Two separate but somewhat related articles that are worth reading. First, Amity Shlaes reminds us of Frederic Bastiat’s Broken Windows and their application to today’s economy (hat tip: Steven Hayward). An excerpt:

In the summer of 1850, just before going to Paris, Bastiat laid out the now-famous parable. Disaster happens. A thief breaks a man’s window, or a storm does. The man has to pay the glazier to fix it. The glazier spends his money at the store. When enough windows are smashed, voila: a visible benefit, new jobs for the glass industry.

True enough, noted Bastiat. The window replacement is what is seen. What about that which is not seen? “Since our citizen has spent six francs for one thing, he will not be able to spend them for another. It is not seen that if he had not had a windowpane to replace, he would have replaced, for example, his worn-out shoes or added another book to his library.”

The same holds for a government: when it repairs windows — cleans up hurricane damage — it is not using the same money for other causes that might be more worthy, such as reducing government debt or taxes.

“What Is Seen and What is Not Seen” was how Bastiat titled his essay. The corollary “not seen” today is all the businesses that can’t be started because of taxes or regulatory and legal uncertainty. The corporate-tax cut that the president proposed would benefit those unseen businesses or individuals.

The other article is the transcript of a speech that Representative Paul Ryan gave this morning at a Constitution Day celebration in Washington. The focus of his speech was on freedom and the importance of the Rule of Law. A brief excerpt:

Usually, our defense of the Constitution is presented as a defense of America’s founding principles and values, and rightfully so. But our constitutional system is not just a collection of principles; it embodies an approach to government with profound practical implications for both our freedom and our prosperity. When that system is threatened, both freedom and prosperity suffer.

Freedom is lost by degrees, and the deepest erosions usually take place during times of economic hardship, when those who favor expanding the sphere of government, abuse a crisis to persuade free citizens that they should trade in a little of their liberty for empty promises of greater economic security.

We all remember what Benjamin Franklin said about that trade – that those who would make it deserve neither liberty nor security. But in such cases, when liberty is lost, it is our fault as champions of the Constitution, for failing to mount a sufficiently persuasive and effective defense.

Ryan goes on to demonstrate several different ways that the rule of law has been attacked over the years. This speech is by far one of the most serious and consequential political speeches I have ever read. There is no doubt in my mind that Rep. Ryan should run for President (the sooner the better).

Be sure to read both articles.

One of the most fascinating books I have read over the last few months is The Forgotten Man: A New History of the Great Depression. Actually, in reading the book I was amazed at how much President Barack Obama’s economic policies are like that of FDR. Needless to say, that was not comforting.

Recently I had the opportunity to talk with Amity Shlaes, author of the book. Click here to read more about our conversation and what she had to say about the current economic crisis.

President Barack Obama has made no secret of the fact that he considers Franklin D. Roosevelt as one of his role models. President Obama’s economic plans are very similar to those of FDR: increased government spending and intervention in markets to try to spur economic growth. Amity Shales, author of the excellent book The Forgotten Man, offers a terrific summary of why the New Deal didn’t work. (hat tip: Nota Bennett)

The fundamental problem with President Obama’s economic policies is the underlying assumption that government action can solve problems that can be more effectively and efficiently dealt with by market forces. The only guarantee with the President’s proposals is that the economy will be no better off and in fact probably be in much worse shape no matter how much new spending is dressed up as “stimulus”.

If the President’s program actually helps the economy recover it will be the first time that increased government spending has spurred economic growth. History (and particularly the New Deal) suggest that the President’s stimulus is doomed to fail.

The trouble with new financial crises is that they provide pretexts for implementing old social agendas. As the president-elect’s new chief of staff, Rahm Emanuel, said recently, “never allow a crisis to go to waste.”

Consider President Franklin Roosevelt’s New Deal, which President-elect Barack Obama invokes when he talks of “a defining moment.” Like Obama today, FDR was inaugurated into trouble. He wisely addressed the financial crisis through the steps that we learned about in school. He signed deposit insurance into law, reassuring savers. He created the Securities and Exchange Commission, making the stock market more transparent and consistent. He soothed our grandparents via his radio Fireside Chats. This was the FDR we love.

But FDR also used the crisis mood to push through an unprecedented program of reforms that progressives had been hoping to put in place for years. Sen. George Norris of Nebraska, for example, had for decades argued that utilities should be in the public, not the private, sector. As far back as the early ’20s, Norris wanted to build a big power project on Tennessee River. He wanted the government – and not the Ford Motor Company, which was drawing up such plans – to be in charge. FDR made Norris’ progressive dream a reality by creating the publicly owned Tennessee Valley Authority. Washington won out, but it wasn’t clear its power served the South down the decades.