Thank you again for your interest.
There is no question that the govt can tax the profits from the production it has itself ordered through debt financing; nor is there any question that production is profitable for those who have won the govt orders. But there is still the the debt the govt has undertaken to finance the cost of the production it has ordered, minus the tax receipts it has simply taken back. To honor that debt it must ultimately tax the surplus value that has been produced elsewhere by commodity producing labor. It is indeed possible that a sufficient mass of surplus value will be forthcoming due to rises in labor productivity or even that govt spending, say in the form of a transportation network, will itself speed the turnover of commodities and therewith the production of surplus value out of which govt debt can be covered (yet the sad truth is that govt debt to GDP ratios had been continuously rising until the US economy received the temporary fillip to domestic production in the form of massive capital inflows/lower interest rates and distress commodity exports from the global slump); it is also most certainly not contested that in lieu of debt financed govt production private capital formation would not be sufficiently vital to escape stagnation conditions.
Perhaps the following from Peter Rachleff from the journal Red Eye in the late 1970s is helpful; it also speaks directly to the importance of the prod/unprod and capital/revenue distinction under discussion here:
"State induced production is funded through taxes or deficit spending (deficits which must be repaid at some point, mostly by future taxes). This is a process of an exchange of revenue for labor power, not an exchange of variable capital for value creating labor power. Present or 'future' surplus value is appropriated from private capital by the State, in the form of taxes or loans, to pay for these expenditures.
"In other words, the products which the govt 'purchases' are not really purchased, but given to the govt free, for the govt has nothing to give in return but its credit standing which in turn has no other base than govt's taxing power andits ability to increase the supply of credit money through the manipulations of interest rates by the Fed Reserve Board.
"...the products produced for the govt do not function as commodities, and hence, they cannot function as capital. They are produced directly for one consumer, never entering the commodity market. They are purchased with revenue, which in reality consists of surplus value already produced (or to be produced, in the case of deficit spending) by private capital. State expenditures therefore cannot direclty add to the mass of social surplus value. ...
"There is no doubt that State intervention increases production and thus expands the productive apparatus, allowing the utilisation of means of production which would otherwise be idle and the employment of workers who would otherwise be out of work. However since the problem of capitalist production is not just the utilisation of means of production and the employment of labor power, but the creationof a mass of surplus value adequate to ensure continued accumulation of capital, and sicne govt induced proudction is not productive, does not yield surplus value, but only produces goods and services which are not thrown on the market, such production production cannot alleviate the fundamental problems of capitalist production"
By the way, I would imagine that as capital inflows slow and commodity prices recover, leading to rising costs and the need to cut them through greater economies of scale, US capital will find itself unable to rely on the effective demand created by its own accumulation and hitherto provided by an indebted govt and thus find itself in a world wide struggle for export share as compensatory effective demand. This will give rise to an intensification of Brenner's kind of inter imperial rivalry and further destabilisation in the major currency markets. The darkest sides of globalisation are yet to be seen.
To some extent, American capital may win this struggle but only at the great expense of production elsewhere and rationalisation, unemployment, wage constraints and speed ups domestically. However unpleasant the conclusion, there is indeed simply no escape from general crisis conditions for the working class within the capitalist mode of production even if regulated in benevolent technocratic fashion. The working class is confronted with the task of its own self emancipation or global barbarism. Ever since Rosa Luxemburg, the achievement of this understanding represents the mark of a revolutionary (mine is at best rudimentary); it must be deepened at all times by the best and toughest minds among us. It is more than pleasant that Daniel Singer ends his latest book with stirring quotes from her.
yours, rakesh