wetcw@pyuxa.UUCP (12/07/83)
Perhaps I will have to make my arguments a little more simple. In the first place, in this day and age, there is no organization or company large enough, or with enough capitol, to undertake the types of projects I am talking about. The government is the only source for the huge amounts of cash needed to finance huge projects. Second, let us take one pipefitter, age 36, married, three children, wages $26,300 per year (an example only). This pipefitter works on the aforementioned battleship project. He belongs to the Union. He was previously unemployed for 3 and 1/2 months. The pipefitter is now working on the project for 4 months and he decides to buy a new car. He buys the new car and the salesman receives a commission on the deal of say $300.00. The salesman sells two cars that week and takes his wife to Florida for a week. While in Florida, the salesman tips (only tips now, not even wages) the waitress in the resturant a total of $27.50 for the service during the week. The waitress then sees a new toaster in a store for $25.00 and buys it. The store manager then reorders his stock of toasters from the manufacturer. The manufacturer, seeing more orders for toasters coming in decides to hire one more person for the assembly line. The new person on the line, feeling good about the new job, takes ten bucks out of the first paycheck and drops by the local bar to celebrate. The person spends the ten bucks on beer and pretzels. The bar owner now must order more beer and pretzels. This could go on and on. What makes it possible is governments ability to spend huge amounts of money. That is not to imply that it is at all all wisely spent, just that this is the flow pattern from huge projects. Filling potholes or flushing toilets could not possibly create an economic cash flow to equal huge projects. Further, even a cross-eyed look at the original NASA projects reveals this cash flow pattern all over the country. Keansian economics, as taught in the schools today, doesn't address these points. The original thesis did, but subsequent fiddleing with the models has blown it out of whack. If we could get our huge corporations to see this same idea, as they once did, the same economic conclusions could be made. But, huge corporations are both no longer willing to take risks, nor are they capable of economically supporting huge proects. Thus, we are left to depend upon the government to finance projects. Just giving the money away is non-productive. There has to be a conclusive result of the spending, economic stimulation, jobs "created", wealth circulating, more taxes collected, more projects targeted. Once the corporations realize that it is to their benefit to get in on the act, then they might be induced to jump into the cycle in a more positive way. Creating goods is only half of the cycle. The other half is creating jobs so that the goods can be circulated. No matter how you slice it, the government is the key pin in the economic cycle in our day and time. We might as well face it and put our energies into making certain that the types of projects undertaken by the government are the ones that assure a continued economic growth. The whole idea is akin to a "war economy" without the war and with recycle thrown in to preserve resources. T. (Spread the Wealth) Wheeler
courtney@hp-pcd.UUCP (Courtney Loomis) (12/09/83)
#R:pyuxa:-41900:hp-pcd:17400037:000:410 hp-pcd!courtney Dec 8 09:23:00 1983 Something that you are missing in your cash flow analysis is the effects of supply and demand. WHENEVER you create a job which does not add any goods to the consumer market place, all you have done is increased the demand on the existing goods. Increased demand with constant supply is one major source of INFLATION (which is sure to show up within the next year or so as a result of Reagan's policies). CL
walsh@ihuxi.UUCP (B. Walsh) (12/09/83)
First of all, it's Keynesian, not keansian, but that's a minor point. Secondly, all you were describing was the 'multiplier', whereby a small increase in planned investment or government spending (not ONLY gov't. spending) results in a relatively large increase in GNP (NNP really). But, if taxes were lowered at the same time and rate that gov't. spending was lowered, the effect would not be great. NNP would remain stable, because a decrease in taxes would indirectly increase aggregate demand, making up for the decrease in supply of gov't. spending. So, if the gov't. lowered defense spending, it could give us a tax cut and everything would (should) work out fine! (Works great on paper!) Reality, alas, is never this easy. B. Walsh
nrh@inmet.UUCP (12/13/83)
#R:pyuxa:-41900:inmet:7800035:000:6301
inmet!nrh Dec 10 19:01:00 1983
[I just couldn't bring myself to repeat your exhausting stories about
the pipefitter, the car salesman, the waitress, and how their
employment by the Government directly or indirectly is the basis
of prosperity. As a reply, some of the wisdom of
Henry Hazlitt, "Economics in One Lesson":
Two arguments are put forward for the bridge, one of which is mainly
heard before it is built .... The first argument is that it will
provide employment. It will provide, say, 500 jobs for a year.
The implication is that these are jobs that would not otherwise have
come into existence.
This is what is immediately seen. But if we have
trained ourselves to look beyond immediate to secondary
consequences, and beyond those who are directly benifited by a
government project to others who are indirectly affected, a different
picture presents itself. It is true that a particular group
of bridgeworkers may receiver more employment than
otherwise. But the bridge has to be paid for out of taxes.
For every dollar that is spent on the bridge a dollar will
be taken away from taxpayers. If the bridge costs $10 million
the taxpayers will lose $10 million. They will have that much
taken away from them which they would otherwise have spent on the
things they needed most.
Therefore for every public job created by the bridge project
a private job has been destroyed somewhere else. We can see
the men employed on the bridge. We can watch them at work. The
employment argument of the governemt spenders becomes vivid
and probably for most people convincing. But there
are other things that we do not see, because, alas, they
have never been permitted to come into existence. They are the
jobs destroyed by the $10 million taken from the taxpayers.
All that has happened, at best, is that there has been a diversion
of jobs because of the project. More bridge builders; fewer
automobile workers, television technicians, clothing workers,
farmers.
]
If we could get our huge corporations to see this same idea, as
they once did, the same economic conclusions could be made.
But, huge corporations are both no longer willing to take risks,
nor are they capable of economically supporting huge proects.
[ And why not? Because a capricious, arbitrary, disorganized and
vindictive force (government) has been given the authority to
destory business activity on a project-by-project basis.
There was a little set-to in California between a Government agency
and a private firm which took the risk of owning land near the
ocean for the purpose of putting up condos. They would have
made 34 acres of the ocean front property available for a public
beach. From "The Incredible Bread Machine", by Brown, Keating,
Mellinger, Post, Smith, and Tudor:
The privately-owned land was completely graded for construction
before the Coastal Commission was empowered. In order to proceed with
construction, AVCO had to apply to the newly formed commsion for
the necessary permits. They were denied.
AVCO was then caught between the conflicting demands of two
government agencies. On the one hand the county demanded that AVCO
finish the promised public beach by a certain date, while on the other
hand the Coastal Commission denied the required permits to complete
the work. In the meantime, the company paid (and is paying) $15,000
a day in taxes on the unused land.
In an effort to save the righ top soil from erosion during the
rainy season, AVCO proposed that the commission at least allow them to
seed their own land with grass. This was also denied as it
was feared by the commission that AVCO, as a result of having put more
money into development, would then have a stronger legal case.
Two years hav passed and the land which is a vicious eyesore, continues
to erode each rainy season until now, even during light rain, the ocean
becomes brown from the washed-out soil. Is this protecting the
environment or the commission's power?
That was some time ago. Anyone know if there's any resolution?
If I were a businessman, I'd avoid taking any sort of risk that
would put me in the hands of the Coastal Commission.
]
Thus, we are left to depend upon the government to finance projects.
Just giving the money away is non-productive. There has to be a
conclusive result of the spending, economic stimulation, jobs "created",
wealth circulating, more taxes collected, more projects targeted.
Once the corporations realize that it is to their benefit to
get in on the act, then they might be induced to jump into the
cycle in a more positive way.
[Indeed, they do. That's why they're turning from productive investment
to fancier offices in Washington. A business has little defense
against government corruption, except to buy in big. Everybody
except the politicians and the "net tax winners".
]
Creating goods is only half of the cycle. The other half is
creating jobs so that the goods can be circulated. No matter
how you slice it, the government is the key pin in the economic
cycle in our day and time. We might as well face it and put
our energies into making certain that the types of projects
undertaken by the government are the ones that assure a continued
economic growth.
[Of course, we could face the idea that "government is they key pin
in the economic cycle", but that it SHOULDN'T BE. This country was
not founded on that idea, You will find little in the constitution
and the bill of rights about Government's power over the economy.
As I recall, Uncle Sugar's power to levy an income tax was added
much later.
]
The whole idea is akin to a "war economy" without
the war and with recycle thrown in to preserve resources.
[How disgusting. It's almost 1984. Was it Oceania vs Easthem?
Shall we have conscription when people refuse to take the jobs
that your (for I assume you, not I will control the government)
programs offer them? Shall we have boarder guards to prevent people
from fleeing to a freer place
]
T. (Spread the Wealth) Wheeler
[
Nat (feel free to spread YOUR wealth) Howard.
]wetcw@pyuxa.UUCP (T C Wheeler) (12/14/83)
Well, that was interesting, however, the bridge analogy does not seem to fit the focus of large projects being financed by private industry. In the first place, why would a private corporation build their own bridge? What will they get back economically? If, as you say, 500 jobs would be taken away from private industry, then I am confused. Isn't private industry going to build the bridge? I didn't know that the government ran a bridge building department. I have always been led to understand that the government let private industry bid on these construction projects. In this bridge scenario, it seems to me that 500 more jobs would be "created" in order to accomplish the building of the bridge. Let us say that the XYZ Bridge Company wins the bid to build said bridge. Now there are two factors involved here with XYZ. First, XYZ has no current projects underway, therefore they will have the need to hire 500 workers for the project. Second, XYZ is currently involved in several projects, and thus will have to increase their workforce by 500. Either way, 500 jobs are created. Perhaps, some of the 500 come from other companies; because there is a better opportunity, more pay, or whatever. Since we are assuming a rising economy such as is now happening, the other companies will be rehiring to replace those lost to XYZ. Again, 500 jobs are created, and with the constant need to create jobs due to the rising available workforce, the cycle continues. As for taxes being lowered to induce private industry to create jobs, that was tried with no results to date. CEO's in the larger corporations are, according to all that I have read, only looking at the bottom line. They do not want to go out 3 years from now as the guy who lowered net profits. Many of their perks are also based on what they put on that bottom line. Noone is going to upset his apple cart. Therefore, to expect private industry to take over the financing of large non-profit based projects is not realistic in this day and age. The government took over the role of creating jobs in the 30's and has been stuck in that mode ever since. The jobs are actually created in the private sector due to contracts, etc.. Whenever the government cuts back on spending(as during Carter admin), layoffs begin to occur in the private sector. As government money dries up, so do jobs in other industries. Social spending, although absolutly necessary, does not create jobs in the sense that new projects do. While new schools or hospitals may be needed ( an arguable point in most areas of the country), they create only short lived jobs ( as does the bridge). We could pay teachers more, but there is only a finite number of teachers, many of which are out of work due to dropping school populations. What does it all come down to? At this time in our history, the government must continue to finance large projects in order to keep economic advancement on an even keel. To do less would invite economic stagnation, just as we went through over the previous two years. My vote is for a space station. A huge long-term project that will require a myriad of disciplines, creating countless jobs, and probably improving technology by large factors. Please don't flame about military uses, I'm talking peaceful uses with technological benefits for everyone, including the soviets. T. (spread a little more) Wheeler
rpw3@fortune.UUCP (12/16/83)
#R:pyuxa:-41900:fortune:17300012:000:192 fortune!rpw3 Dec 16 01:26:00 1983 The "multiplier effect" is real. It is, however, only about $ x 7, not times infinity. In a bad year it can drop to $ x 5, since it depends on money saved and invested, as well. fortune!rpw3
laura@utcsstat.UUCP (Laura Creighton) (12/16/83)
The thing about large government projects is that they are financed through taxation. So you get to build your bridge, but I have to pay for it, which means that I don't get to buy the books I would otherwise. Is your bridge more efficient than a million of us buying books at spreading the wealth? As long as I don't hoard the money in my mattress (remember that banks invest their money as well) won't it acheive the same effect? Anything with a bureacracy is traditionally inefficient, because the cost of communication is so high that it doesn't get done. Thus your large bridge project should be worse than if I and five friends got together and set up a software house with the money that we would otherwise be taxed for large government project. Moreover, when industries run the very high risk of being taxed out of existance, the impetus for private industry to start brave new projects seems to be lost because of the high taxation for your make-work projects. (I think that you are the person who wanted to build and unbuild the battleships, if I have gotten you confused, then I am sorry.) Laura Creighton utzoo!utcsstat!laura
cas@cvl.UUCP (Cliff Shaffer) (12/16/83)
To T. (spreading it a little deeper) Wheeler
<Sorry - I don't really mean to be offensive - I just couldn't resist!>
I think that the infamous "bridge analogy" is not making a judgement on
the merits of bridges, nor saying that independant contractors don't do
the work. Rather, it points out that every penny spent by the
government comes from the tax-payers. This means that those dollars
are used for what the government wishes to use them for, as oppossed to
what the tax-payer would otherwise have used them for - presumably
consumer goods. So the important question, when you give money to the
government, is "Is what the government is spending my money on more
beneficial to me than what I would have spent my money on?" Of course,
defining "beneficial" in this case is difficult.
Now, I think you are getting a lot of unfavorable response about
your original argument on missle silos because many people have decided
that more missle silos are not of as much benefit to them as either
the equivelent consumer goods, or alternatively other uses the
government might put to the same dollars.
On another point - I don't believe the Carter administration cut
government spending, merely resuffled it slightly (certainly the budget
increased). You can't blame the recession on that!
Cliff Shaffer
{we13,mcnc,seismo}!rlgvax!cvl!casdavid@randvax.ARPA (David Shlapak) (12/29/83)
Yeah, but how do you get your untaxed money to the bank if no one's built the bridge over the river...or, for that matter, the road..? "Spread the wealth" is a wonderful phrase but I have yet to see, on this net or elsewhere, a good, internally consistent definition of what it means in practice... Oh well, just idling along...cheers... --- das