In my Pioneer Press column of February 5, I argued that the $800 billion-plus stimulus package notwithstanding, government can create neither jobs nor wealth. Letters to the editor and comments I received via email expressed a common theme on the point of job and wealth creation.

“Kindly explain how Dick Cheney became so wealthy if it wasn’t on the back of government contracts to Halliburton.”

I shall try to be kind, but using Halliburton contracts as an example of government creating wealth is deliciously ironic. After caterwauling about the waste of billions of dollars spent in Iraq breaking things, the same people are claiming that replacing those things somehow results in a net wealth gain for society. Their logic is that by hiring people (the military) to destroy things and then hiring people to rebuild them (Halliburton), government created out of destruction an aggregate job and wealth increase.

That reasoning is a textbook example of the economic fallacy exposed by Frederick Bastiat’s classic allegory of “The Broken Window.” With apologies to Bastiat fans, I have made alterations for the benefit of the many progressive fans of Dick Cheney who wrote to me.

A little vandal named Georgie throws “Arock” through the window of the U.S. budget office. Taped to it is the message, “Broken Window? Call Dick Cheney Window Repair.” The budget office calls DCWR to replace the window. DCWR charges the government $1 billion dollars. Dick Cheney makes a lot of money, but has any wealth been created for society? Have any jobs been created?

Before little Georgie throws Arock through the window, the budget office has $1 billion dollars and a window. After Georgie breaks its window, the budget office has $1 billion, but no window. The entire United States is less wealthy by the value of one window. After DCWR repairs the window, the budget office has a window, but it is $1 billion less wealthy. Dick Cheney is $1 billion wealthier, but the entire United States is still poorer by the replacement cost of one window.

Every economic transaction has an opportunity cost. Tax money spent to replace the destruction caused by “Arock,” is money not available to be spent elsewhere. It cannot be invested by the private sector to produce a return. It cannot be used to make purchases planned before the window was broken. It cannot be used to purchase new plants and equipment. The impact of the $1 billion broken window is a loss of jobs and a diminution in national wealth.

If it were not the case that the broken window caused a net decrease in jobs and wealth, then shouldn’t we applaud the protesters for the economic stimulus they provided during the Republican National Convention? Just think of the jobs they created for glaziers by breaking out storefront windows. If they had just burned down a few buildings, we could have had a real economic boom.

Yes, that’s silly, but it is no sillier than the notion that government creates wealth when it replaces that which it has destroyed or spends money on programs and projects with destructive economic consequences.

Now, one can make the case that the Iraq War is necessary to keep America safe from terrorist attacks. But that is a political argument, not an economic argument. One’s political position on the Iraq war notwithstanding, the economic principle remains the same: The destruction and rebuilding caused by war does not result in a net gain for society in either jobs or wealth. Analysis of the stimulus program and other “government-created jobs” raised by readers should be tested by the same economic principle.

In real life, the people replacing broken windows provide a valuable service. Stores whose windows were broken have no choice but to replace them. Society needs people to replace windows just like it needs people to deliver the mail, route air traffic and build and maintain necessary infrastructure.

But when government requires window repair people and highway construction workers to be paid a “prevailing wage” that is higher than what “merit contractors” would competitively bid, the net effect is the latter workers are unemployed and store owners and taxpayers shell out more than necessary. When government gives the postal service a monopoly on first class mail delivery, private sector jobs never come to be and we pay more for mail delivery. And when government hires more air-traffic controllers than necessary to comply with union contracts or keeps unnecessary military bases open to protect jobs, the net effect is fewer private sector jobs and less national wealth.

Saying that some government jobs are useful and that government independently can create jobs and wealth are two very different concepts. Confusing them creates abominations like the stimulus bill.