A vigorous account, by a Goldman Sachs VP and presidential adviser, of the high cost of combat.
From the nation’s beginnings, leaders have worried about the burdens the citizenry would have to take up in order to pay for their military, with George Washington warning that debts “which unavoidable wars may have occasioned” should not be charged to future generations but paid for as soon as possible through taxes, however hated taxes might be. A sense of fairness governed presidents until recently; during the War of 1812, for instance, Madison approved a $3 million direct tax on slaves to be paid for by their owners, while during the Civil War the federal government imposed a tax—called a duty to skirt constitutional issues—of three percent on all incomes over $800. “It was a victory for the populists and advocates for working poor and farmers,” Hormats observes, since the average income was only $150. The government raised further funds by printing rather than minting money, risking inflation but solving the short-term problem and retiring the Civil War debt within a few years. During World War II, the mix included a tax on corporate profits and the elimination of special privileges for the rich. All that changed, though, with the Cold War, since an army had to be maintained at constant readiness; the Defense Department was kept on a diet at first, with Eisenhower wisely remarking, “the current problem in defense spending is to figure how far you should go without destroying from within what you are trying to defend from without.” That lesson, Hormats concludes, is lost on the present administration, which threatens through its uncontrolled spending and giveaways to the wealthy to leave future presidents “without the resources, the military capacity, the intelligence capabilities, or the homeland security apparatus required to thwart or cope with a dangerous new security threat.”
A careful study in economic history that deserves wide airing.