It's 1938 All Over Again

And World War II isn't walking through that door
By Kevin Spak,  Newser Staff
Posted Sep 6, 2010 10:32 AM CDT
President Franklin D. Roosevelt is seen with, from left, Marguerite LeHand, Stephen Early, and secretary Grace Tully at the White House, May 22, 1941.   (AP Photo/National Archives)

(Newser) – The US economy has been crippled by financial crisis, and the president’s too-cautious policies have failed to stem the bleeding. More stimulus is needed, but the public has soured on spending and plans to kick Democrats out of office. Sound familiar? That was the situation in 1938, writes Paul Krugman of the New York Times. And this time, World War II’s not walking through that door to save us.

World War II brought an unprecedented burst of deficit-financed spending—the government spent double the value of GDP, or $30 trillion in today’s dollars. No one would have approved that without the war, but it lifted us out of depression, and actually wound up reducing our debt. The economic lessons seem clear. “But it turns out that politicians and economists alike have spent decades unlearning the lessons of the 1930s and are determined to repeat all the old mistakes," Krugman concludes.

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