Re: The Pentagon and Poverty

[Clifford Poirot <cpoirot@xxxxxxxxxxx>]

Paul, I am still not sure what has and has not cleared the list-so this may
still be ahead of the distribution.

See my responses below:

-----Original Message-----
From: pdavidso [mailto:pdavidso@xxxxxxx]
Sent: Sunday, February 29, 2004 8:03 PM
To: Clifford Poirot
Cc: pkt@xxxxxxxxxxxxxxxx
Subject: RE: The Pentagon and Poverty


>If you are not assuming full empployment, then budget"resources" are
strictly
a fictious problem.

I disagree for several reasons. Let's take a simple (I hope not too
simplistic and pedantic) example. Let's assume a budget constraint that
represents a balanced budget tradeoff (at full employment-the dollars that
can be spent represents potential tax revenues of the government when the
economy is at full employment) of guns for butter (guns on the vertical axis
and butter on the horizontal). Let's start at a point A, inside the full
employment budget constraint and let A be a line at a 45 degree angle so the
budget is evenly split between guns and butter. If we expand spending to be
at a level that reflects the potential budget at full employment-we will run
a deficit. We could spend more on guns and butter. But if we move towards
the budget constraint at a steep enough angle, we will actually be spending
less on butter at our new full employment budget than at point A. So no,
budget resources are not a fictitious (sic) problem.


>I am arguing that until full employment, there is no REAL budget
constraint.
As an economist -- don't you agree?

No.


>Would you prefer recesion-- In the olden days, before the soviet union
collapsed, military spending to dig holes in the ground saand fill them up
with missles that we nerver used-- ids the equivalent of Keynes's filling
holes with town rubbish, etc from the GT.

At least it created jobs and the multiplier spending created jobs in useful
inmdustry outputs.

Yes-but it also distorted budget priorities and the economy. Military
spending multipliers have been calculated as being lower than normal
multipliers, and as I said, it locks in structural imbalances in the
economy. Yes there are spin offs and it may even create leading sectors-but
the path dependent nature of these effects overmilitarizes the economy. If
you give me a choice between an overmilitarized economy that creates a lobby
for war, and creates a mentality and mindset where the military emerges as a
tempting tool to settle international conflicts, and my only altnernative is
recession, I have no idea what I would choose.

I choose, as much as I am able, as an economist, not to advocate military
budgets just for the same of full employment. Full employment is a valid
goal and one which I support. But it is part of a means to an end of
allowing people to fully realize capacities. In many ways, military spending
prevents people from realizing capacities. So, as an economist, I am not
going to say "well, the increase in military spending is good because it
increases the deficit". That would in my estimation, be professionally
irresponsible.

>
>>We may agree that it would have been "better" if only Bush would have
spent
>
>>the money on rebuilding infrastructure, or educating people, etc.,
>
>Yes-I prefer hospitals to tanks.

But if the electorate will be willing to let the Administration spend on
tanks
-- and not on hospitals, then what?  Don't spend?

The problem with tanks is not that they are not used. See what I said above.
Military spending militarizes the economy and makes violence more
acceptable. I am not going to supplort military spending just as a means of
achieving a deficit.


>Not just to run a deficit -- but to give worker to American workers -- who
ten
through the induced consumption spending (multiplier) give jobs to more
people.

There are better ways-and as economists, we should help people understand
that.


>
>I think it would have been politically possible for the President over the
>last four years to have submitted a budget to the Congress that focused on
>transfers to the States.

That's dreamikng in my view!

No it is not. Bush would have never done it. But transfers to the States
could have been immensely possible.



>How about less employment and output?  Is that a good thing?

We have to specify how deficit spending reduces unemployment and increases
spending. I don't buy that all deficits are good, or that all unemployment
responds to deficit spending.


>Better to dig holes and fillthem up again then to let workers willing to
work
stay idle.

Better to build hospitals and schools.