by Patrick Trombly
In a new twist, the presidential nominees from both major political parties have fallen for (or hope that the voters have fallen for) a time-worn fallacy, and have proposed government spending on infrastructure “to grow the economy and create jobs.” As David Stockman has shown, infrastructure in the United States is not “crumbling,” nor is spending on infrastructure disappearing.
What is equally important to our analysis, though, is the fallacy that government spending, on infrastructure or anything else, creates jobs or economic growth in the aggregate. This fallacy and related myths need to be dispensed with before anyone begins to take them seriously. Murray Rothbard addressed the issue in great detail in his article “The Fallacy of the ‘Public Sector.’” Below I seek to summarize, in simple terms that even Donald Trump and Paul Krugman can understand: there is no such thing as the Infrastructure Fairy that takes government spending and magically turns it into economic growth.