is supposed to bring economic prosperity to America.
After all, public-works projects cost money. Where is the federal government going to get the money to pay for these projects? It gets it from the taxpayers. And that has adverse consequences not only for the taxpayers but also for the people on whom they were going to spend the money that was taken from them.
Let’s assume that a taxpayer is taxed $5,000 to pay for Obama’s socialistic public-works projects. He would have spent that $5,000 on, say, a combination of clothing, food, education, and vacation. Those expenditures would have produced an increase in demand for products and labor in those sectors of the economy.
When Obama takes the $5,000 from you to, say, build a new highway somewhere, he will point to the new highway and proudly say, “This highway, which the federal government has brought to you, has produced jobs for your community.” But what people cannot see is all the products and services and jobs that did not come into existence by virtue of the fact that you didn’t get to spend your $5,000 the way you wanted.
Thus, Obama’s plan cannot and will not produce wealth. It will only redistribute it. His public-works plan will take money from Peter and give it to the Paul. That’s the essence of all socialistic projects.
Obama might respond, “No, I promise not to raise taxes to fund my public-works projects.”
Fair enough, but then how does he propose to pay the bills for the project. After all, contractors, engineers, builders, and all their employees aren’t going to work for free. Moreover, we know that the federal government is, for all practical purposes, broke. It has no savings and it is already committed to spending much more money than it receives in taxes, especially on Iraq, Afghanistan, the massive bailout programs, the military-industrial complex, and all its welfare and regulatory programs.
One option will be to borrow the money. Ultimately, however, that debt must be paid back, with interest. That means taxes. Moreover, the federal borrowing necessarily sucks money out of the capital markets that would have been put to uses designated by the private sector. Thus, while Obama will again be able to point to his public-works project and exclaim, “Jobs for your community!” what will be unseen are all the things that did not come into existence as a result of the diversion of capital from the private sector to the public sector.
The third option at Obama’s disposal is the one most likely to be used — using the Federal Reserve to simply print up the money to pay the bills. That’s what inflation is all about — the inflating of the currency. That necessarily means a debasement or depreciation of the dollar. The cost of that debasement or depreciation must fall on some people in society, most likely the poor and middle class. It will be reflected by a lower purchasing power of people’s money. That will be manifested by higher prices for most everything. Inflation is just another form of taxation. It’s just a question of who’s going to pay for it.
Ultimately, the American people are going to have to confront an uncomfortable fact: The welfare-state, interventionist economic system that came into existence during the 1930s is a failure. There is no way to revive it or save it, especially not through the adoption of such socialistic public-works projects that Adolf Hitler, Dwight Eisenhower, and Bill Clinton embraced and that Barack Obama is now embracing. Such projects will only make a bad situation worse, and they will inevitably lead our nation toward more centralization of federal power and, thus, less freedom for the American people.
The “long run” that free-market advocates in the 1930s warned about has arrived and we’re suffering under it. When will Americans finally abandon this socialistic way of life and restore our nation’s founding libertarian principles of economic liberty, private property, and limited government?