Just Put it On Our Tab: War Financing and the Decline of Democracy

Memorial Day often occasions reflections on what it means to serve the nation. David Barno and Nora Bensahel recently drew attention to the establishment of the all-volunteer force, which ended conscription in 1973 and made military service an individual choice. The all-volunteer force was a success in many ways, but it also made it “too easy for most Americans to believe that they are no longer responsible for fighting the nation’s wars.” The consequence, Barno and Bensahel write, is that it became “too easy for the nation to go to war.”

All of this is true, but the all-volunteer force is only part of the story. In his 1795 treatise The Perpetual Peace, Immanuel Kant wrote the following:

if the consent of the citizens is required in order to decide that war should be declared (and in this constitution it cannot but be the case), nothing is more natural than that they would be very cautious in commencing such a poor game, decreeing for themselves all the calamities of war. Among the latter would be: having to fight, having to pay the costs of war from their own resources.

What made democracies different and more restrained in warfare, according to Kant’s theory of democratic peace, was that the costs in both blood and treasure were passed along to the public, which then imposed pressure on leaders to keep wars short and low in cost. As Kant’s logic suggests, “having to fight” is just one of the reasons democracies exercise restraint. “Having to pay the costs of war from their own resources” is the other. Like conscription, this too has changed in modern America. The changing nature of both war and the fiscal state has reduced the relevance of war taxes. With the American public less willing to pay more on top of high peacetime taxes and the seemingly low-stakes nature of modern warfare, the democratic accountability that war taxes previously conferred has been lost.

War taxes, like conscription, used to be synonymous with war. In addition to generating revenue, taxes also created an accountability linkage between leaders and their conduct of war. As Charles Tilly put it in his observations on fiscal sociology, taxation “constitutes the largest intervention of governments in their subjects’ private life.” Centuries earlier, Adam Smith recognized this when he worried that leaders might sidestep war taxes — which he favored as an equitable and financially sound way to finance wars — out of concern for “offending the people, who, by so great and so sudden an increase of taxes, would soon be disgusted with the war.” It was exactly that possibility of disgust, however, that provided accountability. If leaders of democratic political systems had to introduce taxes to pay for wars, they would think twice about the wars they started and keep them shorter and less costly.

Until the Vietnam War, American presidents regularly introduced war taxes, seemingly less worried about offending the people than about financing the war. In some cases, the government had to work to elicit fiscal sacrifice, for example, with a pro-tax Disney cartoon in 1943 that touted “Taxes to Beat the Axis” during World War II. In most cases, the taxes did not actually offend the people. A New York Times editorial from 1864, three years into the Civil War and on the heels of two major income tax increases, mused that

it was absurd in our government to imagine that, because taxation is ordinarily an unwelcome thing, therefore the people would be glad to escape taxation in a way that recoiled upon themselves and their children in this style…the people are not the dolts they have been taken for. They have not been deceived in the least by these attempts to make the war seem dog-cheap. It was an insult to them to imagine that they require to be reconciled in any such fashion to the continuance of the war…it is not the politicians that have so upheld their patriotism, but their patriotism that has upheld the politicians.

The end of the Korean War and the entirety of the Vietnam War changed that willingness to fiscal sacrifice in wartime. As my forthcoming book discusses, when the public thought the Korean War was World War III, it was willing to pay war taxes. Once they realized it was a new type of conflict, a limited war, with stakes less existential than any of the recent wars, they quickly tired of the taxes, just as Smith predicted. President Harry Truman was pilloried as “High Tax Harry” for raising taxes three times during the Korean War, and did not win re-election.

The Vietnam War brought these dynamics into sharper relief. President Lyndon Johnson insisted on avoiding the perception of a “real war,” which meant avoiding the trappings of a major ground war. Troop movements were labeled “experimental” and he studiously stonewalled his economic advisors’ push for war taxes. Johnson fretted that war lead a fiscally conservative-leaning Congress to kick back the Great Society, “the woman he loved,” while also opening the war up to scrutiny by both Congress and the public.

Accountability unraveled. Since the United States was allegedly not “at war,” those responsible for budgets could not figure out what actions should be “charged to Vietnam” and which were peacetime training exercises. Studies of Vietnam budgeting show that there was “no real attempt being made to budget or to implement any other method of control of funds and expenditures.” Much of the war was resourced through contingency funds and outside the normal budget process, which made the costs of “the Vietnam War” impossible even to identify. Johnson eventually did acquiesce to a war surtax in 1968, which triggered tax protests and added fuel to the anti-war movement that eventually helped bring a close to the war.

More recent wars have followed a similar arc, although without the belated taxes of Vietnam and without the civic engagement that helped bring some accountability to the management of the that conflict. In 2009, during debates about the Afghanistan surge, House Appropriations Committee Chair David Obey proposed a tax that would require homes with incomes between $30,000 and $150,000 to pay 1 percent on top of their existing taxes, and higher levels for the wealthier. Veterans of both Iraq and Afghanistan would be exempt: “We’re just trying to keep in the forefront what the financial costs are.”

Indeed, a study of the costs of these wars showed that the public is blissfully disconnected. In 2014, I surveyed 350 Americans and asked them to estimate the costs of the Afghanistan war to that point. Responses ranged from a million dollars to “probably $10 trillion. A lot more than we can afford.” The typical response was “I have no idea — $100 million?” The real answer at that point was $686 billion. Americans cannot make sense of such enormous figures. They can, however, make sense of their own budgets, which is why the connection with taxes is so much tighter, and why individuals become invested in the conduct of the war when war taxes are levied. As both Tilly and Smith observed, the visibility and intrusiveness of taxes are exactly what make individuals scrutinize the service for which the resources are being used. In the case of war, it means paying more scrupulous attention to its duration, goals, and cost.

In some ways, it is because the democratic accountability linkage between bearing the cost and the conduct of war is so clear that leaders eventually moved away from war taxes. Smith was ultimately right that leaders would avoid taxes lest they diminish support for war, but the question remains why this didn’t apply to earlier wars. The conflicts preceding the Korean War were different for two reasons.

First, peacetime taxes were lower, giving leaders more room for maneuver when conflicts arose. After World War II, taxes never returned to their pre-war lows. In exchange for higher peacetime taxes, the public rejected initiative-specific taxes, preferring an arrangement in which normal taxes would pay for both defense and the social services that became the norm after the New Deal. A bipartisan effort emerged to protect those programs and guard against higher taxes.

Second, and as importantly, the era of large-scale war seemed to have ended. Nuclear weapons meant unacceptably high costs of conflict and therefore a deterrent to direct confrontation with another nuclear power. Deterrence lowered the intensity of war, but with lower-intensity wars came lower perceived stakes. As Matthew Ridgway, who took command of forces in Korea after General Douglas MacArthur was relieved, mused, the problem with limited wars is that “Americans are not inclined by temperament to fight limited wars. As in the boxing ring, they want nothing less than a knockout. What red-blooded American could oppose so shining a concept as victory?” With limited war, therefore, came limits to the sense of fiscal sacrifice in wartime.

Yet limited wars have become the norm and cannot easily mobilize a willingness to make fiscal sacrifices. Americans at home often cannot relate to the measures of progress in faraway modern wars, like the rate of capital flight from a conflict zone or the number of days it takes locals to obtain a driver’s license in the country (a measure of bureaucratic efficiency). One Marine Corps commandant in the Iraq war advocated for a 5 percent gas tax to force Americans to invest in the effort, since otherwise they “continue to be spectators.” He was right that more investment would have produced greater scrutiny. But that greater scrutiny would likely have uncovered clarity about what the United States was doing in Iraq, and at what cost, accelerating and intensifying the nation’s antipathy toward the war, not endearing it to the war.

The tax would have, however, given Americans skin in the game, a reason to be attentive to where American blood and treasure is being expended. Such was the virtue of the “Share the Sacrifice Act” that Obey proposed to help finance the Iraq and Afghanistan wars. That virtue notwithstanding, such initiative-specific taxes are unlikely to materialize. Modern wars do not seem to mobilize Americans’ sense of fiscal sacrifice, and the mainstream of American political leadership is unlikely to ask for it. Without the accountability mechanism of bearing any burden of either blood or treasure, the open-ended wars of the recent past — Iraq and Afghanistan — are also likely to be prologue.

Sarah Kreps is an Associate Professor of Government and Adjunct Professor of Law at Cornell University. She is the author, most recently, of Taxing Wars: The American Way of War Finance and the Decline of Democracy (Oxford University Press, 2018). Between 1999-2003, she was an officer in the United States Air Force.

Image: Wikimedia Commons