Wasn’t WWII Debt Bigger than Obama’s Stimulus Package?
Question: According to many, especially conservative economists who wish to denigrate FDR’s efforts to end the Great Depression, the spending for WWII was ultimately responsible for our recovery from that era’s fiscal disaster, more than his many other stimulus strategies.
Be that as it may, is it true or false that the debt we incurred from WWII was about twice as big as the stimulus packages floated so far by the Obama administration? Ancillary question: How long did it take to pay it off?
(I think it was, and I think our consternation about our current situation stems more from our failure to appreciate just how large our economy is, and how strong and productive an engine of prosperity it is, than from any real danger this indebtedness may represent to our long-term survival.)
If I’m wrong, please don’t shame me before millions.
Paul Solman: Dear Ford: I will not shame you before millions, only the thousands who read this page.
Just kidding. I will not shame you at all, for two reasons. First, I’m not that kind of guy. Second, you’re right – about the size of our national debt during WWII, that is. And you’re also right about the conventional wisdom with respect to getting out the Great Depression: The war did it.
Personally, I’m not sure about the role of war as it’s traditionally presented. After a decade of depression and another five years of war and rationing, maybe a boom was just around the corner in any case. (Or maybe not. We’ll never know.)
As to paying off the debt, we never did. All those cumulative deficits add up to the national debt, and it has grown steadily since the birth of the republic. As a percentage of the economy (GDP), it has dipped and risen, but it’s rising again and that IS a cause for concern, if only because the interest cost on the debt is money we can’t use for a lot of very desirable things.
Remember: The knock on the Federal deficit, ever since the Reagan years, has been that these shortfalls are PEACETIME deficits. If we were running budget SURPLUSES when the Great Downturn hit, there’d be a lot less concern today about future inflation and “how are we going to pay for the debts we’re running up?”
Your answer is the traditional one: We’ll grow our way out of hock with a vibrant, burgeoning economy. I sure hope you’re right.