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.

Failed Ideology

Sent to the Raleigh News & Observer

In advocating Obama's stimulus package, Paul Krugman takes another swing at Milton Friedman by comparing Friedman's monetary theory to the fiscal policy theory of John Maynard Keynes (i.e., large-scale deficit spending by government). Krugman says that “[t]he failure of monetary policy in the current crisis shows that Keynes had it right the first time.” This does not logically follow, however, because the failure of one theory cannot prove the validity of another. Maybe both theories are wrong.

The evidence showing that the large-scale government spending of the 1930s did not get us out of the Depression should show that Keynes' theory was flawed. Claiming, as Krugman has done in the past, that it was the massive spending during World War II that ended the Depression is a flawed notion as well because a command-and-control economy of rationing, price controls, and military production is not economic prosperity. In fact, it wasn't until the dramatic drop in spending after war that the economy got back to normal.

Krugman has claimed that it was a failed ideology that got us into the current situation. I’m afraid that Krugman’s ideology may make matters even worse.

Whatever

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