Charles puts the finger on the critical issue of wealth distribution amongst
private agents / factors of production.
So far the dialogue was about the private sector as a whole vis-à-vis the
public sector. In this case, profits, rents and wages are both but one
single aggregate.
Further disagreggation is highly desiderable, but more difficultly done. To
start with, it would require the construction of Social Accounting Matrices
and, within this, a disagreggated Flow-of-Funds system (the so-called
"Matrices from whom to whom"). I have done such a work over some developing
economies, but would not be able to say more than 'guesses' about the US (at
least not 'today')
Further, to be able to answer the question of who benefits from alternative
fiscal budget programmes would require specifying the relevant items of both
the expenditure and the income side. I think many people in the list have
indicated that the Bush tax plan is being 'regressive' (against the working
class) because it favours relatively more high-income layers, and it does
not re-focus spending towards social welfare. I 'guess' they are right, but
I have not done the numbers myself.
A note at the margin: the framework deployed in my previous mail is using
the notion of 'saving' as 'income minus total expenditure (including fix
investment)'; that is the flow of income that is further allocated into
financial assets (money holdings included).
Hope this serves, but I am sure others in the list would be able to add
much more than this.
Alex
-----Original Message-----
From: [EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED]]On Behalf Of Charles Brown
Sent: Monday, August 27, 2001 11:17 AM
To: [EMAIL PROTECTED]
Subject: [PEN-L:16393] Re: budget surplus & private saving
>>> [EMAIL PROTECTED] 08/27/01 11:02AM >>>
Charles Brown said:
Would it be possible to give bit more of the logic of why a budget surplus
saps savings from the private sector ?
Alex' comment:
In a broadly aggregated economy (say, public vs private sector, omitting,
for simplicity the external sector), one institution running a surplus
requires the other institution running a deficit.
In other words, public sector surpluses mean 'net acquisitions of financial
assets' vis-à-vis the private sector. That means that the private sector is
releasing financial wealth.
(((((((((
CB: So, these "savings" are "investments" ?
What comprises the "private sector" ? The working class is combined with
corporations as the "private sector " ?
(((((((
Lets include all three sectors, and draw the basic accounting identity as:
NET ACQUISITION OF FINANCIAL ASSETS OF THE PRIVATE SECTOR =
CURRENT ACCOUNT SURPLUS + PUBLIC SECTOR BORROWING REQUIREMENTS
Wynne Godley would say ( "Seven Unsustainable Processes..."; 1999, pp.8):
"The intuition that underlies this rearrangement of the numbers is that
public deficits and balance of payments surpluses create income and
financial assets for the private sector, whereas budget surpluses and
balance of payments deficits withdraw income and destroy financial assets".
If I may, I would then like to link this appreciation with what Jim Devine
said last week, suggesting that there is little chance of a policy
implementation in order to revert the ongoing recession. On the one hand
there is little hope for a reversion of the fiscal stance, and on the other
hand, the 'global slowdown' would not be helpful in reverting the US balance
of payments deficit.
I think Jim is basically right. The policy options which "might" now help,
are either not part of the 'political culture', or are not feasible. I guess
that something in these directions would be in place, only if marginally
(the Bush tax plan is an example). But will not be sufficient. So, we should
perhaps regret that these policy options were not implemented sooner, when
the 'fiscal effort' needed to be more manageable/ acceptable, and when the
BoP needed correction from a not-so-low level...
((((((((
CB: Is the working class impacted negatively by the surpluses , or is it the
corporate sector ? Whose wealth it transferred to the federal government by
the effect you describe above ? Workers' wealth or corporate wealth ?
Alex
