Re: The Pentagon and Poverty

[pdavidso <pdavidso@xxxxxxx>]

>===== Original Message From Clifford Poirot <cpoirot@xxxxxxxxxxx> =====
>
>>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.

Cliff:
I stopped beating Louise a long time ago.  If you moved towards more guns and
less butter than at A, then the  marginal propensity to consume of the
additional workers would have to be NEGATIVE.  Do you really think that is so.
 You could only achieve your position of more guns and less butter, if the
government increased taxes sufficiently so that the total labor force
(including the newly employed)  plus the profit recipients had less disposable
income than at the less than full employment point A in your example. So your
example implies lower deficits or surpluses at full employment compared to the
deficit at your point A.
>
>
>>I am arguing that until full employment, there is no REAL budget
>constraint.
>As an economist -- don't you agree?
>
>No.
>
>

Well if you do not agree -- then what 1s the REAL resource constraint to
expanding output at less than full employment?




>>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.


Nothing is locked into the economy if you start from less than full
employment.

What you are objecting to is a political decision and has nothing to do with
economics.

You want to impose your own value judgments on the political side of the cin.
I have no objection to you trying to affect the politics of the situation --
but do not try to wrap this in a smoke screen of economic jargon.

 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.

mindsets and overmilitarized economies before full employment is a political
opinion of yours -- not sound economics.


>
>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.



And what does large scale unemployment employment do for people to "fully
realize capacities"??  You do not think that some of the most important
technological advances -- e.g., the development of computers,  the Internet,
etc. was not a spin off of defense and space (remember Reagan's Star Wars)
budget spending?  How about micro viewing of small spaces via computers --
which is now routine in surgeries?  These technological;logical advances did
not permit people from "fully realizing capacities"?

Remeber before Sputnik, engineers had only slide rulers to do calculations!
You don't really believe the computer industry would have been developed as
rapidly without government military and Cold War space spending, do you?





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.

It is professionally irresponsible to cloak your political views in an
economic coat --   even though I may agree whole heatedly with your political
views , I do not suggest my economic background assures that military spending
is ALWAYS BAD -- at best I can say, I might prefer the government to spend on
other projects -- but if Congress will not deficit spend for these projects,
military spending that increases the deficit (at less than full employment) is
better than letting people who want to work at the going wage remain idle.
>>
>>>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.

Hey do you remember Hoovervilles and people being pushed off their farms
(Steinbeck's "GRapes of Wraith") and the destruction of people's lives that
comes with mass unemployment? Is that so desireable?

>
>
>>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.

You should try to make people believe that.

I tried once when I was in charge of "Economists For McGovern" campaign for
the State of New Jersey in 1972. I learned a lot in that campaign about what
economists could and could not "teach" the average person about government
spending, taxing, etc.


>
>
>>
>>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.


You are ignoring history and what happened to the government's revenue sharing
plans in the late 1970s under a democratic president.

>
>
>
>>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.

In other words, you  believe that if the government orders more goods and
services (financed by deficits and not taxes)ZERO (or negative)
 jobs will be created.

Now that's an interesting economic theory ---).


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

That's not what we are talking about.  The question is is it better to employ
otherwise idle resources to produce something rather than to let them remain
idle!

And you seem to prefer idleness!  -- as long as it is not professors of
economics who are going to be idled!

Paul

Paul Davidson
Editor, Journal of Post Keynesian Economics
University of Tennessee
SMC 503
Knoxville, Tennessee 37996-0550
office phone #;(865)974-3303; office fax#(865)974-4601
home phone and fax # (561)369-1951
email pdavidson@xxxxxxx
http://econ.bus.utk.edu/Davidson.html