President Obama touted his American Jobs Act before a special joint session of Congress last Thursday. The speech was unfortunately filled with familiar platitudes and the same ineffective approach to jump-starting the economy, namely increasing government spending to create jobs.

Politicians can use euphemisms, such as “investment” instead of “government spending,” to sell such an idea, but no manner of grandiloquence can obscure the reality that their ideas are just, to put it simply, bad. Increasing government spending does not create any new jobs or wealth; it only shifts old jobs and transfers wealth.

The Broken Window Parable

Nineteenth century French economist Frederic Bastiat’s broken window parable offers an explanation. Allow me to tell a more modern version.

Let’s suppose that I, as a very benevolent man, want to stimulate job creation on the Biola campus. I decide to walk around Alpha Hall and Sigma Hall and throw rocks at the windows to break them — something you should never be so foolish to actually do, for you will get in trouble.

My deed, after all, will require Facilities Services to work overtime to clean up the mess, and why not? They get to take home a bigger paycheck. Moreover, Biola will then have to contract others to replace the windows. Window makers will see a spike in their business, as will all the producers of raw materials for making windows. Not only that, Biola can hire people to install the windows. It’s new jobs all around!

However, what we do not see are the alternative ways of using the resources had I not broken the windows in the parable. For instance, the money used to pay facilities workers could have been spent on buying better equipment for facilities to work more efficiently. Rather than paying window makers and installers, funds could have been spent to hire additional students for other campus jobs, given to meet the needs of other departments or used to support a campus ministry.

Although my rampage appeared to result in jobs, the truth is that no net jobs were created. If anything, the destruction of property lowered the value of Biola’s assets and diverted funds from more productive endeavors. Jobs and wealth were not created but only shifted in this zero-sum ploy.

Additional government spending slows economic recovery

A similar effect occurs when government spends money to create jobs. The $300 billion needed to fund the proposed American Jobs Act will come from taxes paid by private sector. Yet with every dollar that the government takes from the private sector, it is one less dollar that the private sector can use to create new jobs, generate new wealth and expand toward economic recovery.

Not only are no new jobs created, but the government is also spending its money inefficiently. For example, last year an audit by the Los Angeles Controller found that the city spent $111 million from the 2009 Stimulus Package only to create 55 jobs, or just over $2 million per job. Similar wasteful examples abound. No business would survive if costs were that egregious.

Additional government spending towards alleged job creation, whether it is called the American Jobs Act or the American Recovery and Reinvestment Act, is precisely what should not be done to spur economic growth. In fact, it does the opposite. Government intervention usually prolongs recessions and stifles recoveries, as renowned economist professor Thomas Sowell recently explained. In contrast, maintaining lower taxes, less onerous regulations and less government spending — a climate in which the free market can thrive — will enable the economy to improve on its own.

Obtaining understanding is essential for effective Kingdom work

Biola’s passion to contend against poverty is apparent. During the Ministry Festival last week, I noticed several ministries dedicated to that end. Matthew Fier also wrote a recent Chimes opinions article, exhorting the Biola student body to reach out to the homeless.

However, if the Biola community wants to help those in economic need, then it must labor for a robust understanding about how the economy functions and recognize fallacies, such as the broken window parable. It is crucial to discern appealing government policies that falsely promise to be a solution when they, in fact, can aggravate the problem. Effective ministry and bringing restoration to the world depend on it.