Bringing Down the Deficit: Can We Follow the Marshall Plan Formula? by Gregory Hilton

The U.S. Congress is entering a highly partisan election year and it is not expected to compile an impressive track record in 2010. Deficit reduction and fiscal responsibility will almost certainly be key themes in President Obama’s upcoming State of the Union Address, and my hope is that progress on spending cuts will not be delayed until next year.
The President and GOP leaders will both call attention to the soaring federal budget deficit and the spiraling national debt. As a percentage of gross domestic product, the public debt is dangerously high (84%) and the interest costs are exorbitant. About $3.5 trillion in American debt is held by foreigners and nearly $800 billion of that is held by the People’s Republic of China.
If nothing changes, ten years from now the federal budget will double. Between 1776 and 2008 the US government accumulated roughly $11 trillion in federal debt; the next ten years alone should bring an additional $9 trillion in burdens. Some analysts believe federal debt will reach $50 trillion by 2030.
Several lawmakers are recommending the establishment of a bipartisan commission to provide recommendations which will stabilize the federal debt at no more than 60 percent of GDP by 2018. This is an excellent idea which has been used successfully several times in the past.
The most notable was when a GOP Congress supported a Democratic president by enacting the Marshall Plan and backing the Truman Doctrine, with its pledge of military help to any free people threatened by Communist aggression.
The U.S. spent an unprecedented $13.6 billion in four years on the Marshall Plan. The money was used to underwrite the economic, social and political recovery of war-torn Western Europe. It never would have been enacted without the close working relationship between Truman’s Secretary of State, General George Marshall, and Senator Arthur Vandenberg (R-MI), the Chairman of the Foreign Relations Committee.
Vandenberg’s bipartisan cooperation led some conservatives to refer to him as “a Benedict Arnold,” and it ruined his chances of winning the 1948 GOP presidential nomination. The Senator could truly say he would rather be right than president. His attitude was “We have won the war. Now let us work together to win the peace.” The Michigan Senator said he was a loyal Republican, but he was also a loyal American. He told his critics bipartisanship “does not involve the remotest surrender of free debate in determining our position. On the contrary, frank cooperation and free debate are indispensable to ultimate unity.”
General Marshall announced the plan during a commencement speech at Harvard University in June of 1947. He said, “I need not tell you, gentlemen, that the world situation is very serious. That must be apparent to all intelligent people.” Then Marshall sketched Europe’s devastation and economic disruption: “The town and city industries are not producing adequate goods to exchange with the food-producing farmer . . . People in the cities are short of food and fuel. . . The division of labor upon which the exchange of products is based is in danger of breaking down.” Europe was shattered, broke and facing economic collapse.
Vandenberg’s proposal was accepted by Truman and a bipartisan 16-person committee was established. It was comprised of leading figures from American life. They worked on outlining a long-term aid program and their recommendations were unanimous.
Vandenberg and the committee insisted that the Marshall Plan be different from any foreign aid program of the past. They wanted it to be administered like a business enterprise, with a clear, discernible strategy and goals. The Truman Administration agreed to the recommendation regarding an administrator of the Marshall Plan. They selected Paul Hoffman, the Republican president of the Studebaker Corporation, who instantly became the centerpiece in the Democratic administration’s foreign policy.
The European Recovery Act was signed on April 3, 1948. Two weeks later the freighter John H. Quick left Galveston, Texas, with 9,000 tons of wheat for France. This was the beginning of the most effective peace-time American foreign policy program in U.S. history. The Marshall Plan worked faster than anyone had thought possible. By 1951, Western Europe’s industrial production had soared by 40%. By 1952 as the funding ended, the economy of every participant nation had surpassed pre-war levels. Over the next two decades, Western Europe enjoyed unprecedented growth and prosperity.