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History As An Extension Of Memory

May 8, 2011

[an earlier version of this appeared on my WordPress blog on 10/29/10]

Deficit hysteria seems to have won the day. We hear frantic claims of “We’re on the verge of collapse!” or  “an imminent apocalyptic meltdown” because of “profligate government spending and our huge national debt”.  We are told reducing government spending must be our top priority, to avoid “ruining the lives of our children and grandchildren” who will live stunted lives,  crushed under a cruel legacy, a  mountain of debt. Both parties appear to have given up on doing anything about job creation or the housing crisis in favor of obsessing about deficit spending.  The Democrats have bought into the GOP line that slashing federal government services and spending and reducing the deficit must take priority over any other concerns. After months of media propaganda from both sides,  a majority of the public appears to have been persuaded, too.

We are told that big debts will cripple economic growth, depress standards of living, and make the entire system vulnerable to sudden and disastrous collapse.

Are those apocalyptic  warnings  really based on reality? I am not an economist but I am an (intermittently serious) student of history and I know some relevant facts that raise doubts in my mind.

When World War II ended we had a far larger national debt in proportion to our Gross Domestic Product (GDP) than we do now.   That is not surprising since war is always the most expensive activity a government can engage in. Depending on whose statistics you rely on, our national debt was between 41% and 46% of our GDP in 1946.  During the Truman Administration it dropped into the 18-20% range and remained under 22% until George W. Bush’s actions left it at 22.8%.  Last I looked it is now pegged at 24.3%, thanks to the recession, successive tax cuts, and skyrocketing medical costs.

Was the post-WWII  national debt a crushing burden that destroyed the American economy and ruined the lives of the next generation? No. On the contrary, the thirty or so years after WWII were the most prosperous in world history. People in the USA achieved a greater expansion of prosperity and rising standards of living than has ever happened anywhere in the world, in any country, before or since. Was this because taxes were slashed? No. Corporate taxes in the period 1946-60 remained higher than they’ve ever been in the 51 years  since 1960. Was it because post-war government spending was slashed? No, not at all. Here is a partial list, off the top of my head, of expensive activities  the government spent tons of money on in the post-WWII period:

*The GI Bill, a new entitlement program in which the federal government committed to paying the costs of a college education for 16,000,000  veterans–and all subsequent military veterans, whether in wartime or in peacetime  (remember peacetime?). Not to mention the costs of VA services to the 670,000 who came home wounded and in need of ongoing services and benefits.

*The Marshall Plan to rebuild Europe.  Much of the aid was in the form of credits to purchase from American businesses. Along with its 1945-47 predecessor,   the total cost by 1951 was over $25 billion in  1940s dollars.  According to some stats geeks, that’s over $115 billion in current dollars.

*The Korean War, 1950-53.  This cost at least $54 billion at the time and the lives of 53,000 American soldiers.

*The Cold War and the gradual creation of a world-wide network of 3,000 overseas military bases and nuclear missile-launching sites and a standing army of as many as 3,000,000 servicemen in uniform at one time.

*Post-war occupation and rebuilding of West Berlin and West Germany. The US government sank billions into trying to make West Berlin a glittering showcase of capitalist prosperity in contrast tot he bleak austerity of Soviet-occupied East Berlin.  Costly maintenance of a standing army of over 500,000, with their families and dependents for some four decades.

*In cooperation with state governments, creation of a vast network of taxpayer-subsidized state universities, colleges and junior colleges.  California, for example (my home state) expanded the University of California to seven different campuses, created at least 19 tuition-free state colleges from San Diego State to Humboldt State, and literally dozens of free two-year junior (now ‘community’) colleges which admitted any high school graduate and from which students could transfer to a four-year college. Before WWII a college education was a rich man’s privilege. Not more than 10% of adult white males attended college.  Among women and minorites the percentage was much less. But by 1970 over half of all high school graduates were attending at least some college: a sea-change in public education.

*Creative of the massive Interstate Highway System from coast to coast, unde the Eisenhower Administration: a costly investment in infrastructure.

*The entire Cold-War fueled missile race, nuclear arms race, and the space race.  God, will anyone ever know the total cost of those?

*The expansion of Social Security and the creation of Medicare and Medicaid.

*All of LBJ’s Great Society Programs and the War on Poverty.

*The Vietnam War, especially during the period 1964-75, in which we once had 550,000 troops in Vietnam at one time, dropped more bombs than were dropped by all sides during WWII,  killed two million Vietnamese and lost 47,000 American soldiers.

*This was, remember, an era of continued high taxes on corporations and the wealthy, of strong unions,  and of extensive government regulation.

*The emergence of the so-called “Labor Aristocracy”, skilled tradesmen like electricians, carpenters, machinists, and auto workers started earning more than many white-collar workers with college degrees.  By the late 1950s many blue-collar workers were able to  buy second cars, pleasure boats, vacation homes, or taking vacations in Hawaii.–things utterly unthinkable for working-class people before WWII.

And yet the deficit declined. The national debt dropped from over 40% to around 18% before Truman was out of office.  How was that possible? It makes you wonder how  America managed to accomplish all that during those decades, when they were objectively poorer than we are.  Yes, I know  there certainly was a lot of ugly and scarey things going on in that era–racism, McCarthyism, the haunting spectre of nuclear war, Watergate, Vietnam, the Iran-Contra scandal, among many others–but I’m making a point about growing prosperity  and rising standards of living despite massive government spending and an inherited massive deficit.

The national debt didn’t really grow again until Ronald Reagan took office in 1981. Clinton reduced it,  balanced the budget, and left his successor with a surplus. George W. Bush sent it soaring to new record heights when the became the only president in US history to start two wars and make no provision to pay for either one. He  expanded Clinton’s deregulation of industry and slashed taxes, leaving a ruined economy and a massive deficit for his successor to worry about.

I offer these reminders in the hope of stimulating reflection, thought, and study. I don’t pretend to have the answers. No doubt some will point out that 1946 is not 2011 and we live in a different country and a different world today, 65 years later. That is true. Yet the past can give us clues to help us see the present more clearly, to put things in historical perspective, to understand the present as a product of our history.

According to at least some sober calculations, America is richer than ever right now. The aggregate total of wealth in this country is greater than it has ever been. We are, on paper, richer per capita a than we have ever been. Why, then, do we constantly hear that ” we can no longer afford schools or roads,…we can’t afford pensions anymore….we can’t afford health care for the elderly and disabled”? At face value, we’ve never been better able to afford those things. Yet it seems that previous generations were able to accomplish more with less, to tackle big social problems we are now being told cannot possibly be addressed, let alone solved. Why is that?

Have big deficits and a big national debt ever triggered an economic crisis in American history? When? We had the Panic of 1837, and of 1873 and of 1896 and the Great Depression starting in 1929 (along with many other recessions).  Which, if any, of those were caused by too much deficit spending,  by taxes on the rich,  or by  a large national debt?

When were those ever a harbinger of disaster, and a cruel and crushing burden on the next generation?

I think the burden of proof lies will those who claim it is or will be. Where is their historical evidence?

















One Comment leave one →
  1. Julianne Johnson permalink
    May 10, 2011 9:19 AM

    Makes me want to brush up on my economics and history. Unfortunately, in my ignorance, I am probably more like most folks, willing to get on the bandwagon of the most persuasive speaker, not well informed enough to ask the questions you bring up. I think all the broohaha about Social Security being too expensive to continue is due more to special interest groups who see ending Social Security as a way for investment people and bankers to score big. The problem is, and I think they are banking on this, many folks, myself included, wouldn’t have a clue about where to put their retirement income nor how to really manage it. To people who do get it, we must seem like morons and we deserve what we get but we are not all comfortable with handling our retirement income and may in fact be really intimidated by the process. It seems like a great way for the unscrupulous handler of other people’s money to make it big. Lets see, who do we know just went to jail for just that thing and is now writing his memoirs from prison?

    I think it’s the same for those who oppose a single payer national health plan. There could be a guaranteed level of healthcare available to all for an affordable price…then if you want a face lift or Viagra or a boob job, you can pay extra for the non essentials, buy a fancier plan according to your means. It would just be nice if we could all have access to well managed health care and reasonable prices for necessary medications. Most pharmaceutical companies have programs to provide low or no cost prescription drugs to folks of limited means. That tells me they have plenty to go round. It always comes down to profits for the investors or stockholders. Well, maybe there are some “industries” that shouldn’t expect their dividends to be too high. Especially if it puts necessary drugs or insurance coverage out of reach. There’s something wrong about paying as much for your health coverage as your rent..

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