I finally figured out how Bidenomics is supposed to work. He really is having an incredible amount of success in his economic strategy. It’s all based on what’s commonly referred to as “The Broken window theory.”
According to the “theory,” destruction leads to economic growth. A most popular example comes from an essay written in 1850 by Frederic Bastiat, in which he cites the example of the supposed benefit of hoodlums breaking a shoemaker’s window.
This “theory” assumes that broken windows create an economic benefit because it creates work for the glaziers. If you take this idea to an extreme, a hoodlum riding his bicycle down the street, smashing windows as he goes, would have enormous economic benefit to the glaziers.
The most extreme example of the application of this theory is the claim made by many that our involvement in World War II ended the 20th-century Great Depression. Many people believe that the building of bombs and tanks and ships created work that was not available during the Depression.
Biden’s Application of the Theory
During his short tenure as President, Joe Biden has managed to destroy jobs by encouraging business closures in the face of Covid 19. He has driven up prices through the incredible increase in federal spending. He has dramatically reduced the strategic petroleum reserves. He has given billions of dollars worth of equipment to the Taliban. He has increased wasteful spending in the overzealous promotion of green energy.
Biden can claim success as a result of all of these actions. He now claims the creation of several million jobs. He has created the impression of a strong economy because of the spending subsidized by the government. He has created the opportunity for many businesses to make money replacing the equipment left behind in Afghanistan. And he can claim the creation of many new jobs due to the new green energy policy.
So the broken window theory, now known as Bidenomics, seems to be working like a dream. Could there, however, exist problems with this theory?
Problems with the Theory
The problems with the broken window theory become apparent when you compare the seen benefits with the unseen costs. To demonstrate that distinction, let’s return to the broken window.
We can see the benefit to the glaziers of having much broken glass to repair, but we don’t see what the shoemaker did not do because he no longer had the money spent on repairing his windows. He could’ve hired another shoemaker, bought a new piece of machinery, or just lowered the price of his shoe repairs.
We cannot say that the expenditures during the second world war had a net benefit to the American economy. We have no idea what this country might have produced if the same resources were applied to rebuilding the economy.
We also cannot predict the level of benefits the country would’ve received by not implementing Biden’s shortsighted policies. Job growth could’ve been measured from the level before the pandemic. Production of military equipment could’ve been dedicated to increasing our defense capabilities rather than rebuilding. The market would not have had to correct price distortions caused by excessive government spending. And, we will never know what better solutions the market would’ve devised to deal with any man-made climate change; it certainly would’ve been better than what the experts in Washington have devised.
Bidenomics can undoubtedly claim credit for success if the objective was to wreak extensive economic destruction in order to claim success in rebuilding the broken economy. The US economy would be far better off if we had never had to fight World War II, and we would be much better off if we were not faced with repairing the damage done by Bidenomics.
When government spending programs are advocated, the politicians who ask, “What will it cost?” should address the unseen “cost.” What will we have to give up in the future by exhausting resources in the present?