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Some people claim that natural disasters such as hurricanes "are not harmful to the economy because there's so much extra work involved in reconstruction." John dispels that myth by interviewing Sallie James and David Henderson, who point out that the money spent on reconstruction could have been spent on producing a new item instead of replacing an existing item. The same principle applies to government stimulus spending. While government spending does create new items, the taxes used to produce those items could have been directed at other activities to create wealth. With either reconstruction or government stimulus, the spending only redistributes jobs and production; it doesn’t create them.
SEGMENT 9 / POM DVD