Expensive stimulus bill is a bargain if it helps prevent a full-blown depression
The $787 billion stimulus bill approved in mid-February 2009 has been justified in terms of being an essential element in preventing a downturn that could be as serious as the Great Depression. In pushing for the legislation's approval, President Obama argued that while the stimulus package by itself would not prevent a serious collapse of the economy, it would provide a needed 3.5 million jobs.
Opponents argued that the bill was too expensive, did not include their preferred policy elements, and was loaded with too much pork.
All of this got us to thinking. By what measure could one decide whether or not it was too expensive? For instance, how big a hole would we be in if we experienced a repeat of the Great Depression? How many people would be unemployed? What would be the loss in the value of production? What would be the impact of a new depression on agriculture?
Former Secretary of Agriculture Henry A. Wallace -- philosopher of the New Deal and architect of traditional farm programs -- wrote a book, Sixty Million Jobs, as he finished up four years as Vice President and settled into his new position as Secretary of Commerce.
Wallace wrote the book out of concern that the nation not fall back into a depression following the end of WWII. Wallace wanted to make sure that the country was ready to provide an economy with 60 million jobs, the number Wallace estimated would be needed to provide full employment for the returning veterans as well as the population at home, hence the bookâ€™s name.
In part, Wallace wanted to prevent a repeat of the 1932 march of the Bonus Army, consisting of some 43,000 marchers including 17,000 WWI veterans. They marched, petitioning the government for the payment of a war-time military bonus that was granted the veterans in 1924 with payment deferred until 1945. With unemployment growing, they argued that they needed the money immediately.
To press their point they established a Hooverville in Washington, DC, to the dismay and embarrassment of the President Hoover. It took a military engagement and the deaths of several WWI veterans and family members to move the veterans out of the capital.
In 1945, Wallace felt that the country could and should do better than that. It could make sure the economy had a sufficient number of jobs for returning veterans and their families. He argued that the cost of failure was too great.
To back up his argument he looked at the Great Depression and its impact on employment, loss of production, and above all the human cost: "Men with broken spirits, women waiting at home in endless anguish, children neglected and undernourished."
According to Wallace's calculations, the Depression resulted in 88 million worker-years of lost employment, an average of 6.8 million persons per year for 13 years. That represented 5.3% of the population at the time. A comparable unemployment figure today would be 16 million persons per year for the length of the economic crisis.