Krugman What?

1938:

An argument by analogy can sometimes be helpful... but only if the analogy fits.

The story of 1937, of F.D.R.’s disastrous decision to heed those who said that it was time to slash the deficit, is well known. What’s less well known is the extent to which the public drew the wrong conclusions from the recession that followed: far from calling for a resumption of New Deal programs, voters lost faith in fiscal expansion.

Consider Gallup polling from March 1938. Asked whether government spending should be increased to fight the slump, 63 percent of those polled said no. Asked whether it would be better to increase spending or to cut business taxes, only 15 percent favored spending; 63 percent favored tax cuts. And the 1938 election was a disaster for the Democrats, who lost 70 seats in the House and seven in the Senate.

Then came the war.

From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today.

Had anyone proposed spending even a fraction that much before the war, people would have said the same things they’re saying today.

Oh, right. Only one small point of disanalogy: the war also destroyed nearly all of our competition in the production of industrial goods, while leaving us with customers absolutely starved for replacements. Paying off all that debt therefore wasn't a problem: we had assured income in the form of people buying from us what they needed to put their country back together.

Now, if the proposed stimulus will reduce all our competitors to ashes, leave our industrial base intact, and also require them to buy stuff from us to rebuild? Then I'll be convinced that the analogy holds.