On Deficits and Spending

This article came up on FaceBook this morning.

I liked the article, but found it takes too many liberal ideas and presents them as fact without supporting them. Perhaps this is just a function of its length. But, the central point of the US being wrapped up in a deficit debate, is worthy of more consideration.

Ponder this: All through the Great Depression (which was most of the 1930s) the big debate in Washington was about deficit spending. Unlike today’s debate, they were all twisted up about ANY deficit spending, as in spending one dime over a balanced budget. The idea just flat out scared them. To let a budget go over what was allocated was madness to them, exactly like we talk about the “massive government debt” and “passing on our debt to our grandchildren”.

This fear of a non-ballanced budget (which we now know does not destroy a country) was so pervasive that it kept all social programs, especially the New Deal programs on a short leash. Too short, in fact. It also kept on defense department stunted at a time when it was critical to expand it.

Just like today, the two major sides were a Democratic party President (and congress) trying to spend our way out of economic gloom, and a Republican opposition resisting any effort to spend over the balance point.

When Pearl Harbor came, it did the one thing that neither party could do; it united the country. And in that unity we gave up the smaller fear of running with an unbalanced budget, for the greater fear of being overrun by fascism or Japanese militarism. In essence, the conservative fears of the dangers of an unbalanced budget suddenly had no traction. Our government started spending like drunken sailor. At one point we actually spent more, in terms of percent of the GDP, then we do today. Overnight we went from zero to 100. We also raised taxes like you would not believe, especially on the rich, and even rationed a huge number of materials (a move pretty much every economist will tell you will slow down the economy).

And the end result? One of the largest and longest growth spurts in our nation’s history. The wonderful economic bubble of the 50s and 60s was based on the spending of the early 1940s.

If there is something I would want to pass on to my grandchildren, it would be something like that. And yes, it came about from “out of control” government spending.

Pixelectomy. YellowJacket design by Antbag.