Wichita school bond issue economic fallacy

A recent article in the Wichita Business Journal (December 28, 2007) about USD 259, the Wichita public school district, bond issues contained this passage:

“The economic benefit was fantastic,” says Joe Johnson, a partner at Schaefer Johnson Cox Frey, who was on the 2006 steering committee. “No one predicted the downturn, but this community got tremendous value from the bond issue.”

There was also this passage concerning Wichita Schools Superintendent Winston Brooks:

There is a misconception, Brooks says, that the bond issue was a drain on the economy. Actually, he says, the bond issue had a positive economic impact on Wichita.

“I think we did bail out this community with the bond issue,” Brooks says. “… Often times when you hear the district talk about bond issues, it’s ‘Here they come again. It’s going to kill the economy.’ The fact of the matter is that’s not what happened last time.

“That bond issue helped the economy.”

I have no doubt that the school bond issue in 2000 was a tremendous benefit to Mr. Johnson’s firm. I’m sure Superintendent Brooks, in some way that I don’t understand, benefited from the bond issue, too.

As to the rest of the community, however, the benefit claimed by these two men doesn’t exist. It never existed. It is only a fantasy flowing from an economic fallacy. It comes from being so focused on one’s own self that nothing else matters, and is therefore not seen or considered. As explained by Henry Hazlitt in his book Economics in One Lesson:

This [fallacy] is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

Consider: If the bond issue in 2000 had not passed and people in Wichita kept the tax money that goes to retiring the bonds (and the future payments yet to be made), what do you suppose they would have done with that money? Wouldn’t it be possible that they would have spent and invested it, and that spending and investing would have provided economic benefit to our community too?

I am reminded of another passage from Economics in One Lesson regarding a bridge to be built:

Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing.

But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project.

It is as simple as that. Every dollar taken by taxes is a dollar that isn’t spent somewhere else, with the attendant loss of economic activity. When we hear arguments about how much a new school bond issue will benefit Wichita’s economy, remember this.

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