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Credit-Card Wars
Today’s War-Financing Strategies Will Only Increase Inequality
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In the name of the fight against terrorism, the United States is currently waging “credit-card wars” in Afghanistan, Iraq, Syria, and elsewhere. Never before has this country relied so heavily on deficit spending to pay for its conflicts. The consequences are expected to be ruinous for the long-term fiscal health of the U.S., but they go far beyond the economic. Massive levels of war-related debt will have lasting repercussions of all sorts. One potentially devastating effect, a new study finds, will be more societal inequality.

In other words, the staggering costs of the longest war in American history — almost 17 years running, since the invasion of Afghanistan in October 2001 — are being deferred to the future. In the process, the government is contributing to this country’s skyrocketing income inequality.

Since 9/11, the U.S. has spent $5.6 trillion on its war on terror, according to the Costs of War Project, which I co-direct, at Brown University’s Watson Institute for International and Public Affairs. This is a far higher number than the Pentagon’s $1.5 trillion estimate, which only counts expenses for what are known as “overseas contingency operations,” or OCO — that is, a pot of supplemental money, outside the regular annual budget, dedicated to funding wartime operations. The $5.6 trillion figure, on the other hand, includes not just what the U.S. has spent on overseas military operations in Iraq, Afghanistan, Pakistan, and Syria, but also portions of Homeland Security spending related to counterterrorism on American soil, and future obligations to care for wounded or traumatized post-9/11 military veterans. The financial burden of the post-9/11 wars across the Greater Middle East — and still spreading, through Africa and other regions — is far larger than most Americans recognize.

During prior wars, the U.S. adjusted its budget accordingly by, among other options, raising taxes to pay for its conflicts. Not so since 2001, when President George W. Bush launched the “Global War on Terror.” Instead, the country has accumulated a staggering amount of debt. Even if Washington stopped spending on its wars tomorrow, it will still, thanks to those conflicts, owe more than $8 trillion in interest alone by the 2050s.

Putting the Gilded Age to Shame

It’s hard to fathom what that enormous level of debt will do to our economy and society. A new Costs of War study by political scientist and historian Rosella Capella Zielinski offers initial clues about its impact here. She takes a look at how the U.S. has paid for its conflicts from the War of 1812 through the two World Wars and Vietnam to the present war on terror. While a range of taxes, bond sales, and other mechanisms were used to raise funds to fight such conflicts, no financial strategy has relied so exclusively on borrowing — until this century. Her study also explores how each type of war financing has affected inequality levels in this country in the aftermath of those conflicts.

The implications for today are almost painfully straightforward: the current combination of deficit spending and tax cuts spells disaster for any hopes of shrinking America’s striking inequality gap. Instead, credit-card war spending is already fueling the dramatic levels of wealth inequality that have led some observers to suggest that we are living in a new Gilded Age, reminiscent of the enormous divide between the opulent lifestyles of the elite and the grinding poverty of the majority of Americans in the late nineteenth century.

Capella Zielinski carefully breaks down what effects the methods used to pay for various wars have had on subsequent levels of social inequality. During the Civil War, for example, the government relied primarily on loans from private donors. After that war was over, the American people had to pay those loans back with interest, which proved a bonanza for financial elites, primarily in the North. Those wealthy lenders became wealthier still and everyone else, whose taxes reimbursed them, poorer.

In contrast, during World War I, the government launched a war-bond campaign that targeted low-income people. War savings stamps were offered for as little as 25 cents and war savings certificates in denominations starting at $25. Anyone who could make a small down payment could buy a war bond for $50 and cover the rest of what was owed in installments. In this way, the war effort promoted savings and, in its wake, a striking number of low-income Americans were repaid with interest, decreasing the inequality levels of that era.

Taxation strategies have varied quite significantly in various war periods as well. During World War II, for instance, the government raised tax rates five times between 1940 and 1944, levying progressively steeper ones on higher income brackets (up to 65% on incomes over $1 million). As a result, though government debt was substantial in the aftermath of a global struggle fought on many fronts, the impact on low-income Americans could have been far worse. In contrast, the Vietnam War era began with a tax cut and, in the aftermath of that disastrous conflict, the U.S. had to deal with unprecedented levels of inflation. Low-income households bore the brunt of those higher costs, leading to greater inequality.

Today’s wars are paid for almost entirely through loans — 60% from wealthy individuals and governmental agencies like the Federal Reserve, 40% from foreign lenders. Meanwhile, in October 2001, when Washington launched the war on terror, the government also initiated a set of tax cuts, a trend that has only continued. The war-financing strategies that President George W. Bush began have flowed on without significant alteration under Presidents Obama and Trump. (Obama did raise a few taxes, but didn’t fundamentally alter the swing towards tax cuts.) President Trump’s extreme tax “reform” package, which passed Congress in December 2017 — a gift-wrapped dream for the 1% — only enlarged those cuts.

In other words, in this century, Washington has combined the domestic borrowing patterns of the Civil War with the tax cuts of the Vietnam era. That means one predictable thing: a rise in inequality in a country in which the income inequality gap is already heading for record territory.

Just to add to the future burden of it all, this is the first time government wartime borrowing has relied so heavily on foreign debt. Though there is no way of knowing how this will affect inequality here in the long run, one thing is already obvious: it will transfer wealth outside the country.

Economist Linda Bilmes has argued that there’s another new factor involved in Washington’s budgeting of today’s wars. In every other major American conflict, after an initial period, war expenditures were incorporated into the regular defense budget. Since 2001, however, the war on terror has been funded mainly by supplemental appropriations (those Overseas Contingency Operations funds), subject to very little oversight. Think of the OCO as a slush fund that insures one thing: the true impact of this era’s war funding won’t hit until far later since such appropriations are exempt from spending caps and don’t have to be offset elsewhere in the budget.

According to Bilmes, “This process is less transparent, less accountable, and has rendered the cost of the wars far less visible.” As a measure of the invisible impact of war funding in Washington and elsewhere, she calculates that, while the Senate Appropriations Subcommittee on Defense discussed war financing in 79% of its hearings during the Vietnam era, since 9/11, there have been similar mentions at only 17% of such hearings. For its part, the Senate Finance Committee has discussed war-funding strategy in a thoroughgoing way only once in almost 17 years.

Hidden Tradeoffs and Deferred Costs

The effect of this century’s unprecedented budgetary measures is that, for the most part, the American people don’t feel the financial weight of the wars their government is waging — or rather, they feel it, but don’t recognize it for what it is. This corresponds remarkably well with the wars themselves, fought by a non-draft military in distant lands and largely ignored in this country (at least since the vast public demonstrations against the coming invasion of Iraq ended in the spring of 2003). The blowback from those wars, the way they are coming home, has also been ignored, financially and otherwise.

However little the public may realize it, Americans are already feeling the costs of their post-9/11 wars. Those have, after all, massively increased the Pentagon’s base budget and the moneys that go into the expanding national security budget, while reducing the amount of money left over for so much else from infrastructure investment to science. In the decade following September 11, 2001, military spending increased by 50%, while spending on every other government program increased only 13.5%.

How exactly does this trade-off work? The National Priorities Project explains it well. Every year the federal government negotiates levels of discretionary spending (as distinct from mandatory spending, which largely consists of Social Security and Medicare). In 2001, there were fewer discretionary funds allocated to defense than to non-defense programs, but the ensuing war on terror dramatically inflated military spending relative to other parts of the budget. In 2017, military and national security spending accounted for 53% of discretionary spending. The 2018 congressionally approved omnibus spending package allocates $700 billion for the military and $591 billion for non-military purposes, leaving that proportion about the same. (Keep in mind, that those totals don’t even include all the money flowing into that Overseas Contingency Operations fund). President Trump’s proposals for future spending, if accepted by Congress, would ensure that, by 2023, the proportion of military spending would soar to 65%.

In other words, the rise in war-related military expenditures entails losses for other areas of federal funding. Pick your issue: crumbling bridges, racial justice, housing, healthcare, education, climate change — and it’s all being affected by how much this country spends on war.

Nonetheless, thanks to its credit-card version of war financing, the government has effectively deferred most of the financial costs of its unending conflicts to the future. This, in turn, contributes to how detached most Americans tend to feel from the very fact that their country is now eternally at war. Political scientist and policy analyst Sarah Kreps argues that Americans become invested in how a war is being conducted only when they’re asked to pay for it. In her examination of the history of the financing of American wars, she writes, “The visibility and intrusiveness of taxes are exactly what make individuals scrutinize the service for which the resources are being used.” If there were war taxes today, their unpopularity would undoubtedly lead Americans to question the costs and consequences of their country’s wars in ways now missing from today’s public conversation.

Pressing for a real war budget, though, is not only a mechanism to alert Americans to the effects (on them) of the wars their government is fighting. It is also a potential lever through which citizens could affect the country’s foreign policy and pressure elected officials to bring those wars to an end. Some civic groups and activists from across the political spectrum have indeed been pushing to reduce the Pentagon budget, bloated by war, corruption, and fear-mongering. They are, however, up against both the power of an ascendant military-industrial complex and wars that have been organized, in their funding and in so many other ways, not to be noticed.

Those who care about this country’s economic future would be remiss not to include today’s war financing strategy among the country’s most urgent fiscal challenges. Anyone interested in improving American democracy and the well-being of its people should begin by connecting the budgetary dots. The more money this country spends on military activities, the more public coffers will be depleted by war-related interest payments and the less public funding there will be for anything else. In short, it’s time for Americans worried about living in a country whose inequality gap could soon surpass that of the Gilded Age to begin paying real attention to our “credit-card wars.”

Stephanie Savell, a TomDispatch regular, is co-director of the Costs of War Project at Brown University’s Watson Institute for International and Public Affairs. An anthropologist, she conducts research on security and civic engagement in Brazil and in the U.S. She co-authored The Civic Imagination: Making a Difference in American Political Life.

(Republished from TomDispatch by permission of author or representative)
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  1. Biff says:

    You have until 2030 to get your money out of U.S. banks.
    After twelve years of waiting.
    The ice will be thin where you’re skating.

    • Replies: @Joe Wong
  2. Rome will fall again – the crisis of the third century is beginning, but given the speed of modern economic transitions, the modern ‘third century’ will barely last more than a decade.

    • Replies: @Wizard of Oz
  3. @Ilya G Poimandres

    Then the battle of the Milvian Bridge must be due the day after tomorrow.

  4. If the costs of our ME adventures were factored into the cost of gas, we’d already have been paying $6 per gallon for years.

    • Replies: @RobinG
  5. If the country is ruled and owned by the 1% who control 60% and their henchmen who are the 9% with ownership of say, 30% thus leaving the 90% at the bottom with just 10% of the wealth. Now let’s say that we, the financial dross at the bottom of the cesspool, offer the 9% who basically are the nuts and bolts of the economy, half of the top 1% wealth in exchange for help in eliminating that class and distribute the remaining 30% to the bottom 90%, thus creating a new order of 9 + 99 with wealth ratio of 60:40. Who says we need Bezos, Brin and Zuckerberg? Their deputies can easily do the same job for a cool 30% more… what say you?

    • Replies: @Wizard of Oz
  6. Them Guys says:

    I saw a news headline a few days ago, while I didn’t bother to click on it to read article. The main headline says all one needs know….It stated that due to new recent tax cut trump signed into law.

    Sheldon (((Adelson))) of Las Vegas casino fame, will see a tax savings on his casinos of $670,000,000 for a single year.

    Not a bad profit for his prior expense of funding Trumps election with, was it $10 million? or $25-Million? I forget now which it was. But either way, (((Sheldons))) huge tax cut sure makes up for it, and quickly too. Just another jewish Cohencidence?

    In a few years at that tax cut rate, he will catch up to 9/11 wonder boy (((Silverman))) Who Biggly profited from what is known of as….Jewish Lightning…..when all his multi-Insurance policies paid off after 2 buildings got hit by a plane, and Three buildings dropped like a rock destroyed.

    Perhaps to close that $$$ Gap article speaks of, every working whitey should just stop/quit all paid work/jobs, and copy cat negroes and apply for welfare and all it entails in benefits. Why keep working to pay taxes for those negroes and others too, and to pay war debts with massive huge interest usury fees to jewish private banksters?….Just let all corps in defense profitings pay it all.

    I often wonder if any economist experts like in the article ever yet did any real accurate research on the grand total profit amount gained by those Private Banksters, who’s main income derives from scamming almost every nation on earth, and every individual person that pays any forms usury interest, on money that shoud rightfully be Owned By the nation and it’s People citizens of said nation? There are a small few islamic nations that reject all forms usury interest.

    America and euro nations as well can do as those islamic non usury nations do, and do so without including islamic religious laws and practices. Germany did it very well and successful back before WWII era. US Prez Lincoln did it with Greenback us dollars in his era also.

    If you consider how just the usa fed govnt alone pays something like, close to one trillion per year in interest on its massive national $21-Trillion(? or more now?) Debt. Picture what the grand total of close to 200 other nations, and however many billions of citizens globally adds to it. And the main profiteers compromise a small total number of persons, a majority being jewish.

    It has to equal around $50-$100-Trillion per year for moneys loaned at usury interest eh? Maybe alot more yet?

    That is simply dispicable and wrong as can be. So few allowed to swinde scam everybody else, while in america alone there so far is no shortages of nice Telephone and Electric Poles standing everywheres and awaiting, the Day. The day fed up folks really do get fed up, and employ group, Righteous Indignation to repudiate those ill gotten gains and profits.

    • Replies: @Wizard of Oz
    , @Joe Wong
  7. @Dagon Shield

    Who creates the next waves of innovative big businesses?

    • Replies: @Dagon Shield
  8. @Them Guys

    You mention Silverstein (whom you incorrectly call Silverman) cleaning up one the insurance of the three WTC towers destroyed on 9/11. When I last considered that subject I read that WTC7 has not been reinsured recently and the updating of the insurance of WTCs 1 and 2 was a requirement of his financing arrangements.

    Can you provide the evidence that there was something more sinister?

  9. Wally says:

    Indeed, credit card interest is too high.

    It’s simple, you can refuse to use them.

    Ergo, if you make a choice to use them then it’s on you to pay for what you bought.

    Personal responsibility means just that.

    Just say no to credit cards.

    • Replies: @Che Guava
  10. RobinG says:
    @The Alarmist

    Thank you! for this rebuttal to the “we fought for oil” nonsense.

    • Replies: @Wizard of Oz
  11. Aardvark says:

    Inflation causes more havoc than people realize. It is meant that way and propagandized as greedy merchants raising prices rather than people understanding that the value of money is falling.
    WWII war bonds allegedly returned around 2.92%, but this was after 10 years.
    These are the annual rates of inflation during the war years and after:
    1941 9.9%
    1942 9.0%
    1943 3.0%
    1944 2.3%
    1945 2.2%
    1946 18.1%
    1947 8.8%
    1948 3.0%

    There is no way the paltry return on war bonds made up for the devastating affects of inflation.
    Lending money to a government is for the suckers because the rate of return will never compensate for inflation. Inflation to day is vastly understated due to the manipulation of price indexes (e.g. consumers switched to chicken instead of beef because beef went up 5%). Then the equally asinine excluding taxes, food and energy from the inflation calculations because they are considered “volatile”, as though one could skip consuming energy for a month because energy prices had surged.

    It must have seemed surreal to the average American thinking they were really saving their own asses when movie stars went on tours promoting War bonds to finance the “boys over there”. This while it was never feasible for the Japanese or Germans to launch a full scale invasion of the U.S. with vast oceans to cross. Lest you think that we crossed vast oceans, yes we did but we also had staging areas for supply lines. Think England, southern France and assorted islands in the Pacific. The only way a foreign invader could stage anything close to us would be to get control of a Caribbean Island, Mexico or Canada, which we would not allow in the first place.

  12. Che Guava says:

    It is inconvenient at times, but I agree, Wally. Never had one, don’t want one.

    Interesting article, too. Not just the means of financing over time, but the casualness of the ridiculous amounts of ‘money’ or debt in recent years.

  13. @Wizard of Oz

    Do you always believe that ones you are made to think that created the new and innovative ideas are the true creators of it or are they just “facilitators” and the advantage takers of it? In an increasingly deceptive world, one never knows the truth!

  14. In general I would expect that a Zuckerberg is likely to be a much better “facilitator” (your word for what I am sure you agree is a necessary function even if the facilitator hasn’t done the basic science or invented the technology) than a department of government whether staffed by career civilvservants/mandarins or political appointees. Lysenko is what you can get under government dominated systems.

  15. @RobinG

    There was some talk was there not of the Iraq war playing for itself because Iraq would again be a major oil producer able to sell on the world market?

  16. Joe Wong says:

    Why? Americans are well fed, clothed and housed. Americans get tax cuts instead of paying more taxes, and none of their close kin is harm by the war other than those mercenaries. The USA is not bombed and all is fine, in addition the USD is strong and there is no inflation in the USA, why should the Americans believe someone is fear mongering for something that has not happened in the past few hundreds of years.

    The author is talking about something logical in theoretical economy that only exist in academics, but does not exist in the real world. Besides the USA is getting richer and more powerful as a whole, isn’t it what the Americans want?

    The American is not exceptional, they are walking the same path as all previous collapsed empires. The American will only take actions against their morally defunct and insane governments when they are completely broke and starved in a situation when 朱门酒肉臭,路有冻死骨.

  17. Joe Wong says:
    @Them Guys

    Don’t try to divert attention by blaming the blacks, the whitey got their share of gravy in tax cut too. The article said the whitey did not pay for the wars, the wars are fought on credit card, i.e. funded by somebody else.

  18. Noah Way says:


    The government does not require tax revenue to fund its expenses. When you are the creator of currency you can never run out. Money is not some finite physical substance like gold, it is an artificial construct, created with the press of a keystroke.

    Proof #1: The Great Recession and the trillions of dollars created out of thin air to ‘support’ the corrupt banking system. Where did this money come from? Remember – the government had a $10T debt at the time.

    Proof #2: The government routinely funds wars, corporate subsidies, etc., despite large deficits, yet when it comes to health care, social security, infrastructure maintenance, etc. “we can’t afford it”.

    The real purpose of taxes is not to fund government spending but rather to control behavior and regulate the economy. If the economy is too ‘hot’, raising taxes takes money out of circulation, providing a cooling effect. Tax reduction has the opposite effect. As to behavior, low taxes are used to encourage desirable ones and high taxes to discourage undesirable ones. Example: cigarette smoking declines every time taxes on cigarettes are raised.

    Low taxes on a specific class of individuals has allowed them to accumulate massive wealth – wealth that translates directly into political power. Taxing this wealth out of existence would restore democracy by eliminating the political power associated with it.

    Tax collection has nothing to do with funding government spending. It has everything to do with controlling where money goes and what it is used for.

    Wars are indeed at the expense of the lower economic classes – as is everything else – because the economic ideology of debt slavery rules this society. Economics is not science: it is ideology.

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