Create Wealth, Not Jobs

Spending on construction and infrastructure jobs is a perennial favorite of government stimulus boosters. “There’s no reason for Republicans in Congress to stand in the way of more construction projects,” President Obama told an Ohio crowd in September. “There’s no reason to stand in the way of more jobs.” However, the president now wants to block a massive private-sector construction project that would create the thousands of jobs he demands – the Keystone XL pipeline.

Strangely, the president seemed absolutely opposed to a compromise that would promote the very construction jobs he claims to favor. “Any effort to try to tie Keystone to the payroll tax cut, I will reject,” he said. “The reason is because the payroll tax cut is something House Republicans and Senate Republicans should want to do regardless of any other issues.” The only logical explanation for Mr. Obama’s continuous opposition to constructing XL is that he thinks it’s a bad idea. With that in mind, let’s judge the pipeline on its merits.

TransCanada’s Keystone XL pipeline is a massive job- and wealth-creation project. The pipeline will snake its way 1,700 miles from Alberta to the Gulf coast with stops in Oklahoma and Illinois. Keystone will create $7 billion in investment without any additional congressional spending. It is exactly the sort of massive construction project Mr. Obama demanded from Republicans in September, with one important exception: It’s private.

In the same Ohio speech, Mr. Obama said, “[W]e used to have the best infrastructure in the world here in America. We’re the country that built the Intercontinental Railroad, the Interstate Highway System. We built the Hoover Dam.” In other words, big projects are great as long as they are big-government projects. Otherwise, your project can wait.

The logic behind the payroll tax cut, as explained by Mr. Obama, is that “it will spur spending. It will spur hiring.” But the pipeline the administration is fighting will create 20,000 jobs with no new government spending. Detractors who have argued that these jobs are only temporary, that just 50 permanent jobs will be created, miss the point. Economic activity doesn’t exist to create work, but to create wealth. TransCanada isn’t building the pipeline to provide jobs, but to provide energy – oil for people to power their cars, lower their shipping costs and raise their standard of living.

If constructed, Keystone will deliver 303 million barrels of oil into the United States per year. That’s 830,000 barrels perday. This wealth is the purpose of the project; the jobs are part of the means. If TransCanada could build a pipeline without lifting a single finger – that is, create wealth without work – that would be great. Society would benefit at no cost.

But should creating more jobs be an end in itself? In a word, no. Work is a means to an end – creating wealth. Governments care excessively about jobs because they want every dollar they spend to conspicuously benefit large groups of people very quickly. That is a misplaced priority. For example, Congress could mandate that every person in the United States build the pipeline. We would all have jobs, but we’d all be much poorer, as other areas of the economy languish.

When technology reduces the labor required to travel, make a meal or build a pipeline, that’s progress. The fact that it takes just 50 people to run a 1,700-mile pipeline is an amazing achievement. It frees labor to create wealth in other ways while everyone still enjoys the benefits.

A private-sector project that employs just a few people can create enormous wealth for all of society. Businesses’ drive to increase productivity – to do more with less – frees up resources that then can be invested where they can be put to the most productive use. That goes for infrastructure as well as for any other investment. Furthermore, greater productivity increases wages, as workers’ time becomes more valuable to employers.

Mr. Obama said last summer, “To maintain our nation’s competitive edge, we must ensure that the United States has fast, reliable ways to move people, goods, energy and information. In a global economy, where businesses are making investment choices between countries, we will compete for the world’s investments based in part on the quality of our infrastructure.” We agree. Now the president has the opportunity to show whether he is serious.

Iain Murray is a vice president and David Bier a research associate at the Competitive Enterprise Institute.