"One place we need more government spending is for infrastructure. Drive down any road, go across any bridge, you are likely to see dilapidation. There was a bipartisan panel that said we need to spend $2 trillion or more on infrastructure."
"Don't pretend that stimulates the economy," Brook rebutted. "That money has to come from somewhere, that $2 trillion that you would want to spend on infrastructure is taken from the private economy."
"This is a fallacy," Callahan replied. "Twenty million jobs were created in the 1990s when we had higher tax rates than we do today. After World War II -- also a period of high tax rates, also incredible job growth.
And, by Keynesian logic, war can stimulate the economy.
"World War II was the great stimulus. ... That kind of external crisis can inject a lot of new capital."
"This is one of the worst fallacies of economics," Brook said. "This is called the broken-window fallacy."
The fallacy comes from Frederic Bastiat's story of the boy who breaks a shop window, prompting some to believe that replacing the window will stimulate a ripple of economic activity. The fallacy lies in overlooking the productive things the shopkeeper would have done with the money had the window not needed replacing.
"World War II did nothing to promote economy growth," Brook said. "Blowing things up is not an economic stimulus. Destruction does not lead to progress."
Don't expect most politicians to learn this any time soon.
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