Article

4 Insights on the Cost of War

by Norwich University Online

July 10th, 2017

Through much of our recent history, the reality of war has had devastating impacts on the social, political and economic fabric of society. This is especially true in the United States where modern spending on war technology has grown considerably since the outset of the World War I. Taxpaying citizens as well as individuals affected by the loss of property have traditionally borne the brunt of this financial burden. Even though the turn of the century has marked a shift in America’s approach to war, the incremental changes in war costs and funding have had serious ramifications for the country as a whole.

World War I: $21 Billion in War Bonds and Income Tax Increases

The First World War, also known as the Great War, would mark the dawn of large-scale modern warfare. Combatants leveraged new war technology such as tanks, machine guns and chemical weapons. In addition to leaving over 9 million soldiers dead at the end of the war, heavy use of these new forms of destruction came at a huge economic cost. For the U.S., the economic impacts were unprecedented at the time, with the U.S. government issuing $21 billion in war bonds to provide funding for the war efforts, and U.S. citizens, especially the wealthy, funding the war out of pocket in the form of income tax increases. In fact, during the war, income tax withholding percentages increased from 41 percent in 1914 to 72 percent in 1918. Although these increases were significant, the debt to fund World War I paled in comparison to World War II.

World War II: One of the Most Expensive Wars in American History

The Second World War, which began in 1939 and lasted until 1945, was greater in scale (geographically and economically) than the First World War. Political unrest in the wake of World War I (WWI) made Europe particularly vulnerable to the ensuing conflict, resulting in a complicated war that involved nearly every nation on the planet. The U.S., under Franklin D. Roosevelt, signed the Lend-Lease Act in March of 1941, committing billions of dollars in resources and munitions to aid Britain and the Allied Forces. Japan was spending an equivalent of over $69 million per month on war efforts by current standards. Following Japan’s attack on Pearl Harbor on December 7, 1941, Roosevelt declared war on the nation, and in 1942, war funding was used to develop the atomic bomb. This expensive development, known as the Manhattan Project, cost about $3 billion by its completion.

For U.S. citizens, the economic impact of the Second World War was unprecedented, as families were encouraged to ration food and supplies to conserve resources. Even children were encouraged to participate by collecting and donating scrap metal or buying war stamps that would support the war effort. Income tax rates for wealthy citizens jumped from 66 percent in 1939 to 94 percent by 1945. Low-income Americans would also see their income tax rates increase from 4 percent to 23 percent over the course of the war, a trend that was not present during WWI. Additionally, war efforts were further supported through tax revenues as a result of a significant increase in Americans filing tax returns, with 49.9 million U.S. citizens filing in 1945 compared to just 7.6 million in 1939. Overall, the bulk of U.S. war funding, 63 percent, came from the issuance of war bonds, which increased the U.S. debt from around $40 billion to roughly $258 billion.

A major portion of funding for World War II was used in the production of modern war equipment and artillery. The U.S. produced a total of 41 billion rounds of ammunition, 12.5 million rifles and carbines, over 300,000 military aircraft, 100,000 armored tanks and a list of other war products. Additionally, under the Lend-Lease Act, U.S. factories supplied not only the U.S. military, but also produced well over half of the war artillery for the armies of the entire Allied Forces. After the attack on Pearl Harbor, the U.S. government ramped up war production efforts to the point where almost all of America’s economy was focused on the war. Even automotive producers like Ford and General Motors became mass producers of war artillery such as planes, tanks, and other equipment.

Foreign Debt Funding 21st Century Wars

Today, the approach to U.S. engagement in war has changed drastically. Like many developed nations, the U.S. is sending fewer soldiers onto the battlefield and instead has focused on developing and utilizing the most advanced forms of war technology. While this means fewer boots on the ground, it also means the trend of funneling mass amounts of economic resources into war products has only increased. U.S. involvement in war since September 11, 2001, has cost the economy an estimated total of $5 billion. While income tax rates for wealthy citizens have decreased to a fraction of what they were during WWI and WWII, the number of taxpayers has increased significantly due to population growth. Still, even with more taxpayers, the methods of funding new war efforts have shifted dramatically. Instead of using mostly domestic funding sources, the U.S. has an increasing reliance on foreign funding for 21st-century wars, with overseas sources such as China and Japan helping fund the U.S.’s current military efforts, mainly through U.S. Treasury Bonds. As a result, America has generated about $2 trillion of foreign debt for wars since the September 11, 2001, terrorist attacks.

Production Cost of a Single F-35 Fighter About $160 Million

Established to further expand the aircraft industry, the F-35 program has been an ongoing project for over a decade and is projected to cost at least $391.2 billion. The program was initiated not only to improve upon designs of previous U.S. fighter jet models but also to establish the F-35 as the most advanced fighter aircraft in the world for many decades to come. According to recent reports published in 2016, production costs for the F-35A alone are near the $160 million mark. Producing the F-35B and F-35C variants are even more costly, with price tags of $265 million and $355 million, respectively. The F-35 program has garnered a lot of controversy as costs for these projects are much higher than initial projections; however, many members of Congress and military officials believe far too much has been invested in the program to shut it down.

For many American historians, political activists, and economists, the increasing costs of war are quite troubling in regards to the wellbeing of our society and the health of the U.S. economy. Additionally, the shift in war funding from mainly domestic sources to foreign debt has raised further concern. While there is no immediate solution to the cost issue, military historians can help government leaders develop viable solutions by using their knowledge of previously successful funding methods to create an effective resolution.

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With Norwich University’s online Master of Arts in History, you can enhance your awareness of differing historical viewpoints while developing the skills needed to refine your research, writing, analysis, and presentation skills. The program offers two tracks – American History and World History, allowing you to tailor your studies to your interests and goals.

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World War II, history.com

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Trump to Seek $54 Billion Increase in Military Spending, The New York Times

Explore WWII History, The National WWII Museum

Historical Debt Outstanding – Annual, Treasury Direct

Status of World Nuclear Forces, Federation of American Scientists

4^th War Loan, Archives.gov

How would you feel about a 94% tax rate?, CBS News

Why Is The US Military Spending So Much Money On The F-35 Fighter Jet?, Business Insider

War Finance (Japan), International Encyclopedia