The Politics and Economics of Government Spending
The Politics and Economics of Government Spending
GangaPrasad Rao
Energy, Environmental and Mineral Economist
gprao64.blogspot.com; gprasadrao.blogspot.com
gprasadrao@hotmail.com; Evernote: gprao
For a Docx manuscript, Click here
For a PDF manuscript, Click here
Government Spending within a Broader Context
A Government that rules a politically-demarcated society draws upon broad public support as expressed through a Public Ballot to administer the sovereign nation. The Ballot publicly empowers the Government to protect the sovereign and the rights of its peoples, invest in beneficial social and economic pursuits, and promote/engage in opportunistic export/infrastructural investments. Government Spending is a vague term that encompasses the many investments, budgets, projects, spends and subsidies undertaken by the Government. These have multiple sources and pertain to different purposes and lengths – Prudential lines to ensure Sovereign Security, RoW MDG Long lines that seek global Egalitarian Sustainability across decades, and Public-sponsored Term-limited Lines that enjoin the Government to plan its investments and expenditures to the joint benefit of the people and the niche-conformably aligned political compact.
Government Spending has been pivotal to economies around the world, particularly in the early stages of resource-rich developing nations deficient in technology. In such countries, Government Spending, largely a securitization and monetization of the people’s will and expectations, facilitates exploitation of resources that might otherwise either remain undeveloped, or be exploited to the people’s disadvantage. It also ensures stability at the FX, and anchors the Bond and Currency markets. It is critical to sustaining Aggregate Demand, in creating infrastructure conducive to a Consumerist economy, protecting the Commons, nurturing the common futures of peoples and their basic/extended rights and privileges, and in setting the future agenda of the society as concern Armament and Scientific R&D, Investment Climate and Technological initiatives, as well as Socio-economic Development, and Sovereign RoW Mercantilist agenda. Government Spending has both, a social and a political activity mirror, in the sense, it creates social employment, triggers policy events and political opportunities in the pursuit of a larger socio-economic future. Despite its significance, Government Spending has been modeled as an exogenous variable in macro-economic Sectoral and DSGE models. Such modeling robs it of its significance and role on both sides of the Real-Nominal divide, and its influence on the future of the society and the State.
This manuscript seeks to model Government Spending more rigorously, and offers a heuristic design that integrates its social and political aspects with a better characterized DSGE-modeled Nominal Economy. It offers an instrument for Citizens to ensure fair democracy, a mechanism to efficiently allocate Government Spending monies across time and space, and better manage, if not predict that allocation. Further, the model indicates how the Government may integrate various financial streams with the Nominal Economy to ensure the PV Economy serves the larger Societal FV Cause.
The political government, comprised not only of the Ruling Party, but also the Opposition benches to the extent it has forged a larger, common, political cause, has multiple objectives in executing its government spending. First, it is the channel through which the Government reciprocates the public trust by offering spending-related employment to members of the society who participate in the political democracy; it is also the channel through which socio-economic investments and subsidies are directed. Second, Government Spending is also the pace and metric, leveraging which the Ruling party assuages and favors its political constituency and coalition partners. Third, and given Infrastructure-Spends are a direct stimulus to the social economy and equity markets, Government Spending permits the political government significant control on social equity, and on the nature and pace of economic growth. Fourth, it is the channel through which many sovereign and global prudential lines are invested in to sovereign social sustainability. Contrary to its treatment as an arbitrary, user-defined exogenous variable in aggregate macro-models[1], Government Spending is an endogenous and deeply strategic instrument in the hands of those politically-empowered by citizens of the democracy that elected it to office.
.
.
.
A Political Discourse
The Political economy of a Society-Nation-State is a complex inter-twining of societal socio-economic preferences, Sovereign imperatives, political strategies, technological opportunities and economic policy-making. Much of text-book macro-economics, however, focusses on Nominally-attuned policy-making that largely ignores the Real society, and in a quantitative manner that excludes more of the socio-political reality and Sovereign-Prudential dynamics than it encompasses. It isn’t an exaggeration to claim conventional graduate macro-economics doesn’t prepare a student to grasp the larger context in which finance and economics sub-serve the Nation State and the Real society. This manuscript is a half-step toward offering a possible resolution to the lacuna; it offers a preliminary design that integrates sovereign and prudential imperatives with, on one hand, socio-political structure, and on the other, with FV macro-financial strategies that are administered through the Government, Bond and PV Equity markets, to obtain a model that facilitates democratic, socially-balanced and inclusive economic policy-making consistent with quantitative optimization of the PV-FV economy.
The proposed strategy around optimizing a Political term Government avoids the formalities associated with running a Real/Political Bond, and instead leverages its monetary-short-form, the PC$, as an instrument to obtain a pareto between the People and the Government. The design, centered around reciprocity between the Public and the Political Coterie, as well as meaningful alternatives and choice, permits for a structured approach to political choice, a defensible means of public-endorsed, (private) political monetization, that ‘theoretically’, has the potential to predict optimal temporal and geographical assignment of Government Spending.
The design offers true political and economic freedom to citizens. The mechanism of PC$ offers Voters the opportunity to re-assess their commitment to the Government post elections contingent upon coalition compromises. It offers Citizens, post the ballot and formation of the political government, a credible set of choices in the magnitude and nature of spending they’d accept in lieu of permitting political pay-offs over the term of the Government. The Government Spending so obtained is democratic in the sense it is obtained post a voluntary interaction with the Public that is offered credible alternatives. That choice extends across public investments, social spends and subsidies, deferral of spending to later years/next term through the Austerity Constituency, transfer to Worthy- or impatient neighbouring Precincts, or its redux in favor of the GO. (In fact, the prospect of Voters exploiting such choice would, in turn, induce Political Parties to better gauge Public preferences and offer them Public-surplus generating Precinct Investments and Spends) Such exercise of political and economic choice permit the expression of Public preferences, and obtain informed Public decision-making that enhance both social and political efficiency.
The integration of the Aadhar-UNMDG-Mint Long Cause with, on one hand, Aadhar-Armament Sovereign Cause, and on the other, the CC NGDP Bond FV-DSGE PV construct, not only obtains, if contingently, a financial mechanism to finance infrastructure and subsidies, but also a strategy to predict the optimal size of the Government, and a ‘Democracy currency’ - the PC$, to facilitate the equitable and efficient allocation of Government Spending across Precincts over the term of the Government jointly with mirror political (non-) monetary resolutions, and in addition, a means to integrate the social and political mood of the society with the quantitatively-optimized investment decisions from the DSGE in the Equity markets.
The model characterizes, and offers an evaluation/prediction tool with which to optimize the magnitude, nature and timing of Government spending consistent with larger social preferences and sovereign concerns, and complementarity with capital market-directed production economy. Government Spending that follows the logic of PC$ FV Optimization through trades based on Citizen preferences offers the tantalizing prospect of obtaining socially-conducive and Public Surplus-generating investments. It also optimizes Government Spending over time, and across Precincts in a politically-optimizing paradigm that not only ensures equitable and efficient deferral of certain public investments and spends, but also endogenously signals the optimal term of the political government. In turn, this salient attribute of the proposed design creates local and dispersed regional employment, and generates tax revenues to the Precinct and the Federal Government, as well as returns in the market – outcomes propitious to a trilateral pareto between the Public, Politicians and Private Capitalists.
The design fundamentally empowers Citizens sidelined by the nominal elite, restores public control over democracy, and forces the Political Coterie to proactively seek to maximize Public Surplus as their route to Political Payoffs. By offering Voting Citizens control over the magnitude and timing of Public Spending, and choices within and across Precincts, the design optimizes allocations across Infrastructure, SESH Compensation and Public Subsidies, while marginally equilibrating both, Political return across Precincts, and the Real-Nominal efficiency of Public Spending. The design is consistent with the disparate niches and stakes held by Coterie members, and permits a multi-tiered, quasi-pareto resolutions for party functionaries with divergent affiliations. It recognizes the role played by the GO and the Austerity Constituency in reining in Government Spending, and in enhancing its public efficiency. The joint maximization of Public Surplus, political payoffs, and the Real-Nominal Economy increments socio-economic efficiency that could express itself in higher living standards for the masses .
Subject to the caveats above, the design is proposed to the Public, the Political Private, and indeed the DSGE-leaning Investors, as an instrument to efficiently resolve and beneficially integrate ESH concerns, societal preferences, Sovereign security, RoW prudential causes, the incentives and pay-offs in the tiered political pyramids, with the NGDP Bond directed and DSGE-modeled nominal economy toward a more sustainable society that increments principles of democracy, freedom and choice.
Comments
Post a Comment
Email us at director@altkuznetsadvisors.com