I think that what balancing the budget illustrates very nicely is that economics is not just a technical problem of economics, but a moral and political problem, which must inescapably refer to an ethics which isn't "objective" but partisan. When you have to cut costs and expenditures, and increase revenues, that means ceteris paribus taking income away from some, and giving it to others. However, "market forces" by themselves provide no moral and political criteria for doing so, since, as I have argued, markets have no morality of their own, beyond what's necessary to conclude transactions successfully. A lot depends on the relative strengths or clout which participants in the marketplace already have. But the question that is really important is that of how you could increase total net income, apart from cutting costs.
In recent days, I was looking at the large financial and population aggregates for the US economy to get some understanding of the proportions of incomes, debts, labour-allocations and the distribution of revenues - I had this idea of writing an article about "production and circulation" to show how, as I have argued before, a narrow focus on GDP or gross output blinds us to the real dynamics that spur the capitalist accumulation of wealth along these days (if I remember correctly, Anwar Shaikh called his Phd thesis "theories of production and theories of distribution" which wasn't a bad title really - but I think for my purposes I could make a really good case just by looking at the actual financial data, rather than engaging in very subtle disputes about theoretical categories that most people find difficult to follow). I discovered among other things that the US Bureau of the Census recently published a Defence Department statistical table which aims to show the domestic revenue and employment generated by Defence contracts. It's a weird world we live in when the justification of propping up a debt-ridden economy with military spending becomes an acceptable economic argument... I hope to post some findings soon. Interestingly, California got a large share of the defence contracts (but then I guess California also has a very large population, compared to most other states in the union). It's incredible from a Dutch point of view to think how an economy so wealthy as the USA could go so far into debt, and spend so little on the strategic areas that would boost economic growth. My hunch is that many American economists will live to regret the substitution of a "let the market pick the winners" mania for a positively formulated economic strategy. In retrospect, Reaganomics and its follow-up has been devastating in its economic implications. But that is just to say that in the real world, economic strategies are not so much determined by the rationality of economic arguments, but rather by the competition between social classes for wealth and income. And "him that hath" is in a stronger position to claim wealth now, and displace the consequences of that claim into the future and to other areas, other people. J.
