Skip to comments.Vanity: How did the US pay off WW2 debt?
Posted on 09/26/2009 2:00:32 PM PDT by tired1
My understanding is that WW2 debt was close to our current level of GNP/debt. What were the mechanisms of paying it down? Did the destruction of Axis countries industrial base create a captive market for the US? How was lend Lease and the Marshall plan paid off?
Any insights would be appreciated, thanks.
There were no Medicare and Medicaid programs back then. Plus we were beginning our Baby Boom so our Social Security costs were minimal.
still paying it
Debt doesn't matter if the interest from your investments exceeds the interest from your debt. Inflating away your debt's value helps too.
Now it's the 21st century and we don't make so much stuff anymore, and we are no longer the only game in town. Recovery will be much, much slower.
And keep in mind -- we are currently in a hole, and we are currently digging as fast as we can. Recovery cannot even begin until we realize that no one can spend their way out of debt.
U.S. War Bonds...that we’re still paying for to this day...
My first thought would be that the returning work force of fighters had been expenses to the government, but suddenly became positive contributors.
That federal excise tax on your phone bill was enacted more than 100 years ago to pay for the Spanish American War. Apparently we are still paying for that too.
These were NEVER paid off by the receiving countries (with a few exceptions).
Correct me if I am wrong. Over half of the industrial world was destroyed in WW2. The work had to be done here. The US had the industrial base intact and plenty of natural resources to supply it. No environmental restraints and regulation to hold us back at the time.The US also had industrial (union) workers making as much, if not more, than engineers do today. That does a lot to spur consumption.
When American companies gutted the "rust belt" for cheaper shores and crappier products the current decline became inevitable.
The Federal Government ran balanced budgets until 1970, with year to year variations, not adding to the national debt. As the economy grew the debt as a percentage of GDP shrank. The government not so much paid off the “credit card” as not adding to it.
If we got rid of Medicaid, Medicare, and disassembled our welfare state, the government would be in good shape in pretty short order. Unfortunately, there are a whole bunch of people who vote for that stuff, so it ain't gonna happen.
We inflated the money supply and paid it off with cheap dollars. Yeah, inflation was less than it was during the worst periods of modern economic history, but we were a bit more honest then. Then we got some more debt. So we’re not better off in net.
We had a war-induced monopoly on industrial production.
The 'Great Society' starting kicking in post 1970. Rules and regulation stagnating capitalism amd freedom starting their choke hold at that time. Taxes and fees raised to pay for all the programs were being instituted in that era.
It has all snowballed since then.
The libs all blamed it on paying for Viet Nam.
Interesting that the percentage hit its low point under Carter, then started back up under Reagan.
Our debt is expanding at a compounded annual rate of 8.5% plus. Even at the most generous GDP growth rate of a consistent 5% plus we cannot catch up or pay it off.
We are one step from a massive financial meltdown that probably can't be stopped, The Fed has no more magic bullets and has done a great deal to put us in this mess.
That's the old broken window fallacy again.
Artificially holding wages above their market rate may spur consumption among union workers but it depresses consumption among the consumers who are now having to overpay for those union made products.
It would be more accurate to say the American economy flourished despite union wages.
There is only one way to pay off this debt. Sell Alaska. Sell all federal lands.
The environmentalists should understand where the adherence to the liberal line leads.
I don't think that would raise enough to pay off the national debt. But it would be a good thing to do nonetheless. Right now the land is being wasted through misuse and through disuse.
I’m pretty sure all the war bonds stopped paying interest long ago, though any that haven’t been redeemed are still payable. I’m sure there aren’t too many out there to speak of.
They were patriotic maybe, but not such a great deal. Iirc, they cost $18.75 and denominated at $25, so with the inflation of the 50s and 60s, they were a really lousy place to park money. Probably equal to $800 to $900 in todays purchasing power, $25.00, not so much.
That chart is worthless without an inflation adjustment. A dollar back in 1945 bought much more than a dollar today.
It’s tough to find, but I think it’s still on the ‘net - a list of the stuff we sent the Soviet Union - mind boggling, staggering amounts of finished goods and raw materials.
I was watching Neil Cavuto on Fox the other day and his guest said over fifty percent of the US population now received money from the Federal Government.
He stated that since a simple majority now was beholden to the Government it may now be impossible to get us out of this mess and to watch for Atlas to shrug as more of the wealthy and industrious "go Galt."
It was obvious he had read Ayn Rand and appreciated her point of view.
for some reason I have never read all of Atlas Shrugged until I bought the Centennial copy from Amazon last month and read it all in three days on a camping trip two weeks ago.
I was a great book and it scares me to see so many similarities to what is happening now.
I can't believe you repeat this 1930s faddish garbage with a straight face. That garbage is theory of underconsumption, and FDR's belief that increases in workers' wages will stimulate consumption.
The answer is very simple. A company creates a pie (product). If you pay more to unions, there is less for the shareholders. The total consumption stays the same and EQUAL to the pie created (if part of it is not reinvested). The same is true for the economy as a whole: one sector may appropriate a bigger portion of the pie, but that does not change the size of the pie to be consumed.
Sounds good, but not accurate.
Post WWII to 2002, the national debt increased in 1950, 1952-5, 1957-68, 70-02.
“Interesting that the percentage hit its low point under Carter, then started back up under Reagan.”
Carter wasn’t prez in ‘82.
As for adjusting the dollars, that won’t make a difference. Debt/GDP are both in the same dollar for each year. That’s the beauty of the chart is that it cancels out inflationary pressures. 80 percent is bad, but it’s still not as bad as with the war, and people are right, only about 2/3rds of the debt carried into WWII was paid off, and that includes FDR’s programs in the 30’s.
We are one step from a massive financial meltdown that probably can’t be stopped,
Some don’t think it can happen? It has already started.
“Im pretty sure all the war bonds stopped paying interest long ago”
If memory serves, the war bonds were 10yr bonds.
U.S gov’t paid off the bonds but borrowed funds to pay them off and 11 Trillion dollars and fifty years later, we’re still paying for WWII.
U.S. NATIONAL DEBT CLOCK
The Outstanding Public Debt as of 26 Sep 2009 at 10:02:41 PM GMT is: $11,778,288,071,077.38
The estimated population of the United States is 306,993,010
so each citizen’s share of this debt is $38,366.63.
Yup, were not going to get out of this one. A real old friend of mine (were both 70+)and I were talking the other day that we were born at the opportune time in American history, lived and worked in the greatest nation on earth and will probably be gone by the time Americans will be living like the poor in Zimbabwe (public sector excepted ofcourse). The timeing was perfect for us. We were lucky.
Good point Joan. My 77 year old father just told me the same thing. He feels that he lived a good life and reaped its sows and were stuck with the bill.
I was a kid in grade school during WWII. They had a neat setup for kids. They gave you a little stamp album-type booklet with places for 10c, 25c, 50c or $1.00 stamps:
After so many stamps there'd be a little notation like "you have just bought a cartridge belt for our soldiers", or helmet or anything else up to $18.75.
The 10c stamps were red, which is what most of us bought. A few of the richer kids bought 25c stamps (green) and one REALLY rich kid bought (gasp) a purple 50c stamp EACH WEEK.
Besides the scrap metal drives, it was a great way to involve the kids. As a sidebar, we'd pick up extra money by turning in our parent's can of bacon grease (for explosives) at 2c a pound. Since toothpaste tubes were made out of tin, you had to turn in an old one to get another tube. All kids and most adults not of WWII vintage have no idea how we had to scrimp, with ration books being unheard of and treated as a novelty.
They may well relive that experience in the coming years.
War debt? You better ask England and France about how they paid off the war debt owed to the US and , yes, I am talking about money, not about the lives expended to save England’s and France’s a**.
See, that PISSES me off. Here I am 27 and have virtually NO debt... yet for some reason I AM in debt for almost $40k!? WTF?
I’m coming to be more and more of the opinion that the only way out of this involves bloodshed on some level.
(1) The wartime destruction or decay of Europe's industrial base made the US the sole or prime supplier of many industrial goods;
(2) As a result of wartime and postwar treaties, allies, enemy powers, and European colonies were required to open their markets to US trade;
(3) US industry generated or gained access to many wartime innovations with post war commercial value, such as in aviation, radar, electronics, and nuclear power, with Britain having relinquished key patents to the US as a contribution to the war effort;
(4) Much scientific, business, and cultural talent gravitated to the US, before, during, and after the the war;
(5) The dollar became the world's primary international currency, making it easier to finance US borrowing and with New York eventually displacing London as the world' banking center;
(6) Britain, with an abundance of talent and a competitor to the US, enfeebled itself at the end of WW II by electing a socialist Labour government, which brought in punitive taxation, nationalization of industry, tight regulation of business, and expansion of the state sector;
(7) Through rapid demobilization, deregulation, and the GI bill, the US made an effective transition from a wartime economy;
(8) The post war US baby boom prompted a massive expansion of the US domestic market and productive capacity;
(9) Not only was the US suddenly the world's predominant military, economic, financial, cultural, and diplomatic power, but the Cold War made good commercial relations a strategic necessity for much of the world;and
(10) We did not pay off the debt from WW II, which was carried at low rates with long maturities, but due to the expansion of our economy, the relative size and burden of that debt diminished.
In sum, through the mid 1970's, the US had unique but ultimately transitory economic advantages. Now, massive debt, the expense of the welfare state, high taxes, and the generational deficit caused by the baby bust place us in severe financial peril.
Thanks for the summary, that’s what I was looking for.
The chart is % of GDP, not dollars. It compares the debt to the size of the economy.
You don’t know squat about economics. Nada. Zip. Zilch.
Read. The. Chart.
Percent of GDP has NOTHING to do with the value of the dollar. Specifically, the chart addresses ABILITY TO PAY. We had damned high taxes in the post war period so as to pay down the debt. That harmed economic growth. The good news is we got through it - for a lot of reasons, not the least of which is that we sold a lot of stuff to other countries whose factories were destroyed.
Yep, and no arguing the fact that Ronnie’s spending increased our debt. It also broke the Russians. War is not cheap, even Cold War.
True. The defense budget of Ronaldus Magnus funded the cheapest war we ever won.
Au contraire. The chart is expressed in percent of GDP, not in dollars. It is thus inherently adjusted for inflation.
YOUR CHART says UNADJUSTED DOLLARS. Reading comprehension is your problem.
That actually got repealed finally a few years ago. Was pretty short lived though because it was rapidly replaced by a higher tax and called something else.
What part of the words UNADJUSTED DOLLARS on the chart do you not understand?
Since the Russians did the vast majority of killing of Germans, this was without doubt a good investment.
Carter may have not been president in 82, but it’s still a fact that the percentage ended a long slow decline under Reagan and started upward quite dramatically.
A percentage is a percentage.
1945 dollars are compared to 1945 dollars, 2000 dollars to 2000 dollars, etc.
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