Lesson 7
The Role of Government


"Students should consider the role of government in a largely free market economy ... examine other responsibilities of the government ... [and] understand the federal budget process."

California History/Social Science Framework


A successful transition to a sustainable economy will most likely require the leadership of and funding from government at different levels. Major shifts in government spending and the tax system could help move the economy from one focused on short term profit and growth to one focused on long term environmental and economic health.


This lesson acquaints students with various economic roles of the federal government. It looks first at the issue of government spending, highlighting the federal budget and the actual dollar amounts attached to major budget items. Having reviewed the make-up of the current federal budget, students will be asked to come up with their own budget priorities and see how they compare with actual federal expenditures. Students will also consider how sustainable economic plans can and have been implemented both abroad and at state and local levels in the US. They will learn about various kinds of "green plans," how they are implemented and what effects they have on government budgets. Finally, students will consider shifts in government spending policy that have occurred in response to the end of the Cold War. Particular attention will be focused on the conversion of closing military bases and the different ways this challenge is being met.


Students will decide what they feel should be the national government spending priorities. They will review actual federal expenditures and compare them to their list of where government should spend money. Then students will create a budget to better reflect their ideas. They will finish by considering the opportunity cost of their decisions.


The activity will begin by brainstorming ideas about what constitutes a green plan. Following this, there will be a reading with study questions on green plans. Once students have a solid understanding of green plans, they will work in small groups to create a green plan for a significant local economic sector. These plans will be presented and evaluated.


Students will be introduced to military base closures and conversion as a concrete example of a shift in government policy. They will create conversion plans given some guidelines and a list of base assets/liabilities and community needs.


The federal government estimates spending in fiscal year 2000 will total $1, 989 billion, or almost $2 trillion. Of this vast sum, roughly $846 billion is spent on education, training, employment and social services and $23 billion on the environment ($6 billion of that going to the EPA, or Environmental Protection Agency). Transportation spending is an estimated $53 billion. This spending is mostly for highways, with a very small percentage for mass transit. Subsidies to big business continue to be a part of the budget in the form of tax breaks, below cost natural resource extraction on federal land and direct subsidies such as those that go to farmers with certain crops. The non-profit organization OMB Watch estimates 'corporate subsidies' total $167 billion, mostly in the form of tax breaks which are not subject to annual legislative review, unlike discretionary spending. OMB Watch compares this 'corporate welfare' figure to $51 billion spent on all federal programs for low-income people. It is difficult to read the budget and determine what spending or tax policy could be considered subsidies. Still other parts of the budget are clearer. Defense spending, as proposed by the President's office, totals $283 billion for 2000. When the current costs of past military activities are included (see activity 7-1), that figure nearly doubles. If these figures represent our national government priorities, we are far from a comprehensive sustainable economic plan at the national level.

However, other countries as well as some states and localities in the US are beginning to develop and implement green plans, or sustainable economic plans. Leading the way are Netherlands and New Zealand. Both have developed long range green plans with ambitious goals to make their economies sustainable and improve the quality of the environment. Their programs are the focus of the video and book, Green Plans, from Resource Renewal Institute in San Francisco (www.rri.org or 415 928 3774). Contact them to get a copy of their excellent video. Highlights of these two countries' plans include Netherlands' 25 Year Plan to reduce all major pollutants by 80%, and New Zealand's complete revamping of its political boundaries from arbitrary county and provincial boundaries to ones based on major watersheds.

Green plans exemplify many critical economic concepts. They usually do not contain command and control regulations in which government can set limits on pollutants to industry and require certain control devices be used to that end. Rather goals are set, such as a certain reduction in pollutants, and companies individually decide how to meet these goals. Secondly, goals are usually not government mandated, or top down but rather determined through negotiation involving industry leaders and other concerned groups. Instead of just regulations, green plans can incorporate more market based approaches where taxes or subsidies can encourage certain behavior. For example, an eco-tax like the carbon tax in the Netherlands, will add to the cost of gasoline and other carbon emitting products or processes. Air pollution and related health problems, global warming and the depletion of non-renewable resources (such as oil) partly result from carbon emissions. But these are regarded as externalities, that is, costs that normally aren't carried by the producer or consumer. A carbon tax internalizes the externalities, or hidden costs so the producer and consumer do pay for those costs. A carbon tax can also be seen changing the use of air from a free good to an economic good, where there is a direct cost. Another way to internalize externalities is to have the government sell pollution credits. In order to emit certain pollutants, a company must have these credits. These credits can be traded among companies and the US government has used them with sulfur dioxide, largely emitted from coal burning power plants. Market based approaches can also encourage certain economic activity through subsidies such as tax breaks. For example, the Netherlands' policy allows tax free earnings on investments in alternative energy sources. There are many approaches to implementing green plans.

The government can implement sustainable economic plans at a more local level in the conversion of military bases. Since the end of the Cold War base closures have been widespread.

In California, both base closures and canceled military contracts have hit very hard, with a loss of hundreds of thousands of aerospace and related jobs since 1989. Understandably there is a great deal of concern about the loss of jobs that comes with military downsizing ­ in California and elsewhere, and no shortage of alternative strategies to deal with the problems.

Some propose maintaining present levels of military spending just in order to prevent further job losses. Others point out, however, that almost any other form of spending generates more jobs than the military, where each job generated costs about $50,000. The Congressional Budget Office has studied these figures and concluded that reducing military spending and reinvesting at home could generate more jobs, spur greater economic growth, and create a better future.

Additionally, studies of over 97 bases closed since the 1960s showed that though 88,000 jobs were lost initially, 171,000 new jobs were created over time (a net increase of 94%). Among the most important lessons learned from these experiences is that human suffering and community stress is reduced when there is prior planning for conversion and when training and retraining programs are coordinated with real job prospects.

One approach is to replace military competitiveness with economic competitiveness in the world marketplace using federal funds identified as critical. However, this approach alone would continue to place profits in front of human needs and long-term economic and environmental sustainability.

An alternative approach suggests stimulating the economy by addressing the nation's foremost domestic needs (such as education, health care, public transportation, infrastructure repair, low-cost housing, renewable energy and environmental restoration). While this would create millions of socially useful jobs and positive business opportunities, it would cost a great deal of money and almost certainly require much deeper cuts in military spending.

A final critical issue that must be addressed in military base conversion is that of hazardous waste. Defense manufacturing and operations have left waste from jet fuels, explosives, heavy metals, PCBs, paints, solvents and nuclear energy. Environmental experts estimate that 70% of all US toxic waste is from the defense industry.

Until recently much of the conversion debate and funding have been under the control of the Defense Dept., with some duplication of programs already found in the Dept. of Commerce and the Dept. of Labor. In the fall of 1993 a central conversion clearinghouse was created within the Dept. of Commerce which consolidated all federal, state and local conversion programs and makes information more widely accessible.


How should different areas of the federal budget be prioritized?

What do most Americans need to have healthy, productive and meaningful lives?


copyright information