Focus Point - War And The EconomyCommentary by Pete du Pont
October 11, 2001
I'm Pete du Pont with the National Center for Policy Analysis. There's a notion that war is good for an economy, and that since we're headed into one -- of what type is yet to be determined -- increased spending will be good for the economy and we'll pull out of our economic slide. This mind set is partly informed by the belief that World War 2 pulled us out of the depression. It did, but it's not that simple.
Wars almost always lead to higher taxes -- sometimes taxes undreamt of in peacetime. Wars invite wage and price controls. They distort investment because priorities are obviously different from peace time.
But war can cure deflation, as World War 2 did. And the delfationary slowdown of the last 20 or so months could be cured not only by liquidity provided by the fed, but also by a cut in the capital gains tax and -- if we're foresighted -- a stepped up schedule on the Bush tax cut.
Will there be problems? Sure -- if there was ever a situation for the worst kind of pork barreling to sneak in under the radar, this is it. But if it does, it must ride in on real economic reform.
Those are my ideas, and at the NCPA we know ideas can change the world. I'm Pete du Pont. Next time, the real cowards.