I started a fisk of Dave Mindeman’s blog post responding to my Pioneer Press column on the economic fallacies supporting the job creation claims of the federal stimulus plan. Mindeman’s post is so riddled with reiterating those fallacies, that I found fisking it was creating a small book.

Therefore, let me take what I hope is a more productive approach and address the two most significant fallacious points from Mr. Mindeman’s post — two points which at first glance seem to carry some credibility. Hopefully by not excessively taxing Mr. Mindeman’s attention span, at the margins, I might motive him to some productive thought.  

First, Mr. Mindeman provides a laundry list of jobs he claims government creates. Included on that list are “soldiers.” Because I have argued that national defense is a constitutionally legitimate function of government, it would seem to Mr. Mindeman that government does create the job “soldier.”

Second, Mr. Mindeman agues that government creates wealth when it makes payments to corporations. Among the corporate examples he cites is Halliburton. 

“How would such massive corporations as Lockheed, Boeing, Halliburton, and KBR have fared without government contracts? Did that not create wealth within those companies?” he asks.

In each case, Mr. Mindeman fails to observe Henry Hazlitt’s one lesson in economics cited in my column: The art of economics consists in looking not merely at the immediate but also at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. Mr. Mindeman sees only what he wants to see.

Government “creating” military jobs is a classic example of the seen versus the unseen and failure to heed Hazlitt’s lesson. 

First, it should be noted that without a tax base to support it, a military could not exist. The taxes paid to provide for “necessary and sufficient” national defense is money taxpayers collectively would willingly spend on their own for security, but nonetheless, the military has no productive value to create wealth. In fact, in time of war (whether the war is warranted or not) military activity consists of killing people and breaking things. Money used to support the military must be had at the expense of other sectors of the economy.

The evidence of this is ample. During WWII, American’s manufacturing sector was dedicated to the war effort at the expense of consumer goods. Following the war, the Soviet Union ramped up its military spending at the expense of consumer goods. Guns or butter is as old a debate as, well, the advent of guns and butter.

The constitutional obligation of government to protect its citizens, and what size military that requires, are political questions. How the political questions are answered does not negate the fact that every solider hired is done so at the expense of a job in the private sector. Every tank is built at the expense of a consumer good. That such expenditures provide for the security of the country, they are legitimate, and as I noted in my column, I do not object to good faith government spending intended to meet a constitutional obligation.

However, Mr. Mindeman is supporting the argument that “creating jobs” is such a legitimate function. Yet every solider hired beyond what is necessary and sufficient for national defense is a net loss to the economy. While one can argue for the “necessity” of the military, the “necessity” for a preemptive war, the “necessity” for enhanced security measures, none of those “necessities” change the fundamental economic principle that they are employed at the cost of more economically productive use.

Case in point is the effort of both our DFL and GOP senators, Amy Klobachar and Norm Coleman respectively, to prevent the Pentagon from closing the National Guard air base in Duluth. Neither argued for the defense merits of the base. They fought the closure because the base has a positive annual economic impact on norther Minnesota of $85.1 million, including $41.4 million in wages.

If the base were unnecessary to national defense, as the Pentagon claimed, then the “soldiers” staffing it consumed $41.4 million that would have more effectively flowed to other sectors of the economy if left in private hands. True, Duluth and northern Minnesota would have suffered had the base closed, but the aggregate economy would have been better off with the capital and labor put to more productive use.

Military spending beyond what is needed to provide for national defense is as wasted as salaries paid to construction workers to build “shovel ready” projects whose costs exceed their benefits.

That brings us to Mr. Mindeman’s second contention that the government created wealth by spending huge sums of money with corporations like Halliburton.

This argument of Mr. Mindeman is deliciously ironic. Progressives were critical of the billions of dollars “wasted” on the Iraq war — billions of dollars spent killing people and breaking things. Therefore, it can only be economic ignorance that leads Mr. Mindeman to conclude that paying Halliburton to replace what was broken somehow creates wealth.

Mr. Mindeman makes the classic error behind the “Broken Window Theory,” which assumes that when a window is broken that is a good thing because it creates a job for a glazier that otherwise would not exist. The glazier at work is what is seen. What is not seen is the job that is lost because the owner of the broken window must replace his window rather than buy something he wants. In aggregate, society is poorer by the value of one window, not richer by the money paid to the glazier. 

When government destroys things, whether in a war on terror or a war on global warming by forcing industries to retool plants that still have value it does not create wealth by paying corporations to carry out its programs. Some people get rich — usually those with connections and influence — but in aggregate, society is poorer. 

Money and wealth are not the same things. Government can print money; government cannot create wealth.

Mr. Mindeman’s blog deposits other notions spawned by the same fallacies and failure to look beyond the immediate consequences of government policy to the secondary effects that must necessarily follow. The same analysis can be applied to each. Horse, water, drink and all that.