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No, we can't just spend our way out of trouble

A recent Post editorial took on progressive economists and pundits who argue that the United States’ World War II experience proves massive deficit spending is the best cure for a depressed economy -- and that the same treatment should work today. For these analysts, the problem with today’s $1.4 trillion deficit is that it’s too small. We urged President Obama to ignore their advice. Well, now William Greider, The Nation magazine’s national affairs correspondent, has fired back, taking the Post board to task for peddling deficit “hysteria.”

The mobilization for World War II produced one of the most remarkable success stories in US economic history. War production not only overcame lingering weaknesses from the Great Depression but transformed the economic system into the modern powerhouse that became the platform for our long-running postwar prosperity. All this was achieved by the government, largely with borrowed money. By war's end Washington had piled up federal debt totaling around 120 percent of annual GDP (nearly double today's debt level).
During the wartime emergency the government took charge of the economy and rapidly shifted the industrial system to armaments while suppressing domestic consumption. Deficit spending force-fed the rapid development of new technologies and new basic industries. In a few short years, economic output expanded by about 75 percent. Despite rationing and wage and price controls, Americans at large were replenished: per capita income rose by almost 70 percent (with industrial jobs opened to women and blacks), and since people could not consume much, the savings rate reached extraordinary levels -- 23 percent of incomes. The government borrowed these savings and spent them in the national interest. The store of personal savings fueled the pent-up consumer demand driving postwar prosperity.

“The United States needs something similar today,” Greider writes. He proposes a massive public employment program centered on energy conservation and the like, coupled with public works such as the construction of high-speed rail systems. We can pay off the debt, he says, “after the economy recovers.”

It’s hard to assess Greider’s argument too specifically, because he never quite says how much money we need to borrow for how long, or what rate of growth, for how many years, would be required to pay it back after our economy is back in shape. Some economists think today’s deficits are already dangerous because they are projected to grow faster than the economy itself for the indefinite future.

So let’s stick to his argument’s other flaws. The most important one is the most obvious: World War II was, well, a war. And not just any war; it was widely seen as a patriotic struggle for national survival. Every able-bodied male served in uniform; everybody else, almost, worked overtime in war factories. Companies held the line on prices; unions were bound by a no-strike pledge. Today, we have a war and a half going in Iraq and Afghanistan, fought by a relative handful of volunteers -- and many consider that commitment too onerous, despite the fact that it all began with an attack on the U.S. itself on Sept. 11, 2001. Where, then, would we summon the political will to sustain Greider’s proposed government takeover of the economy and accompanying suppression of consumption?

Gauzy memories of national unity notwithstanding, the World War II home front was actually a pretty conflictual place, and increasingly so as the war dragged on. Families chafed under the pressure of rationing and shortages; defense workers staged hundreds of wildcat strikes over unbearable working conditions. Americans hung together because they saw the war as finite and the alternative as catastrophically worse. Today’s polarized American electorate wouldn’t even tolerate a few cents of additional gas taxes, much less Greider’s big move.

What about “force-[feeding] the rapid development of new technologies and new basic industries?” Greider is right that World War II’s aircraft, tanks, bombs and bullets had profitable civilian spin-offs. But we would have built them anyway, because those were the implements of a war we had to win. Today, the choice of investment is a bit more complicated. If government borrows money to fund particular technologies, “green” or otherwise, they must meet the test of the market someday, lest they simply become permanent drains on the Treasury. Energy-saving technologies have a lot of promise, but their ultimate profitability is hostage to the world price of oil. Greider says we should build high-speed rail. Okay. But everywhere else in the world, it’s subsidized, even in densely-populated Japan. Why would it be a money-maker here?

To repeat a point in the Post editorial that Greider does not really address, World War II was financed out of domestic resources. Some $185 billion came from selling low-interest war bonds to the public. Post-war inflation then eliminated much of this debt. Today, by contrast, we depend on foreigners who hold almost half of its $7.5 trillion public debt. Anybody think we can play the same borrow-and-inflate game with the Chinese central bank? Our foreign creditors are tolerant for now. But if the federal government offers no prospect of near-term fiscal discipline, they will demand higher interest, which could bring our economy to a screeching halt.

Today’s deficit, unlike the one we ran up in World War II, is not only discretionary but also structural. It includes mandatory spending on entitlements such as Social Security and Medicare for an aging population. I suppose Greider’s suggestion would be a bit more convincing if it included a proposal to cut these expenditures and shift the money to his giant national investment scheme. But it does not.

Greider has served one purpose, though: to remind us that broad statistics, such as the country’s overall level of indebtedness, can confuse as much as they illuminate. In 1946, the U.S. was much more deeply indebted than it is now. Yet it was also a nation on the rise, triumphant in global war, dominant in world markets. The government owed its own citizens, and could pay them back on its own terms. Potential competitors abroad lay literally in ruins. Sixty-three years later, we are still the richest and most powerful country in the world, but less in control of our own fate -- burdened by huge legacy costs at home and dependent on creditors abroad. To make fiscal policy as if this were not the case would be a dangerous mistake.

By Charles Lane  | November 2, 2009; 4:00 PM ET
Categories:  Lane  | Tags:  Charles Lane  
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Comments

Good article. I think, however, the article could have gone further by challenging the conventional wisdom: government action got us through the depression and that HUGE government action (in the form of WWII) finally got us out of it. I don't think that notion has been proven, and I sure don't think it's been well-debated. Maybe all that debt explains why we were in a fog from 1929 through 1945 and beyond, as opposed to explaining how we got out of it. Indeed, we are made to believe that all that debt saved us. Who's right? I don't know, but let's have a debate.

Posted by: ktp70 | November 2, 2009 4:25 PM | Report abuse

It's true. We can't spend our way out of the pyramid scheme called US capitalism.

But we can continue to destroy our water and food supplies, and commit genocide in Irag and Afghanistan, and make Halliburton and Goldman Sachs and Blackwater rich until Jesus comes with His apocalyptic mercy.

God, please Bless America. (Somebody/thing/deity has to.)

Posted by: lichtme | November 2, 2009 4:37 PM | Report abuse

Now all we need is someone to bomb Pearl Harbour.

Posted by: affirmativeactionpresident | November 2, 2009 4:52 PM | Report abuse

Keynesian economics only works in the minds of socialists. The US economy will not recover soon, because of massive Govt deficits, which are always inefficiently applied, crowding out private lending. We are seeing this now.

Add to this Obama/Pelosi/Reid tax-raising, job-killing fantasy programs of cap-n-trade, health "reform," and massive increase in Gov't employment, and very few new businesses or jobs will be created.

Posted by: pgr88 | November 2, 2009 5:01 PM | Report abuse

"A recent Post editorial took on progressive economists and pundits who argue that the United States’ World War II experience proves massive deficit spending is the best cure for a depressed economy"

Actually almost every economist in the world AGREES that government spending, deficit or otherwise, should increase during a depression. The Post editorial board on the other hand has made clear that it believes in spending trillions for wars like Iraq while nickle and diming the US. This has nothing to do with economics, and everything to do with priorities. Iraqis are a neocon priority, Americans are not.

Posted by: rodneythecat | November 2, 2009 5:07 PM | Report abuse

Their ain't any recovery without jobs... we need to tax the wealthy that got such tax breaks, cancel the 9 billion in tax relief we gave Big Oil, stop the rediculous payment of Big Pharma for the sky high costs of drugs under Medicare and use the $4 a month deals the local drug stores offer.

We also need to make sure that nursing homes use local drug stores too... charging Medicare 50 times the cost for drugs from their own pharmacies has to stop.

We can employ everyone who wants a job just burying the power lines. Billions lost every year from businesses due to ice, snow and wind storms.

We need debt bonds like we sold war bonds.

STOP SHOPPING AT WALMART! Every dime we spend there goes to China.

Posted by: dutchess2 | November 2, 2009 5:35 PM | Report abuse

The macroeconomic effects of even World War II may be overstated. It was not just the stimulus it provided for a post war boom: it also took half a million American lives out of the post war labor market. And that was from a population half what it is now.

Posted by: jimk8mr | November 2, 2009 5:41 PM | Report abuse

What worked 60+ years ago will not work today as today's marketplace is world wide. 60 years ago, there were not US companies moving overseas for cheap labor. Off shoring was not as popular today. The workforce was USA based not world based.

Posted by: ahashburn | November 2, 2009 5:43 PM | Report abuse

When are the economists who oppose Government interference going to offer anything different from what they have offered since well before The Great Depression? Their commentaries are terribly redundant and woefully short on answers. All they seem to be able to do is present the same old arguments, which long ago showed themselves inadequate for addressing the multiple economic forces at work in the modern world.

Posted by: andrewpatejr | November 2, 2009 5:48 PM | Report abuse

Economics, contrary to many claims, is not a science. Contrary to many claims, capitalism is not protected by God. What we do know from the empirical evidence is that:

1. Left to themselves companies establish monopolies. It helps maximize profits. However, it is counter to everyone's good and that is why anti-trust regulations were 'created'.

2. Whenever regulation of companies is lax we end up with an economic mess that requires massive intervention to protect us. That includes 1929, and it also includes the S&L fiasco as well as the 2008 collapse of the economy. Remember that 1 year ago the economy was in free fall!

For better or worse, we need to first support the economy before we revise it. (I have little hope for the revision part). The only workable alternative I have seen is massive government intervention.

According to the Republicans we need to instead relax regulations. That obviously will not work since it created the problem in the first place. It also did not work when it was tried with the Depression.

Further, the people who complain about the high unemployment rate are those who wanted GM and Chrysler bankrupted. That of course would have created many more unemployed, so they would be complaining about the high(er) unemployment rate. Either way, there is no reason to listen to them.

Posted by: AMviennaVA | November 2, 2009 5:54 PM | Report abuse

Well said, Charles. Greider is clearly a fluffy-headed romantic, whose ideas of national policies are based more on what he would "like" than on any analysis showing benefit for the nation.

That, I think, is reflected on a larger level by left-leaning publications. Not only Greider's "The Nation," but the likes of the NY Times, CNN/MSNBC and many of the Post's writers have no less a "perspective" or "opinion" than the likes of Fox News.

However, after thinking about this problem for some time, it occurred to me that the reason I enjoy reading the Economist, the Financial Times or the Wall Street Journal is that their "perspective" is one of how a company -- or country, or person -- can succeed economically in a competitive, globalized marketplace.

There are no wishy-washy, hopeful pipedreams about WWII-level spending creating "unity" among people; just raw, factual economic analysis of what it takes to do well measured in the simplest, material way. That is rational, reasonable, and I can always understand where this line of argument is coming from, and where it leads.

The US left-leaning media, however, find their slant not in global economic success but in ill-defined, politically correct platitudes and morality plays that generally are not even grounded in a larger ethical framework but instead represent a constellation of unconnected, incoherent stars in the post-60s left-leaning consensus.

In short, it amounts to hogwash, just like Mr. Greider's argument that you so rationally and logically take apart. Luckily for us, the NYT is on the brink of bankruptcy, while the Economist, FT and Journal are on the ascendancy. Reality and a dawning sense that for America to compete in the world it will to recognize 1) that globalization is here to stay and 2) it's better to be a winner than a loser in the globalized marketplace, may yet prevail.

Posted by: itchy1 | November 2, 2009 6:14 PM | Report abuse

The headline may be true but in this instance we HAD TO SPEND TO KEEP US FROM FALLING OFF AN ECONOMIC CLIFF brought on by failed Republican leadership.

Posted by: JRM2 | November 2, 2009 7:11 PM | Report abuse

If we had tariffs, as we did in FDR's time, we'd have jobs. Then, if we stopped the bailouts to the wealthy, stopped the no win wars for $400 per gallon gasoline for our troops, then, maybe, (oh, yeah) we next tax rates on the wealthy as we had during WWII, then, maybe we'd get out of this mess.

But, let's face it. The wealthy would rather get rich off of big govt. even if it meant the destruction of America.

We are in the midst of a class war, and only the wealthy class is fighting. Let's even up the odds.

Posted by: santafe2 | November 2, 2009 7:26 PM | Report abuse

While I support current government intervention in the economy, the central reason the U.S. prospered in the postwar years is that we were basically the only industrialized country (with the exception of Canada) that wasn't flattened by years of war. It was pretty easy to dominate the world economy when we were the only ones left.

Posted by: AOB82 | November 2, 2009 8:17 PM | Report abuse

You want to go to War?

RAISE TAXES..

It is as simple as that.

Fei Hu

Posted by: Fei_Hu | November 2, 2009 8:48 PM | Report abuse

Greider is absolutely right. If Obama had ordered electric hybrids to replace our government vehicles from GM instead of bailing them out, and of course from Ford and Chrysler as well, with billions in down payments for retooling, given high speed rail a full court press interstate and intrastate as they have in Europe and Japan, our companies like GM could have retooled as they did during the war and helped build the cars and parts and electric plugs and parking meters. Obama could have authorized nuclear plants as they have in France to give us 80 percent of our electricity as they have. He could have allowed drilling in ANWAR and with all of the above created millions of jobs, ended our dependence on foreign oil, increased our oil reserves and taken us out of this recession tut sweet. Too bad he never ran a business even a candy store to understand. Now we have poured trillions into a dark hole and 1.4 trillion and more into rationed miserable, forced Obamacare. It makes thinking people sick to their stomach.

Posted by: mharwick | November 2, 2009 8:50 PM | Report abuse

"For these analysts, the problem with today’s $1.4 trillion deficit is that it’s too small."

That's highly disingenuous of you. Generally, they're not at all arguing that the debt is too small, and claiming that to be the case is clearly deceptive -- as well as an indication that you don't have the intellectual courage to debate their arguments on their merits. (For example, I might note that quite the number of them were against increasing the deficit by wasting resources and lives on invading and occupying Iraq, a deficit-inducer that the Post supported, and were against the huge budget-gutting tax cuts of the Bush administration.)

Rather than your caricature, people like Paul Krugman and Brad DeLong are arguing that in order to avoid huge losses due to low demand, the government should step in to boost demand for a short period of time (a couple of years) to mitigate the effects of the crisis, and then, when the economy is healthier, pay down the debt. See, for instance, http://krugman.blogs.nytimes.com/2009/10/30/stimulating-thoughts-3rd-quarter-edition/

Now, since you're currently sitting snug at your well-paid Washington Post job, it is quite likely that the plight of unemployment isn't something you particularly care about, but to the people affected, who don't have a large amount of family wealth to fall back on, it can be really traumatic.

But of course, if you were really serious about cutting the deficit and the debt, you'd want to cut down on the massive American military expenditure -- but no, your big problem is with policies that may actually help people.

Huge tax cuts for the richest and invasions based on falsehoods are A-OK with the Washington Post, but when you're (to quote Daniel Gross) "bedeviled by the haunting fear that someone, somewhere may be getting social insurance", all of a sudden you become raging deficit hawks.

It's not very credible.

Posted by: sembtex | November 2, 2009 9:36 PM | Report abuse

If it stems from the mind of a Liberal, then cast it aside as fallible. Those imbeciles are nothing but dead weight.

Posted by: DCer1 | November 2, 2009 9:58 PM | Report abuse

"Now, since you're currently sitting snug at your well-paid Washington Post job, it is quite likely that the plight of unemployment isn't something you particularly care about, but to the people affected, who don't have a large amount of family wealth to fall back on, it can be really traumatic."

WHAT PLANET DO YOU LIVE ON? NEWSPAPER PAYROLLS ARE DIMINISHIN DAILY AND THE WP (LIKE MOST LIBERAL RAGS) IS NO EXCEPTION. DUDE, GROW UP!

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Posted by: huangzhixian104 | November 2, 2009 10:11 PM | Report abuse

Well, if government didn't intervene, then Darwinism would take over. Survival of the fittest.

Capitalism would die.

Posted by: camasca | November 2, 2009 10:22 PM | Report abuse

At the end of WW2 we had tremendous manufacturing capacity. Much of the remaining industrial powers were in shambles. Not at all like current conditions. We cannot afford to spend a dime that does not directly lead to sustainable job creation - not temporary make-work projects. It really is the economy, and specifically the manufacturing sector.

Posted by: tnvret | November 2, 2009 11:01 PM | Report abuse

...don't worry 'bout the government....don't cha know it's heaven-sent!

don't worry.........be happy!

Posted by: dubya1938 | November 2, 2009 11:42 PM | Report abuse

Lane is simply an idiot. We have 10% unemployment (really 17-18%)--1937 levels. IF we spent two trillion more on getting employment back to full employment, most of that money would come back in the form of taxes. I'm sure Lane is a believe in voodoo economics (excuse me, supply side economics) but their claim of decreased taxation increasing revenues has never been met. Here we know that additional government spending will save hundreds of thousands (if not millions) and increase output tremendously. Without government intervention, we aren't projected to get to full employment for another 6-7 years.

We could pay for this. The top 1/100 of 1% of households has increased their share of the national income from .8% in 1980 to 6% in 2007 (last year for which figures are available). If we took half of this, they would still have 4 times what they had in 1980 and our deficit problem would disappear. I'm sure Lane's argument would be that these people are responsible for our economic success, but what is that success? The average worker is making, inflation-adjusted, less than in the 1970's. The economy grew faster from 1946 to 1980 than it did 1981-2009. In other words, we have been paying the rich to reduce us to penury.

Posted by: garbage1 | November 3, 2009 12:34 AM | Report abuse

"WHAT PLANET DO YOU LIVE ON?"

a) Please note use of qualifier "currently" and that the WP editorial page is not liberal. b) Also, please note that the shift key has _two_ possible positions.

Posted by: sembtex | November 3, 2009 12:35 AM | Report abuse


Today's national debt, as a % of GDP, is about the same as it was in 1952, under Harry Truman. It fell from about 75% of GDP in 1952 to about 39% in 1980. From 1980 to about 1993, debt increased again from 39% to about 69% of GDP. By 2000 it had fallen again to about 60%, today it has risen to about 75% of GDP again.

The debt has been reduced before, it can be reduced again. It's up to us.

Posted by: kenhyde | November 3, 2009 1:14 AM | Report abuse

The glaring fallacies in this article are actually sort of hilarious, but let's take them seriously for a moment. Lane writes:

"Today, we have a war and a half going in Iraq and Afghanistan, fought by a relative handful of volunteers -- and many consider that commitment too onerous, despite the fact that it all began with an attack on the U.S. itself on Sept. 11, 2001."

So having established World War Two as the basic unit of a war, Lane claims that Iraq and Afghanistan count as "a war and a half"?

Really? Compared to the amount of soldiers, equipment and money that was mobilized in World War II, the wars currently going on in Iraq and Afghanistan are one and a half times that size? This is, I'm sorry to say, utterly ridiculous.

Lane then goes on to use the lack of support for these wars as "proof" that the public wouldn't support spending on jobs:

"Where, then, would we summon the political will to sustain Greider’s proposed government takeover of the economy and accompanying suppression of consumption?"

Follow that? Just to be sure you've got it: Lane is saying that since people consider the catastrophic, falsehood-based invasion of Iraq to be "onerous", this shows that they wouldn't get behind any stimulus plans for the economy like creating jobs at home as the Nation magazine proposed.

I'd call this sleight of hand except it's so bizarre it's like a magician just openly putting something in his pocket, and then claiming that it disappeared.

World War II, in terms of its effect on the economy, was a massive spending plan. That's the point being made by those who point to it. It's not a claim that we need another war, or that spending now should mimic in every way the spending that took place then. It's a claim that spending lifted us out of depression, to show that spending can do this, and to demonstrate that once you've boosted the economy that much, the tax revenues that come in, without raising taxes, end up allowing you to pay off a debt, yes even the 120 percent of GDP we had then, which is far, far higher than now.

The idea that "in 1946 we were an upward moving economy" is a non-sequitur, of course we were, because we had just engaged in that massive spending.

This really gets funnier the more you read it.

Posted by: Billy_Pilgrim | November 3, 2009 2:26 AM | Report abuse

Lane never gets tired of being on the wrong end of knowledge. Clearly, he has never bothered to take Economics 101, otherwise he would know that the fiscal multiplier is a lot larger than the tax multiplier, that it is appropriate to increase government spending in a recession because private demand is not forthcoming, and he would also know about the effect of "automatic stabilizers".

How this ignorant yahoo ever got a column at WaPo is beyond me. It speaks volumes about the sorry state of the newspaper.

Posted by: Gatsby10 | November 3, 2009 4:30 AM | Report abuse

Earth to Post: This is one of your existing "pundits?" He's so boring, For a minute there I thought this guy was one of your pundit wannabe contestants.

If this is all it takes to be a Post pundit, no wonder you have so many boring finalists trying out for the dubious honor.

Posted by: eyemakeupneeded1 | November 3, 2009 5:14 AM | Report abuse

Lane couldn't see through Stephen Glass, so of course we should put him in charge of the economy. So typical of Hiatt/Diehl/Brauchli/Weymouth World.

Posted by: misterjrthed | November 3, 2009 8:25 AM | Report abuse

This is pure revisionism by the Left for political purposes.

It was NOT the massive deficit spending in WWII that got us out of the depression. It was the FACT that after WWII ended, the US had literally zero competition from other industial nations (all in rubble from the war) and that we had about 25 years where we were the world's manufacturer. We provided the world's refrigerators, cars, steel, food, you name it. We provided ALL of it. That economic boom is what got us out of the depression and allowed us to pay off the massive debt incurred during the war. So....unless these lying Leftist economists are predicting a 25 year boom like we had from 1945-1970, all we're going to be left with here is a pile of unimaginable debt and no way to pay it off.

Posted by: JohnR22 | November 3, 2009 8:43 AM | Report abuse

You might be a red-necked socialist, if you supported the Wall Street Bailout.

You might be a red-necked socialist, if you supported the GM and Chrysler Bailout.

You might be a red-necked socialist, if you supported the stimulus bill.

You might be a red-necked socialist, if you supported cash for clunkers.

You might be a red-necked socialist, if you supported $8000 for 1st time home buyers.

You might be a red-necked socialist, if you support tax credits for windows and hot water heaters.

You might be a red-necked socialist, if you support health care “reform”

Posted by: txnintn | November 3, 2009 8:46 AM | Report abuse

Excellent article! One of the mistakes politicians and the media make repeatedly is when there is a proposal that the federal government increase spending they say "taxpayers will foot the bill" or something like that. On the margin, all of the federal government spending is funded by borrowing, much of the borrowing from abroad. Thus, when the USA sent close to a billion dollars to Gaza to help rebuild after the recent conflict there, taxpayers did not pay for it: the USA borrowed from China, sent $ to Gaza (which accomplished nothing and bought us no good will), and in the future we will have to repay China! The taxpayers may be involved down the road, but not today. Similarly, the USA is now offering $ to Pakistan: we borrow from China, send $ to Pakistan, it does not good, then we have to repay China.

Posted by: farpq | November 3, 2009 8:54 AM | Report abuse

We have to spend more in order to save.
We have to raise everyone's health care costs in order to lower them.
We have to bail out financial and automotive giants to help the middle class.
We have to destroy the wealth of the nation in order to redistribute it.

What's wrong with you people? Are you racists?

Posted by: blackmage | November 3, 2009 9:14 AM | Report abuse

To say government spending will save the economy, by taking funds from citizens and charging the public credit card, while dispersing the funds to powerful concerns in the name of health care, job creation, credits for homes, cars, or hot water heaters is simply socialism.

Liberals, moderates, and others supporting the cycle of coercion and extortion, hastens tyranny. Puppet masters elected from both parties fill the public trough with slobber. Coercion and extortion are two of the heads of the hydra, our government, riddled with spineless officials, who can’t say, NO MORE! They continue passing out candy to suckers, like drugs for addicts, completing the cycle of debt, despair, and deceit.

Citizens must say NO MORE, before freedom is lost.

Posted by: txnintn | November 3, 2009 10:05 AM | Report abuse

Does the WaPo actually pay Mr. Lane for this drivel?

Posted by: mikehike | November 3, 2009 10:11 AM | Report abuse

You can't spend your way out of trouble, but you can definitely spend your way into trouble, as this administration is hell bent on doing. Anyone who has ever gotten themselves in trouble with credit cards knows this. The only difference is the democrats in congress don't have to pay the bill themselves, they can put it on our children and grand children....http://cooperscopy.blogspot.com/

Posted by: ronsuev | November 3, 2009 10:48 AM | Report abuse

Fact is you are both right. We can't spend our way out of a recession and expect a stable result. But we can invest our way out of a recession. Supply side has to balance demand side or you get instability.

World War II created an artificial boom that could have led to another depression but didn't. Why? Because we built the Interestate Highway system, which was an investment not mere spending.

Investments are gifts that keep giving. Give a man a fish and he eats for a day. Give him the training and knowledge to run a fishing boat and we all can eat for a lifetime.

And investments have to be in balance. If everyone is fishing, the fish disappear. If everyone is buying and selling real estate, eventually the bottom falls out of the market.

We have depressions because of risky behavior. We have risky behavior because of unbalanced and unethical behavior by people who have too much money, too much power, too much ambition, and too much opportunity to shyster others; and so we get gambling rather than investment.

Liberals are right, and so are conservatives, just not all the time or about the things they think they are right on.

Posted by: chris_holte | November 3, 2009 11:54 AM | Report abuse

Greider is a socialist, and by extension, ignorant and ill informed. Trying to explain history and basic economics to a leftist is like trying to teach algebra to a chimpanzee.

Posted by: rustypelican | November 3, 2009 1:34 PM | Report abuse

After World War II, factories that were churning out weapons and military equipment were easily retrofitted and converted into automobile factories and the like. The Dems are not investing anything other than pork and handouts (healthcare for all, subsidies of all sorts for all sorts, etc.). I don't expect any bacon out of this spending spree.

Posted by: mooklock | November 3, 2009 2:03 PM | Report abuse

garbage1 "If we took half of this..." We already take 1/2 of it and more. A study in 2006 revealed the people in the top tax brackets shoulder more of the share of the tax burden than ever. Ironically, after the Bush Administration tax cuts.
FYI http://www.taxfoundation.org/research/show/250.html

Posted by: rom12921 | November 3, 2009 5:58 PM | Report abuse

It wasn't .the massive WWII deficit spending that save the country from the Great Depression: that's way too simplistic. During WWII about 12 Million men were put in uniform, most were shipped overseas, and the US government deficit-financed massive jobs projects, yes. But in 1946 those men came BACK and spending plummeted. The US economy promptly dipped and we would have slipped right back into the Great Depression except for one thing: We were the only industrialized nation on the planet that hadn't been bombed back to the Stone Age. Rebuilding Europe sent our exports soaring and drove a stake through the heart of the Depression. Once Europe picked itself back up in the '60s and the US started buying "Made in Japan/Taiwan/China" goods in large numbers however our economy began faltering again as net exports declined. Congress has been throwing money at The Beast to stave off economic collapse but we're just about out of the stuff and even more bills are coming due. It's not going to be a pleasant, easy decade ahead I'm afraid.

Posted by: orionca | November 3, 2009 6:24 PM | Report abuse

If spending money we don't have would fix our economic problems, then we wouldn't have our economic problems in the first place.

What Greider fails to acknowledge is that after WWII the entire world was starved for manufactured products, and only the US had a viable manufacturing base to supply those products. Years of war had destroyed most of the industrial world's ability to produce. Our only competitor, the USSR, never transitioned out of war materiel production, leaving the entire market to us. And so, we prospered.

What do we make in America today that others want to buy? Cars? Nope. Appliances? Nope. Clothes? Nope. Heavy industrial equipment? Very competitive market. Machine tools? Very competitive market. Software? Yes... but this employs a limited population segment that is highly educated and skilled, and the actual production of software is increasingly being done by foreign nationals or is actually moving offshore. And besides, much of the software we produce is stolen (illegally copied) overseas, so we don't get the benefit. Airplanes? Yes... but in a very competitive market.

I was in Mexico a couple of weeks ago, and the only US products I saw were the occasional car and pirated music CDs. I'm in India now, and I haven't seen ANY products that were made in the USA.

The US economy started to falter when we started losing manufacturing jobs. If we don't figure out how to make things in America economically so we can sell them to the world, then we're going to end up like Argentina or the UK. Spending money we don't have will just hurry the process.

Posted by: johnclif | November 3, 2009 7:28 PM | Report abuse

It appears that the administration would prefer to print more money and see what happens...

Posted by: postfan1 | November 3, 2009 7:29 PM | Report abuse

Before government started spending in the 1930's they fixed the banks with Glass Steagall.

We are still waiting for the return of Glass Steagall that would put the banks back into lending.

We are still waiting for tax changes that will discourage financial companies from using high bonuses and back to salary. Not allowing these high bonuses as business deduction and taxing the bonuses at 85 percent will shift compensation to salary and not financial jackpots.

After over 180 billion of taxpayer money to AIG and the 2 trillion of worthless pieces of paper in bank vaults caused by the desire for large bonuses is it not time to recognize that large bonuses are not in the nation's interest and that financial company should be persuaded to go back to salary as compensation in the same way we tax tobacco to persuade people not to smoke. If this would not persuade them to go back to salary it would certainly help the deficit.

When the financial system is a house of cards just waiting to collapse is it not prudent to fix the financial system?

Billions were poured into the banks and they still are not lending and will never go back to lending until Glass Steagall is brought back.

Why lend when there is the possibility of high bonuses from a 100 million trade? Loans are tiresome.

There is continuous talk of the deficit and government spending and no mention that the financial system that collapsed in 2008 and required trillions to avert disaster is still the same as it was in 2009.

You would think that even the economists would know that you fix the leaky bucket before you start pouring water into it.

Posted by: bsallamack | November 3, 2009 7:45 PM | Report abuse

We can keep analyzing and speculating (not a pun) and not come up with the correct answer. There is only one way out of this mess -- before it is too late.

www.debtrealignment.com

The rest is just useless commentary.

Posted by: fiveman3 | November 3, 2009 8:22 PM | Report abuse

I agree that the loss of manufacturing and the outsourcing of jobs are major causes of our depression. As Henry Ford pointed out, if workers can't buy the products they make, there is a problem. However, this writer is no doubt a neocon who really only wants to make life even more miserable for the bottom 40% of the population. I would like to ask: If government spending and social safety nets are so destructive, why do western European countries, Canada and Australia enjoy so much superior qualities of life and why are they recovering from the depressing, while we probably won't recover for decades? Recent reports confirm that the highest living standards are in Nordic countries, which have generous safety nets and much more active governments and protect their workers jobs.

Posted by: skylark1 | November 3, 2009 9:19 PM | Report abuse

Massive spending worked during WWII because our industrial buildup was coupled with commercial dominance after the war.
After WWII Europe and the USSR were in ruins. Japans Industrial capacity had been affected as well. If people wanted to buy things we were the only viable supplier on the planet. The post war prosperity kept us going well into the early 70s when I would suggest it ended during the Arab oil embargo. Since then we have been on a slow steady decline as compared to the rest of the world. We now manufacture few thing for ourselves and even fewer for export. What we really need to jump start this economy is intelligent investment in education and R & D coupled with wise investment in new paradigm commercial ventures. Be it in Information technology, alternative energy, space and marine exploration or biochemistry we still have the capacity for great advances that will increase productivity dramatically. This is the only way to future prosperity that is viable in the long term. We need to fine tune our educational and commercial
institutions to encourage this kind of R & D. We need to fine tune our venture industry to focus more on seed capital rather than later stages.

Posted by: jude11 | November 4, 2009 5:53 AM | Report abuse

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