We’ve had lots of fun referencing James Taranto’s take on Paul Krugman’s ideal of the ultimate super-sized Keynesian “Stimulus” on stilts — World War II. Last September, Taranto wrote:
Here’s the situation: The U.S. economy has been crippled by a financial crisis. The president’s policies have limited the damage, but they were too cautious, and unemployment remains disastrously high. More action is clearly needed. Yet the public has soured on government activism, and seems poised to deal Democrats a severe defeat in the midterm elections.
The president in question is Franklin Delano Roosevelt; the year is 1938. Within a few years, of course, the Great Depression was over. But it’s both instructive and discouraging to look at the state of America circa 1938–instructive because the nature of the recovery that followed refutes the arguments dominating today’s public debate, discouraging because it’s hard to see anything like the miracle of the 1940s happening again.
What Krugman calls “the miracle of the 1940s” is more commonly known as World War II, a ruinous conflict that cost some 60 million lives, including more than 400,000 American ones, and that entailed the near-extermination of Europe’s Jewish population.
World War II is sometimes called a “good war,” meaning that few dispute American intervention was necessary or that we fought on the right side. But this easy moral clarity is possible only because the Axis actions that started the war were unambiguously evil.
In April 2009 we noted that David Leonhardt, a Krugman colleague at the Times, had praised the economic policies of Germany’s National Socialist Party. Now Krugman calls World War II itself a “miracle.” The Old Gray Lady is in the grips of utter madness.
Never let it be said that Krugman doesn’t think big. But what’s bigger than World War II? Resistance is futile; prepare to be a-stimulated, in Star Trek: First Krugman!
PAUL KRUGMAN, NEW YORK TIMES: Think about World War II, right? That was actually negative social product spending, and yet it brought us out.
I mean, probably because you want to put these things together, if we say, “Look, we could use some inflation.” Ken and I are both saying that, which is, of course, anathema to a lot of people in Washington but is, in fact, what fhe basic logic says.
It’s very hard to get inflation in a depressed economy. But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So, if you think about using all of these things together, you could accomplish, you know, a great deal.
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better –
ROGOFF: And we need Orson Welles, is what you’re saying.
KRUGMAN: No, there was a “Twilight Zone” episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time, we don’t need it, we need it in order to get some fiscal stimulus.
It would also finally allow President Obama to put his 2008-era “People of Earth”-toned rhetoric to good use. But beyond Krugman seeing little green men in his sleep, Noel Sheppard of Newsbusters notes what he’s also tacitly stating:
Oh those whacky liberals.
There’s so much in this that it’s tough to know where to begin, so let’s start with this being another admission by Krugman that it wasn’t Franklin Delano Roosevelt’s massive New Deal spending that ended the Depression.
Much as he did on ABC’s “This Week” in November 2008, the Nobel laureate once again dispelled that liberal myth.
I wonder if the Keynes-loving Zakaria was paying attention.
But more importantly, let’s look at the numbers involved to really get a sense of what Krugman advocated here.
The money unsuccessfully thrown at the Depression prior to World War II was staggering. From 1929 to 1939, government spending tripled from $3 billion a year to $9 billion.
And yet unemployment at the end of 1939 was still 17.2 percent.
Not a very good advertisement for Keynesian economics, is it?
Now imagine that kind of “stimulus” today. That would mean the current $3.8 trillion budget would have to rise to $11.4 trillion which would generate about $9 trillion of debt a year.
What do you think would happen to our credit rating and our dollar then? Wouldn’t be pretty, would it?
Yet that didn’t work in the ’30s – a fact that most liberals other than Krugman still contest – so the Nobel laureate is advocating that we spend like we’re being attacked by space aliens in order to get to the level of outlays during World War II.
Total federal spending in 1940 was $9.5 billion. By 1945, this had risen almost tenfold to $93 billion.
Such an increase in today’s budget would create a deficit greater than $30 trillion per year making our dollar and our Treasuries totally worthless.
Did I mention Krugman once won a Nobel prize in economics?
Was the award ceremony in Grover’s Mill, New Jersey?
More: “And, even when the lid gets blown off, the demand for ‘The Invasion From Planet Zongo Was An Inside Job’ bumper stickers will stimulate a second economic boom!”