10/27/2014 12:38 pm ET Updated Dec 27, 2014

Conservatives for Stimulus - A New Bumper Sticker

Wal-Mart is a favorite of mine. The company's rise since the 1970s has done more to fight inflation than the Federal Reserve. Chain groceries near a Wal-Mart have to lower prices. It sells over 350 generic drugs for less than $4 a month, pushing competing pharmacies to offer similar programs. It has promoted computerized medical records that will cut costs and improve healthcare, and its commitment to sharply reduce energy use and packaging pushes competitors to follow.

I write this, however, not to praise Wal-Mart but to criticize it. Unemployment and underemployment are killing Wal-Mart's middle and lower income customers. The company, however, is doing little to support those in politics and the media for whom unemployment, underemployment and stagnant incomes are the crucial economic issue of our time in their battle against the deficit hawks who have been sabotaging recovery since 2009.

There are no doubt reasons why the company avoids this fight. The most likely reason is that Wal-Mart's leaders share the conservative article of faith that deficits are bad and that more government spending is liberal and a threat to the free market economy. This view, however, is bad economics bolstered by bad history. Big deficits were a conservative idea before they became a liberal one. Conservative pro-enterprise economists at the University of Chicago --- the teachers of Milton Friedman --- urged President Hoover and the Congress in 1932 to deficit spend to combat unemployment. (See J. Ronnie Davis, The New Economics and the Old Economists, The Iowa State University Press, 1971.) These ardently free enterprise economists understood that governments are the only ones who can borrow and spend when the private "credit-money" system collapses as it did in the Great Depression, and as it almost did again in 2008.

The view that deficit spending is "liberal" is bad history. It took root in the mid-1930s when New Dealers gave up on the budget cutting that both President Hoover and FDR favored. They gave up on it because austerity did not work then any better than it does today. Facing reality, many New Dealers like the early Chicagoans came to champion government spending as the only way to replace the buying power of private credit that disappeared in the Crash and the years thereafter.

Support for deficit spending came to be called "Keynesian" much later with the publication of Keynes' "General Theory of Employment, Interest and Money" in 1936. The record shows, however, that American economists with impeccable conservative credentials were calling for such spending years earlier. Indeed some of the best known among them, Jacob Viner and later Milton Friedman, were irked that policies Chicagoans had favored in 1932 were labelled Keynesian.

There is no doubt that deficit spending is effective in reducing unemployment. The large deficits the U.S. finally ran to finance World War II ended the Great Depression and allowed the country to grow at a 13 percent annual rate from 1940 to 1944. The deficits paid for hundreds of thousands of planes, tanks, trucks and guns, drove unemployment to near zero and raised living standards to boot.

The point is that Wal-Mart and other business leaders can be comfortable supporting government deficits to speed up and expand the recovery. Support implies no hostility to entrepreneurship or enterprise, or allegiance to protectionism or unionism or support for much government regulation or big government. The Chicagoans wanted the government to borrow or issue money and spend it for profoundly conservative reasons --- to save the private enterprise system. They believed that the instability of "credit money" created by private banks was the cause of the Depression not the competitive enterprise economy itself. The blessings of that enterprise economy could not be reclaimed without government spending to fill the hole left by the collapse of private credit and the spending it financed, these conservatives argued.

Wal-Mart's working class customers need government to buy goods and services so that they can find jobs, get raises and increase purchases. Larger government expenditures on things like infrastructure and education to put money in working class pockets would be good for Wal-Mart and for the free enterprise system. The Clinton Administration drove unemployment to below four percent without inflation. Spending to get unemployment to that level should be the company's minimum target because that is what its customers need. The company leads in the battle against inflation. It also should lead to restore full employment.