I don't remember my economics professor's name from that 1962 class, but I sure remember the textbook, even though I traded it for a different one the next semester: Economics: An Introductory Analysis, by Nobel Prize-winning economist, Paul Samuelson. (Economics is necessary when one works full time and commutes to college full time.)
What I remember most about the text was the lengthy discussions of "guns or butter," the basics of politics from Greek and Roman times. Will we spend our bounty on war, or will we improve the world around us?
When this was written in August, it was hard to guess what Washington would do about the Oct. 1 spending deadline. There are many options, but given our constipated Congress, it is hard to know whether they will do something and get off the pot, or let the opportunity pass and shut down the nation as they have done before. It is a war of wills. [Fortunately, they did not shut down the government again.]
Ancient 'guns vs. butter' game
"President Barack Obama has signaled his intention to bust, once and for all, the severe 2011 spending caps known as sequestration," reported Lisa Mascaro of the Tribune News Service on Aug. 1. "He's vowed to reject any GOP-backed appropriations bills that increase government funding for military without also boosting support for domestic programs such as Head Start … ." It is the typical ancient "guns vs. butter" game.
Given our crumbling infrastructure and increasing poverty, guns have been winning in recent decades. Not only are we increasingly shooting each other in schools, churches and theaters (not to mention at traffic cop stops), but Congress could have rejected the Iranian nuclear deal, opting for some military option — more guns. The Associated Press reported August 4 that the GOP believes it has the votes to disapprove the Iran nuclear deal. However, this time guns didn't win.
(Photo: Thinkstock)
Impact on insurance claims
There is reasonable economic theory that war is good for the economy. It boosts manufacturing of new military aircraft, replacement of older nuclear submarines, design of new surface ships, and the production of bombs and bullets. But it is no longer with an M-14 rifle that a soldier marches to war, but with high-tech equipment that is expensive to build and is vulnerable to IEDs in a land war. Consider the cost of equipment damaged or abandoned in Iraq and Afghanistan. Eventually, we turned to drones to do our fighting, killing enemies and civilians as well from hidden satellite-control bunkers in California or Nevada. So, do we really need all those new ships, troops and aircraft if we don't go to war with Iran?
"Gearing up" the military is probably good for the insurance industry too. New factories are constructed that must be insured, employees require Workers' Compensation, and small towns around military bases have a boom as thousands of new recruits show up for training. Civilian contractors are also involved in deployment; airliners need to deliver troops to the war zone, construction crews to build landing fields, and other firms to provide meals and do laundry. What ever happened to old-fashioned KP duty that I recall from my days in the Big Red One? We did our own dirty dishes and laundry, and our cooks wore uniforms when not in the kitchen.
Domestic spending may be good for the economy, too
But "butter" may be just as good for the economy. Contractors and new heavy equipment would be needed to rebuild bridges and highways, modern schools could replace those now in disrepair, money could be made available for better hospitals and medical research. College debt could be paid off and new programs created to avoid such debt. Research into new technologies unrelated to armaments could be funded, and maybe poverty decreased.
It may also be better for millennials. As Steven Rattner, a Wall Street executive, reported in the New York Times two months ago, the under-34s are having a hard time. Their median earnings dropped from $37,355 in 2000 to $33,883 in 2013, and for the best educated, the drop was $3,472, with college debt averaging $35,051. Help to pay that off is "butter," but it is Congress that decides whether the nation gets "guns" instead.
Ken Brownlee, CPCU, is a former adjuster and risk manager based in Atlanta, Ga. He now authors and edits claims-adjusting textbooks.
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