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When We Raised Taxes to Fund Wars

Once, we were all asked to share the burden of overseas commitments. Now we borrow and look at what's happened.
Franklin Delano Roosevelt

Taxing Wars: The American Way of War Finance and the Decline of Democracy, By Sarah Kreps, Oxford University Press, June 2018, 336 pages

On Saturday, July 7, Army Corporal Joseph Maciel was killed in Afghanistan during an attack at the Tarin Kowt airfield in Uruzgan province. He was 20 years old, meaning that when the war began in October 2001, he was a toddler. You can be forgiven for not having noticed Maciel’s death, as media coverage of America’s presence in Afghanistan is fairly hard to come by.

The Afghanistan war has held the moniker of “the forgotten war” for more than a decade now, having originally been presented with the honor as all eyes turned to Iraq during the mid-2000s. It received somewhat renewed attention last August when President Trump announced a new strategy for the war. But the spectacle that is the Trump presidency, combined with the sheer length of the conflict, has again relegated it to the back of America’s consciousness. A recent Pentagon press briefing on Afghanistan was attended by fewer than 10 journalists.

Sarah E. Kreps, an associate professor of government at Cornell University, argues in Vox that America’s penchant for forgotten, seemingly never-ending conflicts stems from the way it finances them. “Contemporary wars are all put on the nation’s credit card, and that eliminates a critical accountability link between the populace and the conduct of war,” she writes.

This is the thesis of her terrific new book, Taxing Wars: The American Way of War Finance and the Decline of Democracy. Kreps argues that wars no longer have a political cost to elected leaders because they don’t come with a financial cost to taxpayers. Therefore, the war in Afghanistan can rage for years on end because it doesn’t have a meaningful impact on the average person’s life—there’s no sense of shared sacrifice.

Democratic accountability theory posits that democracies have several embedded checks on the ability of a state to wage war. Democracies may go to war, but because citizens are forced to bear the costs in the form of both blood and treasure, they “put pressure on leaders to keep wars short and low cost.”

This assumes the burdens of war are felt by the general population and that bearing the costs are generally unpopular. Those assumptions don’t always hold true. As Kreps writes, “[d]emocratic leaders have found ways to sidestep or minimize cost-related public opposition.” They have minimized the cost of casualties, as an all-volunteer force reduces the degree to which deaths and injuries are felt across the population, and a strategic shift to employ more airpower and drones limits the absolute number of combat fatalities.  

But perhaps the most critical way leaders have successfully minimized the costs of war felt by the public is by financing efforts through debt instead of direct taxation. “Borrowing shields the public from the direct costs and insulates leaders from heavy scrutiny,” Kreps says. “To the extent that leaders turn to borrowing as a form of war finance, rather than taxation, the gap between their actions and public scrutiny—an accountability gap—widens.” This reduces constraints on “the allocation of domestic resources as well as initiation and termination of interstate conflicts.”

It’s more complicated, though, than just taxing versus borrowing as a means of gauging support for or opposition to a given conflict. Kreps argues that people are cost-sensitive to wars, but that sensitivity is “shaped by both the type of war and underlying state-society relations.” Recognizing this, leaders “pursue strategies that both anticipate and deflect opposition,” such as focusing taxes on specific sectors of the economy or segments of earners.

Kreps divides America’s wars into two different categories: “Liberty Bond” and “Hide-and-Seek” conflicts. As you can probably intuit, Liberty Bond refers to wars directly financed through taxation, and Hide-and-Seek to those financed through debt.

America’s involvement in the two World Wars were Liberty Bond affairs. The nature of those conflicts—total wars—instilled in the American public a sense that significant sacrifice was necessary for victory. Prior to the U.S. entry into World War I in 1917, President Wilson was able to raise war revenue by taxing high earners, sparing the majority of the public and preventing the formation of a sizable opposition. When the Zimmerman Telegram incident finally thrust America into the war, there was a consensus that “fiscal sacrifice was needed if the United States had any hope of winning.”

World War II was a similar situation. “In many respects, the American public was even more primed to engage in fiscal sacrifice than it had been in the previous war…the public’s receptivity to fiscal sacrifice was the clear sense of the stakes involved,” Kreps writes. The high stakes also shielded the government behind a heightened sense of legitimacy that made citizens even more willing to hand over their incomes. This generosity was not boundless, but support for the war remained high throughout.

After 1945, the calculus for the American public changed. We moved into an era of limited war and a different social contract. Spending on New Deal-era social programs mandated higher peacetime taxes, which the public was willing to pay because they’d experienced the commensurate benefits that came with this new fiscal commitment. Any new revenue for defense purposes now needed to be traded off against the social safety net.

The objectives of a limited war are also not so easily articulated and defended to a general public. The Truman administration approached the Korean War as a “police action” instead of an all-out war, to avoid risking a nuclear confrontation with the Soviet Union. This sowed doubts about the war’s necessity and depleted public support.

When presented with the prospect of total war, Americans are more than willing to cough up cash. Police action in Korea didn’t meet this threshold. The opportunity cost of less social spending was too high.

This reality has affected American foreign policy ever since. Citizens feel taxes are high enough, and are unwilling to trade off anything for defense revenue for limited engagements, of which the average person doesn’t feel the tangible effects. Elected leaders stave off this opposition by financing wars with debt. LBJ balked on collecting war taxes for Vietnam until 1968, which then hastened his and the war’s unpopularity.

Despite early support for the Afghanistan war after 9/11, a disconnect developed between the events on the ground and individuals’ sense of security. “At least after the fall of the Taliban, Afghanistan had become like Korea and Vietnam,” Kreps says, “a limited war with limited objectives that had become unclear…meaning the public’s willingness to make fiscal sacrifices unlikely to emerge.”

Professor Kreps’ book is a penetrating dive into the problems of America’s fiscal-military complex. In today’s climate, few politicians will push for taxes to pay for the multiple wars they’re waging, so only a few citizens will demand accountability for those wars. Kreps highlights perfectly this moral rot that we’ve created for ourselves.  

Jerrod A. Laber is a writer and journalist living in northern Virginia. He was formerly a Writing Fellow with America’s Future Foundation and a Free Society Fellow with Young Voices. Follow him on Twitter @JerrodALaber.



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