Clinton St. Quarterly, Vol. 7 No. 4 | Winter 1985 (Seattle) /// Issue 14 of 24 /// Master# 62 of 73

By Gar Alperovitz edly told that because of the $200 billion annual deficit we must cut spending, particularly for the poor. But the “deficit” would not exist if we chose to run the economy at high levels of production and chose to cut military spending, or if we chose to raise taxes on the wealthy as part of an overall program. These are political, not technical, choices. During the Eisenhower years, the economy was regularly run at a little over 4 percent unemployment. If we chose to manage the economy at this level, rather than the current 7.3 to 7.4 percent level of unemployment, simply putting the additional people to work would generate roughly $100 billion in additional tax payments and welfare savings. Cutting the military budget and raising taxes on the well-to-do could easily eliminate the other $100 billion of the deficit. How could we put people back to work? Reflect on the woman’s question: Think of what the government did during the Korean and Vietnam Wars. First, a decision was made that producing certain things was a priority. If, instead of spending money on guns and bombs, we spent money on houses, solar collectors, and schools, the same overall stimulus to the economy would occur, and this would put people to work. Second, with public initiative setting the pace, businesses would know there will be a market, and they would begin to spend money on machines and factories so they will have products to sell. This multiplier effect works because the initial public and private spending translates into additional jobs as the people first put to work begin to buy things, causing demand for additional products and putting others to work. How do we pay for it? Again, think of the woman’s question. In time of war, it is f—। ow is it possible to understand, let alone affect, the JI JL large and abstract entity we call “the economy”? Particularly in the difficult times of the Reagan era? Is there a way forward that is both effective and faithful to deeply held values? Or is our only choice to make meaningful “gestures,” participate, perhaps, in small-scale “projects,” and help the poor, while the larger, dominant economic system continues to function indifferent to the actions and attitudes of those who feel it no longer serves important human needs and values? First, a correction must be made: The proper term for the economy—and the traditional one from the time of Adam Smith—is “the political-economy,” for may of the most important aspects of economic functioning are determined by politics or by politically defined processes. The combined budgets of all levels of government constitute well over a third of the economy—an obvious indication that public decisions are far more important than those made by any other actor in the system. So, too, are interest rates and monetary policy established directly or indirectly by public actions. These two major functions of government-massive budgets and the management of money—also give public activity the initiative in the economy, especially when integrated with tax, regulatory, and other activities. To the extent we think of the “economy” as “out there” or as a machine functioning automatically without real guidance, it is not “ours.” When we recognize that the fundamental terms of reference of the “economy” begin with public decisions, it becomes eminently clear that what we choose or do not choose to do to alter those decisions in a democracy is the fundamental economic question. It is much easier, of course, to believe in the myth of “an invisible hand.” This relieves us of responsibility for all economic failures. Recently a retired working woman in the Midwest focused this issue in a way that underscores the political nature of the economy and the nature of our responsibility. “Why is it,” she asked, “that the government can get the economy going and put everyone to work when it wants to in time of war, but somehow it can’t seem to do it in time of peace?” The answer obviously is that a choice has been made as to which priorities the government affirms. What is so helpful about this woman’s question is that it cuts to the heart of the issue. Often economists and statisticians offer the public technical reasons why this or that decision “must” be made to ensure economic health. But in a very rich nation, there are very few technical issues that force us to allow millions of people to go without work. If we so choose, as the woman’s question reminds us, we can find many ways to overcome most “technical” problems when we want to. Take, for instance, the enormous debate about the “deficit.” We are repeatIllustration From A Mural By Isaac Shamsud-L)in POLITICALECONOMICS FOR THE NEXT CENTURY 32 Clinton St. Quarterly