Legal Commentary

Metro's sleight-of-hand

By Tom Kirkendall

Kevin Whited passes along this Bellaire Examiner article that reports on Metropolitan Transit Authority CEO Frank Wilson bragging to a couple of local Chambers of Commerce about the economic impact that Metro's new light rail projects will have on Houston:

The Metropolitan Transit Authority’s construction of nearly $2 billion in light rail projects will be an economic boon to the entire Houston area, Metro Executive Director Frank Wilson said recently.

The light rail projects will create 10,000 jobs in the next four years, in addition to having a “secondary and tertiary economic impact,” Wilson told members of the Greater Southwest and Asian Chambers of Commerce on Wednesday.

When Metro spends that much, there is a ripple effect of about $300 million that he said will end up in the hands of small businesses.

“Our effort is to spend it sooner, rather than later,” Wilson said. “By this time next year, all five (rail) lines — $2 billion — is going to be in play,” Wilson said.

The economic benefit will happen as 10,000 people go to work on Metro’s rail projects, he said.

“When 10,000 people go to work, what else do they need? They are going to spend whatever money we give them to spend, and spend it again,” Wilson said. “If you’re an economist, and you look at that — the economic impact is going to be immense.”

Wilson is engaging in a common political sleight-of-hand in which transfers of wealth are promoted (distorted?) as wealth creation. For example, building a new highway creates economic wealth only to the extent that it enhances economic productivity, not because of the jobs that are involved in building it. Creating jobs to construct the highway is really no such thing -- the state is simply transferring the jobs from other sectors of the economy.

Moreover, the government-created jobs aren't even as good in terms of wealth creation as the jobs they replace. That's because it costs taxpayers more when government agencies are spending the money. This Heritage Foundation report  recently made this point in response to a recent Department of Transportation assertion regarding the alleged "job creation" benefit of highway spending.

Thus, when you hear bureaucrats such as Wilson talk about "secondary and tertiary economic impact," hold on to your wallet. Unless productivity enhancement is substantial, these types of government investments are generally boondoggles. Inasmuch as taxpayers have to pay $1.50 (or more) for the government agency to spend a dollar, it's easy to understand why that is the case.

Full post as published by Houston's Clear Thinkers on August 22, 2008 (boomark / email).