Thursday, June 24, 2010

Government Spending Kills Jobs

Rasmussen Reports that politicians and government spending cause downsizing:
Of all the myths helping to sustain the unsustainable status quo in Washington, D.C., among the most widely accepted is the belief that a politician’s seniority translates into tangible economic benefits for his or her district. In fact, this perception works hand-in-glove with another central government myth – the one about politicians being able to create private sector jobs with your tax dollars in the first place.
In fact, the research that could end up blowing these myths out of the water seems to have come about accidentally – or at least as an afterthought. Three professors at Harvard Business School – Lauren Cohen, Joshua Coval and Christopher Malloy – were examining the correlation between politically-connected firms and powerful legislative committee chairmen when they stumbled upon something “unexpected.”
What did they discover? Something free market advocates have known for years: Government spending kills jobs.
“It was an enormous surprise, at least to us, to learn that the average firm in the chairman’s state did not benefit at all from the increase in spending,” says Coval. “Indeed, the firms significantly cut physical and R&D spending, reduced employment, and experienced lower sales.”
This is only surprising if you're a Keynesian... if you do not see that paying one set of people to dig ditches and another set of people to fill them in is a variant on Bastiat's broken window fallacy.

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