Posted on 09/10/2005 7:01:45 AM PDT by LS
Actually, it will be another trough for the piggies. Era of small government my ass.
Stand by for all of the Broken Window Fallacy posts. . . . .
Even if the government employees snarf half of the money, it will still be spent *somewhere*.
Mike Rosen (KOA Denver) went through this the other day.
He challanged callers who believed this to go through the city Denver and break windows.
I couldn't resist.
I call it the broken monitor fallacy. I see something which says "We'll all be richer if a city is largely destroyed", I punch the monitor and the economy is improved because I have to spend money for a new monitor and stitches for my hand.
Sigh. Love your book (it has a personal place of honor in my bathroom library).
But clearly you have not considered the Broken Window Fallacy.
Before Katrina, our economy had $100 billion (or whatever the final cost is) and an economically vibrant Gulf Coast.
But once the recovery is complete, all we'll have is the Gulf Coast.
That $100 billion would have been in the economy anyway. It just wouldn't have gone to replace what we already had.
No way that $100 billion isn't a loss to our economy, even though I agree that some people will make a lot of money from reconstruction. But their gain is merely someone else's loss (i.e. the people who would have earned that $100 billion had it not gone to reconstruction). There is no real gain to the economy as a whole.
If disasters created economic booms, then we could create the world's strongest economy by nuking one or two of our own cities every year.
Walter Williams has a column just out which disagrees completely with this common "hurricanes are great for the economy" assessment.
I'm out of state on a clunky borrowed WebTV, or I would link it and quote it.
There can't be too many of those. A lot of folks need educating.
Thanks for listening.
While disasters may not be good for the economy, keep in mind that the massive relief effort will include a large dollar value in tax-deductible contributions to charities. So every dollar I send to the Red Cross (hypothetically speaking) results in 35 cents less that I pay in Federal and state taxes. Most charities are more efficient at spending money than governments are, so there is more of an economic benefit to fixing this "broken window" than a normal one.
Maybe those charities are more efficient, but the fact remains that if you didn't have to give your money to charity to rebuild what we once had, both you and the economy would be much better off.
As for the deductibility piece, it appears that you are saying that you end up having more money because your charitable contribution is deductible. I don't get that reasoning at all.
Chairty is great, and while it certainly is a benefit to the recipient, it is definitely an economic loss to the donor. The fact that people are willing to take economic losses in order to help others is admirable, but it doesn't change the fact that there is a loss here.
"Government employees" and "the well-connected" are some of the same people, especially in 3rd world polities like Louisiana. Either way, from an economic standpoint, the money will purchase something, to the benefit of some seller, and on down the line.
In the larger picture, as Thomas Sowell observes, the situation is a net loss for the economy, because every dollar spent on rebuilding/repairing/restoring is a dollar that couldn't be spent on a new, productive use. Some will benefit greatly, but for the economy as a whole, opportunities are lost.
I agree.
Walter Williams article:
http://www.townhall.com/columnists/walterwilliams/ww20050907.shtml
Frederic Bastiat (1801-1850), a great French economist, said in his pamphlet "What is Seen and What is Not Seen": "There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen." What economists Chan and Woodward can see are the jobs and construction boom created by repairing hurricane destruction. What they can't see, and thus ignore, is what those resources would have been used for had there not been hurricane destruction.
As for the deductibility piece, it appears that you are saying that you end up having more money because your charitable contribution is deductible. I don't get that reasoning at all.
The deductibility piece is what enables someone (either myself or someone else) to buy more lumber. I have to earn $10,000 to buy $6,500 worth of lumber, but if I write a $10,000 check to a relief organization it could buy them about $8,500 worth of lumber. Granted -- I myself may not be better off, but Home Depot sells more lumber.
Beyond that, if the money goes through govenrment bureaucracies and they take 80% of it, they get used to having it, and will be looking for ways to replace it when it's gone.
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