How to Pay for Wars


A Placeholder for War?



The administration appears more interested in seeming economical than economizing.”



No Wars, Only Contingencies



The Budget Control Act caps discretionary spending but excludes war costs. That makes war appropriations an off-book haven for defense programs trying to evade caps. As the White House notes in its budget-justification materials, that circumstance “could allow future Administrations and Congresses to use [OCO] … to evade the fiscal discipline that the BCA requires elsewhere.”


But those forces are not devoted exclusively to the wars, so the shift smacks of an attempt to game the cap. Many other budget lines could, in the future, be attributed by similarly arcane logic to war costs. The White House is already doing exactly what it says its war cap should prevent.

Paying for the Wars

Done right, spending caps would improve national decision making about war. Because American wars have broadly distributed and often obscured costs, the public and Congress have little incentive to carefully consider their consequences. Leaving aside the volunteer military, the only cost of war for most Americans is marginally higher taxes. And deficits subsidize war costs, diluting their effects on current voters.

This circumstance lets us make war almost casually. Most other public policies have more concentrated and thus tangible cost. Environmental regulations, for example, provoke complaints from the businesses that bear much of their cost. With environmentalists on one side and regulated businesses on the other, you get a fuller debate.

A war tax, which Congress traditionally used to fund wars, would concentrate the cost of wars and serve as a disincentive to use the military recklessly. Like natural disasters, wars are hard to predict, but they are the sort of thing citizens should readily finance. This could be done through an income surtax, a device that is particularly appropriate when spending caps are in place to contain government spending. A surtax for emergency spending outside of the caps keeps it from adding to the deficit.

Spending caps can create similarly beneficial effects by forcing war spending to be paid for out of other government programs, including the Pentagon base budget. That prospect encourages those programs’ advocates to oppose war. Debate improves, and the public considers trade-offs more carefully.

War and the Public Interest



That cap should be low enough so that uncapped funds cover only the initial operating expenses of war while Congress decides how to fund the rest. Funds above the cap would have to be offset by spending cuts or taxes. If that seems too restrictive, bear in mind that if a sufficiently dire circumstance occurs — think World War II — we can always change the law.

That policy would give the taxpaying public a greater interest in determining whether initiating or extending a war is wise. Spurred by its constituents and the interest groups they form, Congress would then have to take its constitutional responsibility to authorize and fund war more seriously. Like most people, nations don’t properly consider the value of something until they have to pay for it.

Benjamin H. Friedman is a research fellow in Defense and Homeland Security Studies at the Cato Institute. Charles Knight is codirector of the Project on Defense Alternatives at the Commonwealth Institute.