Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Path: utzoo!watmath!clyde!bonnie!akgua!sdcsvax!dcdwest!ittvax!decvax!cca!ima!inmet!nrh From: nrh@inmet.UUCP Newsgroups: net.politics Subject: Re: Re: The WSJ on Reaganomics Message-ID: <1840@inmet.UUCP> Date: Thu, 29-Nov-84 01:14:36 EST Article-I.D.: inmet.1840 Posted: Thu Nov 29 01:14:36 1984 Date-Received: Sat, 1-Dec-84 19:33:21 EST Lines: 77 Nf-ID: #R:dciem:-120800:inmet:7800195:000:3579 Nf-From: inmet!nrh Nov 27 13:06:00 1984 >***** inmet:net.politics / dciem!watmath / 12:34 pm Nov 22, 1984 >================ >... Back to >basic economic truth: the cost to the citizenry of government is the >total it SPENDS (plus some), not what it taxes or borrows. >... >================ >No it isn't. When the Government spends money, it transfers money from >one group of people to another. There is no NET cost to society, since >each dollar transferred can be used to buy something, whether a civil >servant buys it or whether the worker who built an aircraft buys it. Think about it for a moment -- if there were no net cost to society by any transfer, we could (at no net cost to society) divert ALL the money in everybody's bank account to an attempt to build a giant cabbage patch doll the size of the Dakotas. Or better yet, we could spend it all on trying to drill a hole through to China. Of course, all other industry would stop -- there'd be no capital to support it, and we'd all starve. The "opportunity cost" of diverting money from private hands to government hands is the value of what would have been done with that money in the private hands. The net cost to society of such a transfer is thus more accurately described in terms of (what benefits WOULD have accrued) - (what benefits DID accrue). MEASURING what benefits would have accrued is tough, but it's pretty obvious in extreme cases (such as taking everybody's money in order to build a hole to China) that the benefits that accrue (the hole to China) are worth less than the benefits of what would have happened (farms produce, industry hums, people work at things other than digging). >In the case of a deficit, poor taxpayers transfer wealth to the rich >who loaned the money in the first place, when they pay interest. But >originally, the rich transferred the money to the poor when they loaned >it. I think you may be a little confused here. An lot of the poor own US savings bonds. They also participate in this boondoggle. (In a particularly cruel way, given that a lot of the bonds they owe were, during the Carter years, paying interest below inflation). > Are forced loans good for those who accept them? Sometimes yes, >sometimes no, but it can hardly be good when most of the interest is >paid by accepting yet more loans ... ask anyone who has used a loan-shark >how that works! Better yet, ask the ex-king of France what happened when the interest on the national debt began to approach the national income. Hint: "Bastille Day". >Reaganomics has been super-Keynsian in forcing the >depression to stop by incurring extraordinary deficits, That's a remarkable assertion, given that Keynes did not predict (and his followers could not explain) high inflation during a recession, and that Ronnie's major GOOD accomplishment has been to lower inflation. >and super-damaging >by drawing much of the loaned money from other countries through >unnatural real interest rates. There will indeed be a cost to US >society, and perhaps a greater cost to the rest of the world, but it >isn't due simply to how much the Government SPENDS. People assert that it is what the government spends, not any balance between what it spends and what it earns, that is the problem. I think that they are incorrect in economic-only terms (clearly, the deficit is due to a difference between income and spending) but correct in the following broader sense: If we were to increase government income, government would then increase its spending by a similar amount, so that the deficit would grow no more slowly.