I wish I had read the following passage in Human Action before commenting last week on the latest ill-conceived targeted tax incentive package for North Carolina.
[T]he
means which a government needs in order to run a plant at a loss or to
subsidize an unprofitable project must be withdrawn either from the
taxpayers’ spending and investing power or from the loan market. The
government has no more ability than individuals to create something out
of nothing. What the government spends more, the public spends less.
Public works are not accomplished by the miraculous power of a magic
wand. They are paid for by funds taken away from the citizens. If the
government had not interfered, the citizens would have employed them
for the realization of profit-promising projects the realization of
which they must omit because their means have been curtailed by the
government. For every unprofitable project that is realized by the aid
of the government there is a corresponding project the realization of
which is neglected merely on account of the government’s intervention.
Yet this nonrealized project would have been profitable, i.e., it would
have employed the scarce means of production in accordance with the
most urgent needs of the consumers. From the point of view of the
consumers the employment of these means of production for the
realization of an unprofitable project is wasteful. It deprives them of
satisfactions which they prefer to those which the government-sponsored
project can furnish them.
And here’s the most interesting passage:
The gullible
masses who cannot see beyond the immediate range of their physical eyes
are enraptured by the marvelous accomplishments of their rulers. They
fail to see that they themselves foot the bill and must consequently
renounce many satisfactions which they would have enjoyed if the
government had spent less for unprofitable projects. They have not the
imagination to think of the possibilities that the government has not
allowed to come into existence.
