From: ZEITLIN@SLACVM.SLAC.STANFORD.EDU (Cary Zeitlin)
Newsgroups: alt.politics.elections
Subject: Re: Republicans bad for Economy?
Date: 18 Aug 92 22:36:21 GMT
 <92231.103814ZEITLIN@SLACVM.SLAC.STANFORD.EDU>
 <16847CB17.MEDELMA@cms.cc.wayne.edu>
Organization: Stanford Linear Accelerator Center

In Message-ID: <16847CB17.MEDELMA@cms.cc.wayne.edu>
         EDELMA@cms.cc.wayne.edu (Michael Edelman)  writes:

>>I think a better measure would be the fraction of the federal budget
>>that military spending constitutes. Remember, it is not just DoD spending
>>that needs to be considered; a substantial fraction of the DoE budget
>>goes for defense, not to mention funding for the various branches of
>>the national security bureaucracy. Does anybody have these figures handy?

>If military spending as a % of GNP has been steadily decreasing, and
>entitlements steadily increasing, doesn't that suggest that the same
>trends should be true when the numbers are expressed as %GNP as when
>expressed as % budget? It would be very surprising for the ratios to
>reverse! ;-)

That wasn't my point at all; I am genuinely interested in getting some
realistic estimate of military spending (not just DoD budget) as a fraction
of total government expenditures. Your argument that this fraction is
declining because the % compared to GNP is declining rests on the assumption
that the federal budget is growing at least as fast as GNP over a longish
term. Probably it is, but I was asking for figures, not conservative dogma.

>>I would have guessed that entitlements were steadily increasing, rather
>>than undergoing periodic explosions. Still, if there are such explosions,
>>perhaps they can be best understood by looking at the underlying state
>>of the economy. Some part of entitlements must be gradually increasing,
>>just because of demographics (the aging U.S. population); probably
>>other parts of this spending are stronlgy anti-correlated with the
>>strength of the economy. Again, I'd like to hear some numbers here,
>>if anyone can present them in a reasonably objective way.

>No, there were tremendous accelerations in spending at certain times,
>noteably during the Carter and Bush eras. In both cases the explosion
>in spending and taxes preceeded an huge downturn. The pattern has been
>repeated enough to establish causality over the past century ;-)

You cite no references to back this up. Your assertion of causality has the
ring of oversimplicity and is similarly not backed up. I'm afraid I over-
estimated you.

>
>>Mike, I disagree. The classic Keynsian idea was to pump up the economy
>>by means of federal deficit spending. Now, point to whatever you want
>>as the cause of the deficit, but the fact remains that there was deficit
>>spending on a huge scale. The Keynsian idea was that the government's

>I think you're overlooking something- government spending increased
>tremendously during the Carter adminsistration while the economy was
>going to hell on a sled.

Government spending may have increased under Carter (as it has, continuously
through three decades now), but I do not recall the tremendous increase
you cite. How about some numbers to back up your claim? In any case, you
have chosen to ignore the uncomfortable (for you) fact that the deficit
was *not* increasing under Carter. And the deficit is what we were talking
about since it's a central part of Keynesian theory.

>The overall trend during the Reagan administration
>was a decrease in the trend, while cutting taxes. It was tax policy that
>fuel recovery, combined with a monetary policy that kept inflation down.

Nonsense. The "trend" we were talking about was increased deficit spending.
This rose sharply. You can't hide from that, as much as you'd like to.

>For further evicence we only need look at the European countries that
>cut taxes in the 80s and were rewarded with similar boom times. If
>Keynsian spending of the sort Clinton endorses were the answer, we
>should have seen a further boom in the 90s as spending under Bush
>took off similarly. This was obviously not what happened!

Yeah, geez, it's almost enough to make you believe in a business cycle.

>Right. The notion of the business cycle took a hit during the Reagan
>years. Those who believed the cycle was independant of policy were
>somewhat disconcerned.

Disconcerned, that's a good one. Not to flame you for spelling, but
it just sort of fits with the Reagan way...

>>more during bad times to prime the economic pump. What Reagan et al.
>>(and I include the Congress in this too) did was deficit spending
>>during a boom time. Not surprisingly, this exaggerated the upswing
>>in the business cycle that was coming anyway, hence the good times rolled

>No, I can't buy this in the least. You don't need a mythical business
>cycle when you have striking differences in policy that repeatedly correlate
>with economic performance.

Well, maybe there's a new school of economics that says the business cycle
doesn't exist. When I had economics (just one course, mind you, twelve
or so years ago -- from a *very* conservative Cal professor who went on
to be a Reagan appointee), this was not an issue in dispute. The whole
notion of a business cycle seemed to have a rational explanation, which
I don't want to get into here. Has this been totally discredited by the
events of the last 12 years? I doubt it. Maybe some trendy economists
have jumped on the supply-side bandwagon, but can you really say that
the consensus of economists is that the business cycle does not exist?

>>on and on. But it couldn't last forever, and now we have to pay the piper.
>>It should not be surprising if the downswing now is as protracted as the
>>upswing was in the 80's. (Yes, I know by some measures the economy is

>Nonsense. It was the "compromise" on spending and taxes that killed
>an 8-year boom.

This is the typical know-nothing answer -- the tax increase killed
economic growth. I expected better of you, Mike. If you recall, the
economic slowdown had started and government revenues were low. To meet
the Gramm-Rudman limit without cutting spending, taxes were raised.
I'm not saying it was right, I'm just reminding you of some recent
history. When the economy slows down, projections of tax revenues
(which tend to be very rosy anyhow) go to hell. This was behind the
tax increase that Bush and the conservatives now blame for everything.

>
>>The media are certainly not economic genuises. They repeat the conventional
>>wisdom ad nauseum. But I'd like to hear some specific examples of the
>>'flat-out lies' you complain about.
>

>Sure. The idea that there is this mythical "business cycle" is one. Actually,
>the economics behind the business cycle are well-known; it's not a mysterious
>force underlying cyclic boom and bust, but the actions of rational consumers
>and investors and cyclic *policy* decisions based on short-term economic
>goals.

This is not a 'lie.' It is a widely accepted fact (at least it was). There
is lots of historical evidence to support it.

[...Other stuff deleted, cause I don't have all day to argue with you.]
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 Cary Zeitlin                                ZEITLIN@SLACVM.SLAC.Stanford.Edu

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