World War II Was Fought With Savings Not Debt

Peter Schiff

While the country and the stock markets reel from the impact of the Coronavirus, many economists and politicians are calling for the government to fight the pandemic as if we had to fight the Second World War all over again. In his address from the White House on March 18, President Trump made this comparison explicit when he said that we must sacrifice the same way our parents and grandparents fought the War in the 1940s. The President likened himself to a “wartime president” as he invoked the Defense Production Act, a Korean War era measure that allows the president to exert tremendous authority over key industries deemed important for the war effort.

Although it seems absurd to compare a war and a virus, there are some similarities in the way WWII and Coronavirus are impacting the economy. Both are unexpected international events that shattered Americans’ sense of isolation and fundamentally altered the U.S. economy almost overnight. The attack on Pearl Harbor and the Coronavirus both took the country by complete surprise, and in both cases politicians can argue, correctly, that the crisis was not America’s fault. 

For needed perspective, it must be said that the Coronavirus is not shaping up to produce a bloodletting anywhere like WWII. But from an economic perspective, that almost doesn’t matter. In order to slow the spread of the disease, we are seeing a near total shutdown of economic activity. In that sense, it does feel like Pearl Harbor has been attacked again. But the government’s response could not be more different. 

On December 8, 1941, the day after more than 2,000 Americans were killed at Pearl Harbor, then president, Franklin Delano Roosevelt, addressed the nation to explain how the United States needed to undertake a momentous challenge: To fight two enemies on either side of the world, a task that would clearly require an enormous expense of money and resources.

But imagine that instead of warning that the effort would require Americans to work harder (in ways they wouldn’t necessarily choose in times of peace), pay more taxes, lend more money to the government, and reduce consumption of consumer goods and services, FDR promised the opposite? Suppose he said that in order to defeat Germany and Japan, the U.S. government would suspend taxation, guarantee income continuity by sending checks to all adults, and bail out every business that lost sales due to a “crisis that was not their fault.” And rather than asking Americans to join the Army to fight on the beaches of Normandy and Iwo Jima, Roosevelt instead asked the people to stay at home and do nothing for possibly months on end?

As absurd as this sounds, this is precisely how the government is proposing to fight the current crisis...

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