Mission Accomplished: The Tax-Free War

It is the fifth anniversary of President Bush’s dramatic landing on the deck of the aircraft carrier USS Abraham Lincoln where, in front of that massive “Mission Accomplished” banner, he declared “major combat operations in Iraq have ended.” They have not, of course. And it has me thinking about how those of us who do not have loved ones in combat operations are sacrificing nothing for this conflict.

As the war drags on, the cost is apparent: 4064 U.S. dead and more than 30,000 wounded. Roughly 150,000 troops still remain on the ground, the same number who were there the day Bush spoke. The price tag so far is in excess of $600 billion . CBO figures the total cost will exceed $1 trillion, and Nobel economist Joe Stiglitz  thinks direct and indirect costs could approach $5 trillion.

Amazingly, we have not paid for a dime of it. Every cent has been borrowed from our children and grandchildren. Not only is this one of the rare wars in U.S. history that has not been financed at least in part by a tax increase, it has been accompanied by massive tax cuts.

The Urban Institute is about to publish an instructive new book called War and Taxes.  In it, authors Joe Thorndike, Steven A. Bank and Kirk J. Stark argue that “this contrast—between an active war effort on one hand and substantial tax cuts on the other—has no precedent in American history.”

The authors are careful to recount that taxation during wartime has not always been a story of heroic, John Wayne-like national sacrifice. Indeed, they remind us that these tax increases were often delayed and obscured and rarely shared equally. Still, in the end, the bill was paid.   

Compared to other wars, Iraq has been very cheap. Today, the entire defense budget is only about 4 percent of Gross Domestic Product. During Vietnam, military spending topped out at 9.5%. At the height of the Korean War it was 14% and in 1944,World War II absorbed nearly 40% of GDP.

Maybe, as Stiglitz argues, the Iraq conflict has had an impact on energy prices and the overall economy. Maybe not. But the costs are still trivial compared to past wars. Relatively low inflation makes it even easier for the White House to put the war on a credit card.

There is little doubt that we can afford Iraq in the conventional financial sense. Our unwillingness to pay for it through higher taxes—or, for that matter, a draft-- is not really about economics. In the end, it is a moral test. And it is one we are failing shamefully.