Tuesday, August 16, 2011

History of War... and paying for it

American historian James Wright argues in Foreign Affairs that before the 21st century, every war in American history was matched by new taxation to pay the cost of war.  Suddenly that changed.
Since 9/11, no national leaders have proposed that the country actually pay for the current wars. In fact, the theme from the outset has been to reduce taxes -- a response without a wartime precedent in American history. And for the last two years or so, the mantra in Congress has been to not impose any additional or restored taxes on anyone. Only recently has the financial cost of the wars even been part of a public discussion.
The Canadian analogy seems striking. We are often reminded, for instance, that Canadian income tax was introduced in 1917, to pay the costs of World War I.  Since 2006, however we have had a Canadian government committed to military build-up and overseas military expeditions -- and committed to tax cuts and deficit financing at the same time.  The same government is now telling us that the troops are really the Queen's soldiers, not ours. But the Queen is not going to pay for them.

Update:  Ray Argyle observes:
Apropos of your post today, I think Lyndon Johnson waged the Vietnam War on the basis there would be no tax increase to pay for it. The result was the worst period of inflation and high interest rates in American history. We all paid for that war but in devalued bucks! Nixon also used inflatiuon to offset the OPEC oil price hikes of the 70s - it wasn't long before the price of oil was back to its pre-hike level, in current dollars.
Wright argues the US did increase taxes to pay for Vietnam: "In 1968, a bipartisan congressional vote also supported a surtax when President Lyndon Johnson belatedly asked for taxes to pay for the war in Vietnam." Too little too late, maybe, but an increase, not a tax cut. 

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