Wednesday, September 30, 2009

If Pearl Harbor were attacked today, could we afford to defend ourselves?



Excellent article by Paul London on the Huffington Post.


If Pearl Harbor Were Attacked Today Could We Afford to Defend Ourselves?


If Pearl Harbor were attacked today as it was on Dec. 7, 1941, would the government have the money to defend the country? This question was answered 70 years ago. In 1939 opponents of Roosevelt and the New Deal were wringing their hands about budget deficits in exactly the words they use today. They argued that FDR was bankrupting the country and that the Federal deficit had to be reduced. Then suddenly money stopped being a problem: we had plenty of it.

Hitler struck Poland in September 1939 and two years later the U.S. was at war. The American government found billions to pour into war-related industries and the U.S. economy became the "arsenal of democracy." The conventional wisdom had said that the country did not have even a few billion dollars to end unemployment and fight the Depression, and it was completely wrong. In fact the government had access to all the money it needed to put idle resources to work to fight a world war and support a civilian recovery that raised living standards enormously. Government spending, far from being the economic disaster conservatives predicted, made the economy boom and was completely manageable.

How robust was the U.S. economy during World War II? It grew over 17 percent a year in 1941, 1942, and 1943, and 8 percent in 1944. Unemployment disappeared. Millions of men and women, said by conservatives to be unemployable during the Depression (remember The Grapes of Wrath), were pulled into the workforce and the armed services. The country built hundreds of thousands of fighters, bombers, and military vehicles and launched millions of tons of shipping. It supported 16 million people in the armed forces, the equivalent of 36 million today. It built new plants to produce aluminum, dams to power the new factories and much more. It paid for this with what, in effect, was printed money that the anti-New Dealers had said would be catastrophic. Talk about being wrong.

This history is 100 percent relevant in 2009. Almost 15 million Americans are out work and millions more are working part time involuntarily. Our factories and offices are on short hours, states are laying off teachers. Consumers and businesses are saving, not spending. Our dependence on foreign oil is dangerous and has been for 60 years, and our public works are in shambles. Republicans, having learned absolutely nothing from history, say more government spending to address these problems would break the bank. They ignore the experience of World War II when the government found the money to finance a huge war when Republicans had argued that it was broke.

Are Republicans just ignorant? I doubt it. Many of them know this "deficits will kill us" stuff is bull. Former Vice-President Cheney famously told then-Treasury Secretary Paul O'Neill that "Reagan proved deficits don't matter." His wife, Lynne Cheney has written at least six books aimed at teaching history to American children, a goal which I share. But the Republicans dismiss history when it serves them, and the economic history of World War II is clearly history they want to dismiss.

The truth is that Republicans spread fear about the deficit because they do not want Democrats and the government to get credit for dealing with unemployment, health care, the need to "green" our economy, and to modernize our educational systems and public infrastructure. When they had a congressional majority they did not wait a year to blow the Clinton budget surpluses to smithereens by giving tax reductions to the wealthiest Americans. Unfazed by deficits, they never had the political guts to propose taxes to fight the unpopular Iraq War, or to pay for earmarks that served their political purposes. The feckless George W. Bush and the Republican Congress doubled the national debt on their watch and refused to take responsibility -- that is ask voters to pay for -- their actions. Republicans don't care about deficits. They talk about deficits now because it fools people, and they see that as good politics.

The country can afford to spend money to put Americans back to work, modernize our infrastructure, green our economy, and improve our educational systems just as surely as it could afford to spend money to fight World War II. To do otherwise is to ignore American history. Write a book about this Ms. Cheney.

He just gets a little off track on the, "doubling the national debt" stuff.

6 comments:

Matt Franko said...

Mike,

Looks like he also doesnt connect the Clinton surpluses with the 2000 recession. But your right it is a start.

I think the 'SCE' concept is still up for grabs politically and would be valuable to which party would fully embrace it. The GOP could implement it via tax cuts or the Dems could drive increased expenditures, (I cant forget Warren who looks like he's running as a tax cutting Democrat! I hope he goes far.) I think which ever party grasps this concept and is able to all get on the same page and EXPLAIN it to the voters (as you are doing here all the time) will benefit greatly politically.

Meanwhile we have Sarah Palin scolding us for borrowing from the Chinese and Obama saying we're out of money....no help for us on either side! Go Warren!

Mike Norman said...

Matt,

I don't have much hope. Any savvy marketer would tell you it is far too costly and time consuming to change the way people think. It's better to accept the way they are and go with that. Having said that it seems to me that a good political strategist would never tell his candidate to try to change the way people perceive the deficit. It is far more effective to go with how they feel (deficits are bad)...even hype that...because it's all about winning elections and garnering political capital. This is why no politician speaks well of the deficit, even though I am sure there are some who understand it just as we do.

MortgageAngel said...

Hi,Mike. Hello, Matt.

Looking for ways to 'fund' our businesses through this recession, my husband and I dug out some U.S. Savings bonds we received as wedding gifts back in 1988. The U.S. Treasury has a pretty cool website. I quickly found the information we needed.

Exploring further into the history of the Savings Bond program I learned that sales of U.S. Savings bonds was promoted as an opportunity for every American to help "fund" America's freedom vis-a-vis helping pay for the war. Dozens of iconic personalities were used in patriotic ads - Bing Crosby, Superman, Bugs Bunny. Even Mr.Ed! Watch a video conglomeration here http://www.treasurydirect.gov/indiv/research/history/history_unclesamspeaks.htm

Hahaha - It's a little frightening to think about but had I found this before I found you guys I may have pointed to it in answer to your question "Who paid for the deficit after World War II?

Okay, one more thing to share with you before I go - I received a past due notice last month from the GOP! Fortunately for me the 800 number included served as an escape valve. I said "Are you crazy?" I said. "I have no contract with you that you should mail me an envelope stamped past due!" The poor numbskull on the other end explained it's nothing serious really (I'm so relieved) they do that hoping to get my attention on the chance I'm not in the habit of opening my mail. "Well be assured this is no oversight." I said, "I sent the 50 bucks to Warren Mosler."

Sadly the thoughtfulness exercised in providing an 800 # with a live person to talk to may be the last remaining accountability differential between Repulicans and Democrats.

Rock on!
Jill

Mike Norman said...

Jill,

Way to go! Now...how can we get about a million more of those to Warren??

-Mike

bubbleRefuge said...

Actually, I think Warren has a better shot at running as a Republican on a cut taxes payroll taxes platform. But I suspect he'd never make it past the primary due to the thick-skull-ed nature of the republican base.

googleheim said...

GETTING BACK TO THE DOUBLE LEDGER SYSTEM -

IS THERE ANYONE WHO CAN POST THE FED AND THE TREASURY'S BASIC BALANCE SHEET SHOWING HOW TAX REVENUES ARE A FRACTION OF THE OVER SYSTEM ?

AS A FUNCTION OF TIME ( INCLUDING REAGAN, bush, CLINTON, bush ii ) ??

THIS CLEARLY SHOWS HOW WEAK THE TAX PAYER ON THE HOOK STORY IS.

AND IF YOU BREAK DOWN THE TAX PAYMENTS SEGMENTS, COULD WE NOT DEBUNK ANY MYTHS ABOUT WHO IS HAVING TO PAY AN UNFAIR SHARE ?