Monday, October 29, 2007

Spending your way to prosperity 

Our local state senator Tarryl Clark is not going to let go of this idea that we can spend our way to prosperity. There would be more jobs in Minnesota, she says, if only Governor Pawlenty would have let the legislature spend more money. Via Larry Schumacher (referring to a news column that I guess I didn't get, maybe Mrs. S figured it would be bad for my blood pressure?)
"In this year's legislative session, the Minnesota Senate passed a capital investment bill with broad bi-partisan support. The bill funded dozens of construction projects across the state including a new biomedical research facility at the U of M, new public safety training centers, and economic development projects around the state. However, the Governor vetoed this bill and by doing so he vetoed thousands of jobs. If he had instead signed the bill, Minnesotans would be working on these projects right now.
I think I should mail Sen. Clark a copy of Bastiat. It is easy to see the jobs created by the additional spending on these construction projects; that is what is seen. But she seems incapable of understanding the jobs lost due to the higher taxes to be paid now and in the future by businesses in return for these projects. That is what is unseen. Government consists of elected officials who necessarily have short time horizons and thus think they can borrow their way to prosperity. This doesn't work for homeowners, and it doesn't work for businesses, and it doesn't work for state governments. Just ask Michigan.

There are any number of reasons for the Minnesota unemployment rate to exceed that of the U.S. If you look at the annual figures, job loss in Minnesota is focused on the goods-producing sector, particularly manufacturing and construction. The service sector is moving at a fairly normal pace; health care services are strong. Given manufacturing is in a secular long-run trend downward around the country, how much of this do you want to lay at the feet of Pawlenty? And do you want to spend $200 million to try to get back 2,000 jobs in construction? How many jobs in the service sector might be lost to create those construction jobs?

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