One of the most absurd notions repeated by politicians and journalists is that war is good for the economy. Their logic follows that rebuilding destroyed buildings and creating new warplanes will create jobs and stimulate growth. On the surface, this appears to be true.

The real question is, what would have been created if resources were not used for these projects? Glass would have been used for Pathfinders and Compaqs. Builders assembling missiles would have made cranes for equipment companies. More resources would have been available for private production and, therefore, consumer and capital goods would have cost less to produce. You aren't going to see the goods and investments that would have been created had the resources not been plundered by the government to replace goods destroyed during conflict.

Feeding this fallacy is the belief that World War II ended the Depression. Federal intervention demanded that Americans ration resources as private-sector innovation and production were diverted to the war effort. Citizens were further taxed to pay for it all. How did this possibly help create new wealth and opportunities?

Yes, the gross domestic product appeared to increase during the war years, but keep in mind the GDP figure included spending on military goods and services. Nonmilitary output actually decreased for two years after 1941, and budget deficits reached $55 billion in 1943. After the war ended, 10 million troops returned to private industry, civilian production increased by nearly 27 percent from 1945 to 1946 and the wartime deficit disappeared.

The proven solution to stimulating the economy is to reduce government spending, regulation and taxation. Productive citizens can then create wealth, invest in businesses and keep profits. This libertarian system will increase competition and likewise reduce prices and move production forward.