Taxes and War

I started out to day to write on the effects of Taxes, but simply decided to let Mallaby, Mankiw, and Kling explain themselves. It may be unnecessary to comment that Libertarian Conservatives can join with Leftist Thought on the practical removal of the Mortgage and Health Insurance provisions, but disconnect with the idea of taxing the Rich. Mankiw would shiver, as would Kling, at removal of 401(k)s or IRAs. They and all other forms of Savings and Investment credits have led to the Paper Instrument flood (Stocks, Bonds, etcetra etc.) They are the real Generator of Stock Options and Stock Grants; the Inflationary expansion of these Paper instruments brought on the demand for ever-increasing Corporate profits for Dividends to maintain Stock prices.

A friend, though, lately asked me on a Internet forum at what Point Wars became bad for the Economy. I replied that Wars were always back for any Economy, and here is my rationale:

1) The Government, often pushed by by Business Interests themselves, engage in a spree of military supply Contracts.
2) Business initiate a overcapitalization of Material resources recovery, along with geared up Processing and Manufacturing. This process, along with military subscription of Labor, gives any Economy an aura of prosperity. It is a artifical image, as qualified Personnel often revert to military usage, and inferior Labor cadres (less qualified than pre-war industry standard) are pressed into service by both Government and industry.
3) The economic euphoria lasts only as long as the Period of overcapitalization lasts.
4) The Government has been purchasing these Supply Contracts with either higher taxation or with massive Government borrowing.
5) Citizenry find themselves with larger Tax rates in the Present, and higher Tax rates in the future.
6) The cessation of Hostilities stand equally as bad for the Economy. The military Supply Contracts rapidly diminish in number and size. Materials Supply industries curtail their labor force, who are joined by returning Servicemen, while Business overall slows to transfer their Product lines to Civilian Goods.
7) Even a full employment Economy prior to the War will find itself with a high significant Unemployment post-Conflict; one endured under policies of high Taxes and Public Debt.
8) We have not even discussed the direct Resource Costs of the expended weaponry and munitions, the undercapitalization of Civilian Goods industries in the War years, the increased Medical Costs of returning Casulties, or the loss of Labor cadres or labor potential of Returnees. lgl