In a comment to my recent Pioneer Press column on economic stimulus and job creation, a writer quotes from a recent speech by President Obama speaking on earmarks in the stimulus package.

PRESIDENT: … And when you start asking, well, what is it exactly that is such a problem that you’re seeing, where’s all this waste and spending? Well, you know, you want to replace the federal fleet with hybrid cars. Well, why wouldn’t we want to do that? (Laughter.) That creates jobs for people who make those cars. It saves the federal government energy. It saves the taxpayers energy. (Applause.)

So then you get the argument, well, this is not a stimulus bill, this is a spending bill.  What do you think a stimulus is?  (Laughter and applause.) That’s the whole point.  No, seriously. (Laughter.)  That’s the point. (Applause.)  

One could not make up a more textbook example of economic fallacy than the president offers up.

Should we replace the federal fleet with hybrid cars? We should under two conditions: First, the fleet is fully depreciated; Second, if the benefits of hybrids are greater than the benefits of non-hybrids.

If the current federal fleet still has utility value, that value is destroyed when the fleet is prematurely replaced. Obama’s logic is the logic of the “Broken Window Fallacy”: Broken windows are good things because they create jobs for window makers. The logical extension of that thinking is that the RNC protestors really out to be commended for breaking store windows and thus, creating jobs for the people who had to replace the windows. It is too bad they weren’t able to blow up a few buildings – think of the construction jobs that would have created!  

The decision to replace the current federal fleet with hybrids instead of traditional gas-powered vehicles is more complex, but based on the same simple economic principle. The fleet should be replaced with hybrids only if the cost/benefit is greater than the cost/benefit of gas-powered vehicles. It is proper in this equation to consider “externalities,” the impact of each technology on the environment, for example. And were the president making his case on that basis, he’d at least be on economically logical sound ground. However, that is not the argument he is making. He is making the false broken window argument for job creation.

President Obama speaks in half-truths when he says replacing the fleet will create jobs for the people that make the cars. That is true, but his comment ignores the secondary consequences — the jobs lost because a) government is taking tax dollars to replace a fleet that doesn’t need replacing, b) government is taking money out of the private sector that would have more efficiently create jobs in other sectors of the economy and c) government is, through deficit spending, creating inflation which lowers everybody’s (including the hybrid workers) purchasing power and quality of life. (Sobbing.)