This fallacy should have been laid to rest once and for all by Frederick Bastiat, the 19th-century French classical liberal economist and legal theorist, who described it as the "broken window fallacy." The story goes: A naughty boy breaks a store window with a rock, and an observer says this will help boost the economy, since the shopkeeper now needs to buy a new window, so the windowmaker will have money to buy new shoes, so the shoemaker will have more money to buy what he wants, and so the effect of the window destruction will ultimately be wealth creation.
This ignores, however, what the shopkeeper would have done with the money had his window not been broken. He could have bought something else, and he'd still have his window. Bastiat stressed that an economist's role was to understand not just what was seen in economic life, but what was unseen.
Yes this unseen costs are very important to the whole idea of stimulus. In this case you have a window that wasn't broken in the first place and maybe the window repair money will instead go to hiring some guy to help make shoes. Suddenly the shoemaker doubles his production and the economy grows.So if the shoemaker is paying hefty taxes to the government (to fix broken windows) he is prevented from growing and has to make shoes all by himself. It would be all good if the government was efficient at fixing windows but they are notoriously poor at just about everything it does.
So when the government taxes at a high rate and is allowed to carry a huge deficit we have the idea that growth can only happen as long as the Red Chinese are willing to buy our debt. If the Chinese money stops so does our government growth economy.
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