Financing the Second World War for the U.S.A.

John Kenneth Galbraith, a Canadian economist following in John Maynard Keynes deficit spending, pump priming policies- not entirely dissimilar from Arthur Laffer’s Supply Side Economic policy that advised the Reagan administration, was one of F.D.R.’s wartime economic advisers(Arthur Laffer – Wikipedia) . Galbraith was the Deputy head of the Office of Price Administration that set prices on goods during the war.

John Kenneth Galbraith – Wikipedia

Select goods were rationed during the war, including gasoline. Industry was converted to produce war materials rather than consumer goods. Total war required total commitment of the economy toward defeating the axis powers.

With 20 million Americans drafted into the military during the war years, in a nation with a population of 132 million, labor surplus from the post-depression era with a 14% unemployment rate probably dried up. Wage and price controls and the need for full employment producing items for war as well as national sustenance allowed the United States- a largely self-reliant nation at the time, to devote itself to defeating the foreign enemies of the Republic.

Running deficits, selling bonds and raising the tax rate to 90% on the rich helped finance the war. Economic growth after the war’s conclusion allowed the very large public debt to be repaid rather quickly.