I just finished listening to a round table of pundits talking about Obama’s new jobs bill and going over the implications and possibilities. What occurred to me, not ten minutes ago, was that critics of these stimulus packages are not all wrong, nor are they necessarily doctrinaire.
It’s a natural thing to compare the current situation to the Great Depression (which was a lot worse, but pain is relative) and of course the Progressives are saying that we need federal spending to get out of it. After all, that’s what we did back then.
Everyone keeps forgetting a significant difference. The aftermath of World War II.
Look: the problem with FDR’s solutions was that they wouldn’t “take.” He kept pumping money into the economy, one innovative program after another, and as long as the money flowed, people worked, it looked like recovery was on its way. No one wants to remember (or acknowledge) except perhaps the naysayers that every time Washington cut back, the country slid into higher unemployment and fiscal stagnation. If the idea was to “prime the pump” and get business moving again, it wasn’t working, at least not fast enough to matter much. From all appearances, any recovery that looked like what everyone wanted was still going to take a very long time and would require mountains of federal dollars to achieve.
The War ended the Great Depression. Spending to fight it, to sustain allies, lifted the unemployment rate from record highs to record lows. Money flowed like water and the country was back at work.
That was still federal money.
Most of it was paid for through War Bonds. (We forget that, too—WWII was a pay-as-you-go war, which is amazing when you stop to think about it.)
Now, the question is, why did the recovery “take” in the aftermath?
Very simple. The United States was one of the only countries that still had a totally intact industrial machine. Russia had a big one, but they’d suffered damage. Also they lacked the transportation and banking systems to do what we did. Almost no one else could mount the kind of manufacturing effort we could and sustain it the way we did.
What did we sustain it doing?
Rebuilding half the world’s industrial base.
This is not hyperbole. Through a number of programs, the machinery that built the military might was turned to restoring the productive capacity of most of Europe, Japan, and some of the subcontinent. We made the boom times of the Fifties and Sixties on the money spent to do that.
Now the part everyone forgets. Our banks made the loans to all the countries that we aided for them to turn around and buy all that necessary stuff from us. The money flowed out and came back with interest in long-term notes. Yes, many of them defaulted, but it didn’t matter, because the flow of capital had resumed from the time it had stopped in the late Twenties, and a good chunk of that money was flowing into our coffers and paid for the American Golden Age.
The trouble with the current situation is that we are no longer in a position to do anything like that. Europe doesn’t need us. We’ve been getting along selling our debt, and China owns most of that. Stimulus spending therefore does not go into the kinds of instruments that will send it back to us from other countries that need what we have because they have cheaper sources or their own capacity.
So the recovery now is going to be the long, slow one that will require changes in our fiscal institutions before we see anything sustainable. The wars we’re fighting now are not the kind that will result in long-term loans to rebuild those countries and thus allow us to recoup expenditures—they’re just drains. We are no longer the Last Man Standing after a slugfest, so what we do and what we have no one needs to get back on their feet.
Nevertheless, we are in a situation where we have to face the fact that the decisions we make in the next decade will decide whether we remain a vital, civilized, progressive nation or will descend into the kind of wallowing third world morass that China was in during the heyday of Mao and the Gangs, a helpless giant. Whether the Tea Party or John Boehner wants to admit it, the only thing that will get us out of the current doldrums is spending—a lot of it. So you can either do something to require it from those who still have it or you will have to suck up your ideology and erect that quasi-socialist machine everyone is so terrified of and figure out how to make it work without losing us our essential freedoms.
What I hear coming from the GOP are plans that will make us strong based on the well-being of a minority. What I hear coming from Obama is finger-in-the-dyke delay tactics, treating symptoms without addressing causes. The actual solution is likely to be something neither side wants to consider.
The world is different. Time to stop looking to the lessons of the Great Depression for solutions.
