By LOUISE STORY
c.2010 New York Times News Service
How do you pay for a war? The question re-emerged in Congress last month after President Barack Obama announced he would send 30,000 more troops to Afghanistan, and it is likely to be a major issue as lawmakers return to work in January.
Reaching back into the nation's history books, some lawmakers are suggesting a war bond program similar to those used during the Civil War and both World Wars. Such a program might reduce the country's reliance on foreign borrowing and avoid a tax increase.
The World War II bonds in particular have a certain popular appeal. They were promoted by movie stars like Bette Davis and Rita Hayworth, who toured the country to rally support. Norman Rockwell drew up some of the government's advertisements, with slogans like: "Ours ... to fight for. Freedom from fear." And the Treasury Department organized a door-to-door drive. About $185 billion in bonds were sold.
Sen. Ben Nelson, the Democrat from Nebraska who last month introduced war bond legislation, said in a statement that he hoped to "tap into the same spirit of patriotism and create a sense of participation in the war effort akin to that shown by the greatest generation."
Can you see it? Britney Spears and Oprah touring Midwestern towns to rally support for the war? It sounds farfetched today, and not just because the public is more skeptical.
Economists and others who have studied the war bonds programs say America's economy has matured in ways that would make such an effort possibly harmful to today's economy. For decades, Americans have been urged to consume. Encouraging people to set aside money for the war could slow the economic recovery.
"With war bonds, we would be effectively saving this money and taking it out of circulation," said James J. Kimble, a professor at Seton Hall University and author of "Mobilizing the Home Front: War Bonds and Domestic Propaganda." "War bonds in effect limit our spending. It could be that that ends up shooting our economy in the foot because our economy was more built on spending today."
Consider the economic logic behind war bonds. In World War II, the secretary of the Treasury, Henry Morgenthau Jr., weighed three options for financing the war: printing money, raising taxes or issuing war bonds. But printing money can cause inflation, and imposing taxes would not offer Americans the opportunity to give to the war effort. (In the end, the government ended up printing money and raising taxes, but the bonds limited the extent of those actions.)
War bonds in 1941 translated into sacrifice. Indeed, in 1942, Morgenthau initiated the door- to-door drives to encourage Americans to buy the bonds. "I am not thinking of a token contribution," he said.
But can Americans make a real investment in war bonds today without hurting the economy? Nelson suggested the bonds as an alternative to a war tax, which he said would be more damaging to the economy. Taxes and war bonds would both take money out of the system that might otherwise be spent at the shopping mall.
But today, the economic recovery looms as a greater concern to many people than war costs. Spending on Iraq and Afghanistan is significantly less, proportionately, than spending on World War II. That war accounted for about a third of the nation's economic output; the wars in Iraq and Afghanistan add up to just over 5 percent of gross domestic product today, according to Hugh Rockoff, an economics professor at Rutgers University who has studied war bonds programs.
Another difference, economists point out, is that World War II was a boon to the economy, creating jobs, mainly in manufacturing. The war against terrorism has not provided similar benefits for the U.S. economy.
"Back then you had all these people who suddenly had a lot of extra cash because they were working two shifts for the war," said Kimble. "This war is not contributing in the same way. This war is an outflow, if you will. Some people have described this as more of a spectator's war. We just get to watch."
Of course, the United States today has a fourth option to pay for the war that Morgenthau lacked in the 1940s: borrowing from other countries. During World War II, America was a creditor nation, lending out money to others. Today, the United States is a debtor nation - a point Nelson has seized on in pushing his idea. "War bonds allow us to borrow from ourselves, rather than other countries," he said.
But Rockoff is doubtful that war bonds are the answer. (A program by the Treasury Department to sell Patriot Bonds, begun after 9/11 to contribute to the government's "overall effort to fight the war on global terrorism," has raised only $10.9 billion in eight years.)
"We are financing all of these deficits with debt," Rockoff said. "A bond campaign might be a morale booster. But it's a different world now. I could see people protesting outside of the bond rallies. In the long run, they're going to have to raise taxes."