More Government Please? Give Me a Break

I have recently been tapped to blog for the Ludwig von Mises Institute of Canada which is a great opportunity I am grateful for.  I was referenced an infuriating new piece in Harper's Magazine to give my thoughts on.  The article, authored by Thomas Frank, is titled "Easy Chair-More Government Please!" and is a call for more government spending to create jobs directly.  My critique follows:

Thomas Frank's "Easy Chair-More Government Please!" is another short sighted plea for the benevolence of government to aid in the effort of putting people back to work.  In what amounts to no more than a Robert Reich-like worship of the massive vote buying scheme by Franklin Roosevelt known as the Civil Works Administration (CWA) and Works Progress Administration (WPA), Frank wants a 21st century jobs bill.  The fact that the first stimulus bill known as the American Recovery and Investment Act failed to make a significant dent in the unemployment rate goes unacknowledged.  President Obama later joked about the lack of "shovel -ready" jobs; it's always comforting when a president finds humor in generational theft without substantive results.  What also goes unmentioned is the newly proposed "American Jobs Bill" which saw a quick death in the Democrat controlled Senate.  Frank lumps blame on the Republicans for refusing to pass another short sighted spending measure despite the outright snubbing by the President's own party in upper house of Congress.

In reference to the CWA Frank writes:

To create jobs, the CWA did not offer tax breaks or fine-tune the regulatory climate.  No, the CWA simply hired unemployed people and put them to work...The program's administrator, Roosevelt confidant Harry Hopkins, had famously spent more than $5 million in his first two hours of as a federal official.

Yes, nothing screams success like squandering stolen funds amounting to $5 million in a mere two hours.  One can only imagine the careful thoughtful process Hopkins employed in spending such a large amount of money (in that day) in such a short period of time.  In summing up the success of F.D.R.'s employment schemes, Frank states:

At the CWA, he (Hopkins) found jobs for 4 million people in two months...The WPA, which Hopkins ran from 1935 to 1938, ultimately created about 3 million jobs per year...The Civilian Conservation Corps...employed another 3 million.

Despite the millions employed, the unemployment rate remained stubbornly high during the period Washington gorged on spending:

Again, such facts elude Frank's government worshiping.  He even goes so far as to praise the building of murals in Post Offices, the paying of artists to paint, and theaters to direct plays.  Being that such activities are unprofitable in most instances, government funding of such is essentially the destruction of wealth.  Frank falls under the oft-made presumption that jobs represent wealth.  If that were the case, why doesn't the government just spend trillions paying the unemployed to dig ditches with their bare hands?  No real wealth would be created but jobs are what matter, right?

The fallacy with government spending to compensate for the lack in the private sector has been outlined many times before by economists not infatuated by the incoherent rambling of Keynes' General Theory.  In short, every dollar spent by the government comes at the expense of the private, productive sector.  If the money isn't borrowed or taken with the point of a gun (aka taxation), than it is printed into existence by the Federal Reserve.  Government owns no resources; this can never be stressed enough.  Cries of "not enough aggregate demand" normally serve as a rational for increased government spending but demand is never inadequate in terms of human nature marked by infinite desire.  As I wrote in a recent piece titled "It's Not Aggregate Demand, Stupid":

What's at work here is the fundamental concept of Say's Law that Keynes failed to disprove: markets clear.  A perceived lack of aggregate demand doesn't mean products won't get purchased.  Every consumer good is bought if the price falls low enough.  Producers must find this price in order to adopt a new production structure to begin meeting this demand.  Most people aren't going to pass up a 36-inch television for $5 at Best Buy.  Sure, the television producer may fail to garner a profit on this new sales price, but that is why price signals are so important.  They tell producers the structure of production can be adjusted in order to meet this new equilibrium.  Capital not allocated to producing 36-inch televisions means investment in more profitable operations.

Armchair economists like to assume that human action is predictable and calculable.  But action, based solely on individual preference, isn't measurable with econometric formulae.   

Frank spends a great deal of time trying to explain away the prospect that Uncle Sam's overbearing taxation and regulatory structure is sending unfriendly signals to entrepreneurs and businessman.  Ironically, while he offers unlimited praise for F.D.R., he ignores the unprecedented attempts of micro managing the economy that made the Great Depression really "Great."  As economist Robert Higgs noted:

Industry was virtually nationalized under Roosevelt's National Industrial Recovery Act of 1933. Like most New Deal legislation, this resulted from a compromise of special interests: businessmen seeking higher prices and barriers to competition, labor unionists seeking governmental sponsorship and protection, social workers wanting to control working conditions and forbid child labor, and the proponents of massive spending on public works. 

The legislation allowed the President to license businesses or control imports to achieve the vaguely identified objectives of the act. Every industry had to have a code of fair competition. The codes contained provisions setting minimum wages, maximum hours, and "decent" working conditions. The policy rested on the dubious notion that what the country needed most was cartelized business, higher prices, less work, and steep labor costs.

As the state sector drained the private sector, controlling it in alarming detail, the economy continued to wallow in depression. The combined impact of Herbert Hoover's and Roosevelt's interventions meant that the market was never allowed to correct itself. Far from having gotten us out of the Depression, FDR prolonged and deepened it, and brought unnecessary suffering to millions.

With Obamacare, Frank-Dodd, the propping up of the housing market, and the Wall Street bailout, it is clear such attempts at cartelization are once again being resurrected.  It only  makes sense the effect on unemployment and the business climate remain the same.  The desperately needed market correction isn't occurring and the can is being kicked by politicians focused on the next election rather than the next decade.  The crisis is serving once again as an excuse for a power grab by Leviathan.  Despite the unprecedented increase in spending and monetary base increase over the past few years, the economy remains stagnant.  A recent report by the Phoenix Center found that government spending has had no effect on private sector hiring within the past fifty years.  To those who understand basic economics, this comes as no surprise.  To government apologists, it's just another report to brush aside while preaching the divinity of an institution they believe is capable of eliminating the fundamental concept of scarcity.  As Ludwig von Mises wrote in Human Action:

 It is important to remember that government interference always means either violent action or the threat of such action.  The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning.

Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

Frank's article is lacking in both historical evidence and rational economic thought; such is often the case for advocates of government spending.  As long as such suggestions pass as conventional wisdom, the economy will continue to struggle under the vice grip of a State that knows no bounds to its reach.
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It needs work, but not too bad for a first draft.