Henry Hazlitt said "If a [government funded] bridge costs $10 million then the tax will lose $10 million. Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else." This makes no sense. It's not as if the rate of taxation correspondingly results in less jobs; there is simply a critical point when workers start getting fired. If the government spreads the taxation over the masses and concentrates the money on those who need jobs, then no one should lose their jobs but the project will provide more jobs.
It may look that way when you think of 1 bridge vs 350 million people, but it still kills jobs at the margin. A few thousand people decide they need to skimp and not buy hamburger buns, so bunny lays someone off, a few thousand more put off getting an oil change, some others forego buying something else, it all adds up to equal. It makes no sense to think it doesn't, if it were true then we could just cut each project down to miniscule pieces and it would never harm the economy.
The effects of paying for each individual bridge on each individual are just small enough they are not percieved. We're talking about millions of these bridges every year though. I'm guessing from the way you phrased your question that you agree that lots of bridges would destroy private jobs, how is 1 bridge any different ?
These are the Classical Economics arguments against government spending. The Austrian argument is that are more problems for the bureaucrat than just losses in the areas of having to use force to collect the resources and the crowding out of private providers. The Austrian Position is that the bureaucrat bypasses the pricing system and therefore can not perform Economic Calculation. In other words the bureaucrat has reduced means to determine the best uses for scarce resources.
Now initially the resource collection and crowding out problems are more pronounced, but as the poor people in the Soviet Union, China, South America, etc found out the effects of chaos from poor Economic Calculation are much worse in the longer term.
The $10 million in spending sucks $10 million out of the economy and realocates it to a project. It is zero sum at that point. But the government must take a cut of the money to pay for its own unproductive administration (Obama's pay check for example). So every dollar that comes in as taxes goes out at some fraction, like 95 cents. So the productivity that is destroyed by taxation is not perfectly recreated by state spending. That is a net loss.
I was definitely wrong to say it comes out equal, equal is the absolute best it could possibly turn out, and that is so unlikely as to be almost impossible. As pointed out above due to administration costs, and economic calculation. I'll add lower incentives to be frugal spending other peoples money, and inefficiency to the list as well.
Government created jobs can take away money from private individuals, which can drive up demand for x good, supply x good, etc, etc..
Private individual's money can be used to create a job, drive up demand for x good, supply x good, etc, etc.
Government encounters calculation problem since there is no profit loss, free market pricing, etc,etc.
Also when government uses its money, its less careful with it.
“Since people are concerned that ‘X’ will not be provided, ‘X’ will naturally be provided by those who are concerned by its absence.""The sweetest of minds can harbor the harshest of men.”
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