In speaking with people about the president’s Economic Recovery Plan, a common question from both supporters and detractors is: “Has the government ever succeeded in something like this?” As a person with degrees in both Economics and History I can state confidently that there have been several times in recent history where something like the current plan has succeeded in reversing our country’s economic fortunes. Perhaps the one example that best illustrates the point is the post World War II example of the Servicemen’s Readjustment Act of 1944, or GI Bill.
As World War II was drawing to a close President Roosevelt and many of our nation’s leaders faced a daunting challenge: what will happen when more than 15 million soldiers, sailors, and airmen get laid off from their jobs at a time when demand for the industrial goods produced by war time industry collapses? The country had faced a similar crisis after World War I, and lack of action had led to the veterans’ “Bonus March” of 1932, and contributed to the depth of the Great Depression. Social upheaval and economic collapse were a very realistic fear!
Harry W Colmery, a former Republican National Committee chairman, was one of the earliest proponents of a government program to mitigate the effects of the war’s end on the economy. Warren Atherton of the American Legion greatly influenced the content of the bill, and Arizona Democratic Senator Ernest W McFarland guided the legislation through Congress. So, the bill had initial support by the minority party, was greatly influenced by a “special interest group,” and was championed by the majority party! The Economic Recovery Plan also enjoyed initial support from Republicans, but largely managed to escape special interest input because the speed in which it was passed, and ended up having to be passed by the Democrats with little support from the minority party.
The main parts of the bill were provisions for college or vocational training, and one year of unemployment benefits for returning service men. So, it invested in our future by creating a more educated and skilled work force while deferring many people’s entry into the work force, and provided immediate help to the unemployed. Subsequent legislation, after the war including the Employment Act of 1946, and various programs aimed at making home ownership a practical goal for most families also had a stimulative economic effect. The Marshall Plan, with its buy American provisions did as much to bolster our economy as it did to rebuild Europe.
While our challenges after World War II were brought on by different circumstances, they were similar to the problems we face today: industry that needs to be retooled, a collapse of world wide demand caused by the inability of consumers to pay, a surge of suddenly unemployed workers, all of which is happening after years of deficit spending by the federal government. The actions that the United States took spurred demand across our economy by directing government spending into programs that created long lasting value for our nation. The Economic Recovery Plan has exactly the same goal.
Our country’s reaction to the economic challenge that it faced after World War II was hugely successful and can largely be credited with creating the middle class that became, and remains, the main economic driver in the U.S. economy. Our country eventually had to stop deficit spending, and bring forth a balanced budget when the economy got to a stable point, but it can be said that government fiscal (spending) policy has a long and mostly successful history as a tool for dealing with economic hardship. President Obama’s Economic Recovery Plan, like the GI Bill, is aimed at solving a problem BEFORE it gets out of hand. History says that it can work, and it is worthy of our enthusiastic support.
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