From: slagle@lmsc.lockheed.com (Mark Slagle)
Subject: Re: Raising Revenues vs Spending Them
Reply-To: slagle@lmsc.lockheed.com
Followup-To: ba.politics,ca.politics
In-reply-to: andy@SAIL.Stanford.EDU's message of Tue, 21 Jul 1992 01:50:26 GMT
Organization: Lockheed Missiles and Space Co., Sunnyvale, Ca.
	<1992Jul21.015026.26228@CSD-NewsHost.Stanford.EDU>
Date: Wed, 22 Jul 92 04:55:14 GMT

In article <1992Jul21.015026.26228@CSD-NewsHost.Stanford.EDU>, andy@SAIL.Stanford.EDU (Andy Freeman) writes:

> So?  Price is a balance between "money" and goods/services.  Inflation
> refers to a particular change in that balance.  One can add both
> additional goods/services and "money" to an economy without affecting
> the balance.  Since spending, even by govt, can create goods/services,
> just printing money need not cause inflation.

You continue to repeat your fundamental error.  Spending, per se,
cannot produce anything, much less material goods.  These things
are produced by the application of labor and capital.  If you are
suggesting that the government should go into business and compete
with the private sector, then you are talking about fomenting a
revolution.  If you are not, then your proposal is inflationary
to a large degree.

> Yes, govt spending "transfers" resources (some from other uses, some
> from disuse).  That's true no matter where they get the money and is
> true of all spending.  So what?  Either the result is worthwhile, or
> it isn't.

Government spending, if derived from tax revenues, does not
of itself increase the money supply.  Printing money to cover
the spending does, that is why it is necessarily inflationary.

> I don't assume that govt spending is be inherently stupid.  If it is,
> taxation can't save us from the consequences.  If specific spending
> isn't stupid, there's no inflation to account for.

No matter how many times you repeat this, it still matters
where the money came from that the government spends.  It
doesn't matter, at least in this context, whether or not the
spending is stupid, though much of it is.  In competition with
private spending, which does remove that much money from the
competition for other spending (otherwise I can buy something
twice with the same money), your proposal just adds to the
money chasing the same resources.  No matter how productive
the printed money turns out to be, that expansion is still 
there relative to private uses of money.  That is why your
scheme is inherently inflationary.  You have to compare it
to the available alternatives, not just wave your hands and
assert that the money will be productive.  Even if it is
productive, it is still inflationary with respect to the
present tax and spend scheme.  It cannot be otherwise.

> There is no free lunch, and I'm not offering one.

No, it's not a free lunch, but the benefits of government
largesse are still just as concentrated as they are in our 
present tax system.  The problem is that the costs are quite
a lot more diffuse than they are now, as bad as things already
are.  That's a recipe for an inflationary disaster.  A free
lunch is an easy miracle compared to what it would take to get
your scheme of fiscal suicide to work.
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Mark E. Slagle                                 PO Box 61059
slagle@lmsc.lockheed.com                       Sunnyvale, CA   94088
408-756-0895                                   USA