A New World War Two

As the work of Amity Shlaes and others starts to make much of the “new New Deal” propagandizing ever more difficult, many liberals are now switching to the argument that what we really need is another World War Two, minus the war part of course. Paul Krugman said a few weeks ago that WWII was just a big jobs program. And here’s Robert Kuttner on ABC’s This Week:

Now, on the question of whether the New Deal worked, Doris Goodwin said to me the other day, don’t look at the Roosevelt of 1933, look at the Roosevelt of 1941, 1942.

The New Deal got us halfway out of the Depression, and it was Roosevelt’s effort to balance the budget in 1937 that caused the downturn. But in 1941-42, we converted to a wartime footing and unemployment disappeared. And the deficit went as high as 28 percent of GDP. Now, I’m not saying the deficit has to go that high.

But Doris’ point was, look at the auto conversion in 1941, 1942, when they shut the lines, they retooled, they started making planes and tanks and produced aircraft and weaponry at a rate the world had never seen. We could do that with fuel-efficient cars as the price of the auto bailout.

This is at best misleading — and it’s also an enormous “never mind” for liberals who’ve been worshiping the New Deal for 70s years. As Tyler Cowen noted this weekend, much of the gains from the war economy occured before we actually went to war but after we started selling all sorts of materiel to Europe. And the big gains that came after World War II were the result of the fact that Europe had been flattened and needed to buy pretty much everything from America. Investments in green technology are secondary, historical analogies are rationalizations. Kuttner simply wants a massive new industrial policy.

(Cross-posted to the Corner)

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