Newt Gingrich, Ron Paul Flub America’s Post-WWII Economic History

More was behind America's post World War II prosperity than reducing the budget and cutting taxes.

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There was a revealing moment in Thursday night's GOP debate in Charleston, S.C.

Rep. Ron Paul dilated on the problems of reintegrating veterans into a postwar economy:

[W]e have to think about how serious our problems are here, because we faced something much, much greater after World War II. We had 10 million came home, all at once. [W]hat did we do then? There were some of the liberals back then that said: Oh, we have to have more work programs, and do this and that. And they thought they would have to, you know, do everything conceivable for those 10 million. They never got around to it, because they came home so quickly.

But you know what the government did? They cut the budget by 60 percent.  They cut taxes by 30 percent. By that time, the debt had been liquidated, and everybody went back to work again and you didn't need any special programs.

[ See a collection of political cartoons on the 2012 GOP hopefuls.]

Tax cuts and budget cuts. Lather, rinse, repeat.

Former Sen. Rick Santorum and former Gov. Mitt Romney followed Paul. Santorum took an appalling cheap shot when he claimed that President Obama wants to cut benefits for veterans. Romney offered up federalist platitudes about helping veterans more effectively at the state level.

Former House Speaker Newt Gingrich, as is his wont, piped up to correct "Congressman Paul's history":

The U.S. government did two dramatic things after World War II. They created a G.I. Bill which enabled literally millions of returning veterans to go to college for the very first time... The second thing they did is, they dramatically cut taxes, and the economy took off and grew dramatically, and it absorbed the workforce.

[ Read the U.S. News debate: Do the Rich Pay Their Fair Share in Taxes? ]

While he was the only candidate to recall the G.I. Bill, Gingrich was only marginally better informed than his rivals as he quickly fell back on recitations of the supply-side catechism.

These guys didn't just miss the forest for the trees; they missed the forest for a twig.

Gingrich could have gone on to mention the Marshall Plan and the massive postwar recovery effort, which helped rebuild a European market that could afford to buy U.S. goods. He could have mentioned the system of international trade and monetary exchange that knitted together developed noncommunist economies.

[ Check out our collection of political cartoons on defense spending.]

Why did the postwar U.S. economy take off so "dramatically," to borrow one of Gingrich's favorite adverbs?

Could it have had something to do with the war effort itself? You know, the Metals Reserve Company, the Rubber Reserve Company, the Defense Plant Corporation, the Defense Supplies Corporation, etc.?

There were prodigious increases in steel production and merchant marine tonnage. There was rapid technological innovation in aeronautics that sparked the jet airplane industry, not to mention research and development of pharmaceuticals. This isn't to say that it wasn't a good thing for a free society that this juggernaut was eventually wound down. It's merely to say that the groundwork for unprecedented prosperity was laid well before any changes were made to the federal budget.

[ Read the U.S. News debate: Does the United States Need a Balanced Budget Amendment? ]

Clyde Prestowitz sums up the American position as an industrial hegemon immediately following the conclusion of the war:

It accounted for about half of global GDP, owned 70 percent of the world's gold, had a monopoly on nuclear power, was the world leader in virtually every technology and every industry, owned the world's main currency, was the leading creditor to the tune of $3 billion, and had a trade or current account surplus of $5.8 billion. It had more than caught up. It was all alone in a realm no nation had ever before inhabited.

But no; it all comes down to fiscal policy, taxes and spending. It's like some kind of ritual incantation: Government can't create wealth ...  Government can't create wealth ... According to this line of ahistorical supply-side reasoning, 1945 was Year Zero. Taxes were cut. Price controls were lifted. And the economy just magically took off. It's ersatz religion, only worse: It's a religion that's just a creed atop a mountain of ignorance.

It's comical until you realize one of these jokers might be president.