"The faster rise of the national income relative to the national debt is usually demonstrated by comapring the respective quantitative data of both. This follows from the lack of distinction--notable in bourgeois economic theory--between private and public, profitable and non profitable production. Actually the growing national debt cannot be related to total income, as determined by both pubic and private production, but only to that part of the total which has not been injected into the economy by way of deficit spending. ** That part which has been injected falls out of the economy as a profit producing system. ** >>
What does this mean? The output created by 'injection' is no worse than other output, if in fact any distinction between the two ex post is meaningful at all.
>>It yields income, but by being
unprofitable, it yields no taxable income and can for that reason being
considered as a compensatory factor vis a vis the national debt. >>
Same question. Why is the additional output any different from the standpoint of taxation?
>> The debt
has to be paid out of taxes, that is out of the decreasing profitable part
of production. >>
Huh? Taxes come from production of all types.
>> Unless the national debt is actually recovered through
additional income in the private sector of th eeconomy, that is, additional
income apart from that injected inot the economy by govt deficit spending,
the 'income' derived from the latter remains, as far as as capital is
concerned, a govt expense. >>
Debt service is an expense, but one that can clearly be defrayed with higher total output. What's the problem?
>> "IN bourgeois economic theory, the GNP, or the aggregate demand, is equal
to the sum of consumption, investment, and government spending. Govt
deficit spending, however is not part of the market demand, but a
deliberate policy of producting beyond the actual market demand as
determined by consumption, investmetns, and govt spending, in order to
employed unused productive resources. This creates an 'effective demand'
WHICH IS NOT SUCH IN A CAPITALISTIC SENSE. However, individual businessmen
are not concerned with the nature of the effective demand which they
supply. to them it makes no difference whether its stems from govt or from
private spending. Likewise, the financiers do not care whether loans are
made to private enterpreneurs or to govt, so long as the loans seems secure
and yield a desired rate of interest. To the invidivual it makes no
difference whether he is employed by the govt or private enterprise,
whether he produces commodities for the market or for govt contracted
production. In practice, no distinction is made between the public and the
private sectyor of the economy, and in both all transactions are money
trasactions, which veil the underlying social implications of these
transactions. In the individual's view, govt induced production may be just
as , or even more, lucrative than production for the market, and --unless
repudiated--the accumulation of the national debt appears to him as the
accumulation of private claims on the govt and as an equivalent to the
accumulation of money and capital... >>
Sounds right to me . . .
>> "While this seems to be so, the steady rise of taxation and of the
national
debt implies a rise of taxable, that is, profitable production, which
demands an increased taxation. The material equivalent of the debt, such as
the construction of public improvements or the pursuit of war, cannot be
recovered as income.>>
Au contraire. Debt which finances public investment can be serviced with taxes on the income such investment generates in the private sector. If the Gov builds a bridge which raises the profits of business firms and wages of workers, taxes on those can service the debt which built the bridge.
Debt which finances public consumption can be serviced by the extra income such consumption generates.
In either case, obviously, debt can finance useless projects or can be excessive from the standpoint of the employment level or the growth of the economy.
>> . . . The income derived from taxes must come from NEW
production in the profit producing sector of the economy. But finding its
source in this new production means that a greater share of the altter's
profit must take on the form of taxes to cover current tax needs as well as
the costs of the national debt. >>
What are "current tax needs"?
>> This could imply a reduction of
profitability and therewith a further discouragement of private
investments. And this, in turn would force the govt to extend its deficit
spending. The only way of avoiding a situation wherein the decline of
private investments leads to govt spending and the latter to a further
decline of private investments, is that of increasing the profitability of
capital through the increasing productivity of labor."
>>
This sounds like J. Buchanan's argument that public debt displaces, dollar for dollar, private capital formation. In fact the negative effect of public borrowing on private investment is quite problematic, from an empirical standpoint.
I seem to have these same arguments with Republicans, so I look forward to your explanation.
Cheers,
MBS