Sunday, March 01, 2009

Wartime stimulus?

Sent to the Raleigh News & Observer
I'm confused. Recently, letter writers as well as last year's Nobel Laureate in economics have pointed to the experience during World War II to justify an expensive stimulus package to get the economy out of recession. We have been told that the wartime spending created a thriving economy.

Yet, Sally Buckner, writing about her experience growing up during the war, said of the time, “Americans adapted to rationing of food, tires and gasoline; saved bacon grease, scrap metal and aluminum foil.” Hence my confusion. How is it that the government spending during World War II created a supposedly wonderful economy, yet citizens had to endure such privations? I am not doubting the veracity of Ms. Buckner's comments because her experience is backed by historical evidence. (In fact, she neglected to mention that it was also a time of wage and price controls.)

Historical evidence also suggests that it wasn't until after the war, when government spending was cut dramatically, that the economy returned to one that would be considered normal (i.e., production and consumption driven by consumers and not wartime needs). This occurred even as certain economists were claiming that the reduced spending would cause another Great Depression.

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