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From: robinson@ubc-cs.UUCP (Jim Robinson)
Newsgroups: can.politics
Subject: Re: Star Wars North
Message-ID: <992@ubc-cs.UUCP>
Date: Sat, 30-Mar-85 22:54:37 EST
Article-I.D.: ubc-cs.992
Posted: Sat Mar 30 22:54:37 1985
Date-Received: Sun, 31-Mar-85 17:26:13 EST
References: <890@ubc-vision.CDN>
Reply-To: robinson@ubc-cs.UUCP (Jim Robinson)
Organization: UBC Department of Computer Science, Vancouver, B.C., Canada
Lines: 87
Summary: 

In article <890@ubc-vision.CDN> mack@ubc-vision.CDN (Alan Mackworth) writes:
>
>     .........    Weapons   research  and  development  has  been
>     compared, in its economic impact, with digging  an  enormous
>     hole  in  the ground and filling it in again.  It has little
>     spinoff benefit to the industrial and consumer economy.  The
>     economic  multiplier effects are minimal compared with other
>     activities.  Using lasers, particle beams and  computers  to
>     dig  the  hole does not change that fact! The United States'
>     economy is now overheated because of massive military expen-
>     ditures.  It appears however that, fundamentally, that econ-
>     omy is in decline.   In  1984  the  United  States'  current
>     account  balance  of  payments deficit was $101,600,000,000.
>     It is now a net debtor nation.  Is this the economic perfor-
>     mance we want to emulate?

If indeed the US economy is overheated then I suggest that this state
of affairs is *not* due to massive military spending. I am not an 
economist but it would appear to me that in order for an economy to
overheat there would have to be too much money circulating in that
economy which could only happen if a substantial amount of money 
found itself in the hands of a substantial number of people. Since
I agree that the multiplier effects of military spending are minimal,
i.e. a great deal of money is going into the hands of a few, I am tempted
to look elsewhere for the answer.

The single action that Ronald Reagan did that would both cause this
release of large amounts of money into the economy *and* ensure that 
this money was reasonably distributed was to deficit finance a 25%
cut in federal income tax. By returning this money to the people 
he  stimulated the consumer economy in a very (overly?) positive manner.
No ridiculous job creation schemes in **selected** MPs' ridings which 
tend to do little more than guarantee the re-election of the concerned
MP and cause a short term drop in the unemployment rate. No, he gave
the money back to those who know best what to do with it. Unfortunately,
a key phrase in the above is "deficit finance" and it is this deficit
financing of the tax cut that has now come back to haunt the US.
Canada's deficit has done nothing for the Canadian economy due to the
fact that it is being used to finance non-productive ventures. ( Did
I hear someone say Canadair ? )

Any criticism of an economy would be incomplete if one looked only at
its trade deficit and ignored its unemployment rate and yearly deficit.
Yes, the US does have a whopping trade deficit of $100 billion which
compares poorly with Canada's trade *surplus* of 20 billion. However,
the unemployment rate in the US is about 7.2% compared to Canada's 11%.
Of the Big 7 only the US and Japan have single digit unemployment, and
my own personal opinion is that  much of the Japanese way of doing
things is not transplantable to North America. Somehow I cannot picture
happy UAW members cheerfully singing the company song before merrily
starting another day of work for their respected employer.

Canada has a yearly deficit of about $35 billion versus the US's
$180 billion. I.e. on a per capita basis, our deficit is *twice* the
size of the US's. This also ignores the fact that 49 of the 50 states
are required by law to have balanced budgets, whereas I don't think
there is a single province with such an animal. It is of interest
to note that in the States both the Republicans and the Democrats agree
that the deficit stands in the way of full economic recovery; their
disagreement is on how to reduce it. In stark contrast to this Canada
is in the situation where not one of the three federal parties will 
admit that something has to be done. They are all trying to pretend that 
the deficit will magically go away on its own if we ignore it long enough.
To his credit, John Turner did at the beginning of his campaign talk
about reducing the deficit, but he quickly realized that nobody wanted
to hear about it and so shut up. 

Coming back to  Canada's trade surplus we note that about 75% of
Canada's exports are to the US. This means that Canada is in the 
precarious position of benefiting from the US's trade deficit. 
This suggests that whatever measures are taken by the US to reduce
their trade deficit will invariably decrease our trade surplus. 
The Americans are already quite upset about Canada's steel 
and lumber exports and it is only because of Reagan's free trade
attitude that Canada has not found heavy quotas and/or tariffs
affecting those exports. If that had been a Democratic president
Canada would have been up the proverbial creek without a paddle.
We also note that trade deficits are not cumulative in the manner
that revenue deficits are. I.e. every year that we add to the 
national debt by running a deficit we must devote a greater percentage
of our expenditures, in the following year, to servicing that now
larger debt thus leaving less money for productive purposes. 

So my answer to the question "is this the economic performance that
we want to emulate?": it sure is a lot better than we're doing now.

                                          J.B. Robinson