The battle cries have been raging for a few weeks now, regarding a much anticipated "stimulus package" to be passed by Congress, more than likely right after the inauguration.  Governors and mayors have been flying and driving to Washington for some time, begging and pleading for more money, and listing off all the "public works" projects they could implement immediately with the money in order to "jump start" the economy.  Many are also calling for a "green stimulus", which would help to fulfill Obama's promise to "create 5 million green jobs".

But if they want to help the economy, why don't these people just walk down Main Street and start breaking windows in store fronts?  After all, even that helps the economy, does it not?  Yes, it's sad to be vandalized, but then the shop keeper will hire a glazier to fix the window.  That glazier then has more money to spend on buying things for his family, and so the economy grows, all because someone vandalized a storefront!  So to help the economy grow, all we have to do is start destroying other people's property, right?  Of course not, because this ignores the cost to the shop keeper.  The money that went to the glazier could have been spent on hiring another worker in the store, or on increased advertising to improve his business.  In the end, the shopkeeper had to spend money to return to the status quo (a functioning window), and therefore the economy is actually worse off.  He spent money, in order to simply stay the same!

Hopefully, this seems obvious to you, but you'd be amazed at how many times people use that very logic to justify economic actions, especially by government.  Have you ever heard someone argue that war is actually good for the economy, because it stimulates production, and creates innovation?  But what of the damage that war causes to property and the lives it takes?  And if we didn't spend that money on war time production, we could have spent that money on innovations in health care, or any number of other peaceful applications.  Then, once the war is complete, think of all the money that gets spent returning cities to their pre-war states.  Once again, we spend money to return to the status quo.  Countless activities tend to be postponed during wartime in order to allocate resources to the fighting.  Wars actually delay significant innovations.  While we're at it, we might as well start saying that hurricanes are good for the economy, because we have to rebuild cities after they are destroyed.  I'm sure there are a lot of Louisiana contractors who are doing great business, but I don't think the majority of New Orleans citizens would agree that they're better off.

But hold on a second.  How can we equate a stimulus package with breaking a window?  As described above, the issue with the vandal is that he performs an action which forces the shopkeeper to spend money to simply return to the status quo.  The ancillary benefit to others in the community is unimportant in this regard, and can't be used to negate the harm to the shopkeeper.  But the effect on the shopkeeper can be stated more generally.  The vandal performs an action which forces the shopkeeper to spend money in some fashion the shopkeeper would rather not do, which does not benefit the shopkeeper.  Which is exactly what a "stimulus" package does.

People seem to forget at times like this that stimulus money doesn't come from the ether.  It is acquired in one of three ways.  It is either acquired directly from money received via taxation, by borrowing money against future taxation, or by printing money.  All of these are the equivalent to the vandal who breaks the window.  Taxation and borrowing incur a cost on the shopkeeper either now, or in the future.  And printing money incurs a cost on the shopkeeper by making the money he holds today less valuable, which is a cost in and of itself.

Then, the government takes money we would normally have spent on something, and redirect the funds to something else that those in power feel is more important.  However, this no more stimulates the economy than fixing a broken window does.  In other words, any old spending does not equal "growth".  Growth occurs when spending is done which either responds to (and nurtures) economic demand, or creates demand that does not exist.  "Green Stimulus" is not an economic end to itself, but rather an adjective to other types of growth, that has a cost associated with it.

One plan is based on the fact that investing in energy efficient buildings would go a long way to create jobs and help the economy. The so-called Architecture 2030 plan recommends an investment of $171.72 billion over two years combining a housing mortgage buy-down and an accelerated-depreciation program for commercial buildings with energy efficiency. This plan could create over 3 million jobs in the building sector and over 4 million indirect jobs plus an additional 350,000 jobs from consumer spending.

The retrofitting and construction of green schools -- the largest construction sector in the United States -- will do the same. Between 2006 and 2008, we spent $80 billion on school construction. If we build those buildings green, they cost less than 2 percent more to construct; however, they pay for themselves in a few years. Consequently, municipalities with major school systems are increasingly looking at "green building" and renovation as they work to update school facilities and save the district money in utility bills. A green school can save a school enough money to hire two additional teachers -- all while preventing 585,000 lbs of CO2 from hitting the atmosphere.

In other words, the government will "break the window" of the building by declaring it not efficient and require it to be rebuilt or retrofitted... the modern day equivalent of forcing the owner to hire a glazier.  While the cost of making a building green at construction may only be 2% more (and we only have the author's word on that), retrofitting is significantly more expensive, and adds no growth to the economy.  It only diverts money away from other potential spending in order to "fix" a perfectly functional building.  There are also no statistics that show when the savings will come to offset the increased cost.  When talking about the need for stimulus today, that is significant.  Those tax dollars could be better spent on immediate growth, instead of what is the essentially a net loss today, for some undetermined potential future savings.  Spending on "green transportation" does the same thing.  It declares the functional roads and bridges of today to be broken, which must be replaced with new infrastructure.  But once again, this is not growth.  It is merely spending to return us to the status quo of transportation (but by different physical means).

That's not to say that trains aren't useful for certain types of travel scenarios.  But the reality is that the demand for growth in this area is not nearly as high as those in power want to believe.  If it were, then more private solutions in this area would pop up, instead of ones which require heavy government subsidization.  Instead, those who would like to see these types of projects funded for non-economic reasons are using the current crisis as an excuse to gain funding they normally wouldn't be able to get.

In the end, the only "stimulus" we need is to force government to take less of our money, so that we can spend it on things we the people demand, through our own spending and savings.  That is what generates real, sustained growth that will last.