I got some great feedback on my previous post so I'll post some of the best ideas that I came away with. Many thanks to Georg, Eric Larson, Eric Parks, and Laura.
First of all, to clarify, this is an exposition of the World War II stimulus from a philosophy of mercantilism (tip: Eric Larson) towards governance and economy. I had cited Roosevelt's system of tariffs and regulations as effective price floors in the economy and assumed that goal of setting price floors (in real terms, so adjusted for inflation) were a given, and tried to show how World War II removed the need for government controls over the economy since the economic equilibrium reset above the price floors. If the government had instead operated with a philosophy of capitalism and freedom, recovery would have been strong and swift (tip: Eric Parks and Georg). This philosophy of mercantilism is somewhat similar to the philosophy prevalent among the political elite, today.
The effective stimulus from a mercantilistic view towards the world is the destruction of foreign competition so that domestic producers can sell more at home and abroad. Wars have this stimulating effect by destroying foreign capital for production through collateral damage. Destruction of capital include activities such as killing skilled laborers, destroying arable farmland, and bombing and shelling factories - basically the definition of collateral damage. Insofaras war achieves the destruction of foreign capital, it is stimulative for domestic producers.
In this economic view of the world, all the money that a country consumes for war is the cost and all the destruction that it inflicts is the benefit. Should the country spend money on a war without destroying foreign capital, then economists would call the entire venture deadweight loss. Should the country spend money on other activities that have no value in the market place, those expenditures would also fall into the category of deadweight loss, and rationally, a government should seek to expend as few resources as possible to achieve the same amount of foreign capital destruction.
The US government consumed an unprecedented amount of resources for its War effort. The war had the unpleasant effect of consuming a lot of domestic capital. Hundreds of thousands of Americans young men died, and farm equipment and all other capital unrelated to the production of weaponry went into disrepair. Besides, the belligerents would have inflicted a staggering amount of capital destruction upon each other regardless of America's entry into the war. One might say US massively overpaid for marginal economic stimulus received. And because of war time distortion of the economy, the earliest definitive evidence that the Great Depression ended is in 1946 (tip Eric Parks).
In summary, the idea that war spending stimulates the economy is a confusion of cost and benefit. If mercantilists really wanted economic stimulus through spending, they have to propose a plan of action that results in massive amounts of destruction of foreign capital. They should be advocates of murder and wanton violence on an unprecedented scale. This is the true moral dilemma (tip: Laura).
