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Billing The Grandkids

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By Ruth Marcus
Wednesday, June 11, 2008

By the time Congress finishes the latest "emergency" war spending bill, a mere seven years into the emergency, the cost of operations in Iraq and Afghanistan will have exceeded $860 billion. For the first time in American history, every penny of that amount will have been borrowed. For the first time, billions more will have been borrowed to finance tax cuts in the midst of war.

Confronting the debt amassed during the Revolutionary War, George Washington was determined to pay it off, warning against "ungenerously throwing upon posterity the burden which we ourselves ought to bear." Confronting the enormous costs about to be piled up in Iraq, George Bush determined to press for new tax cuts -- not just "little bitty tax relief," as he put it, but hundreds of billions more.

"This contrast -- between an active war effort on one hand and substantial tax cuts on the other -- has no precedent in American history," three tax historians explain in "War and Taxes," a new book from the Urban Institute. Rather, since the War of 1812, "special taxes have supported every major military conflict in our nation's history."

As Steven Bank, Kirk Stark and Joseph Thorndike show, presidents and lawmakers have not always been eager to impose taxes to pay war costs. But historically, Republicans and Democrats alike ultimately acknowledged the necessity -- fiscal and moral -- of shared sacrifice. "I think the boys in Korea would appreciate it more if we in this country were to pay our own way instead of leaving it for them to pay when they get back," said House Speaker Sam Rayburn.

Until Iraq, that is. "Nothing is more important in the face of a war than cutting taxes," then-House Majority Leader Tom DeLay declared in March 2003.

The authors suggest several reasons for this turnabout. The end of the draft alleviated pressure on those left at home to do their part. A globalized economy and a more skillful Federal Reserve have reduced the fear of rampant inflation that fueled previous wartime tax hikes. Political polarization has driven away moderates, who tend to be deficit hawks.

I'd argue that the biggest factor is the transformation of the Republican Party: This is the first extended war fought under the banner of supply-side economics. Richard Nixon, shortly after taking office, announced that "the path of responsibility" required him to support extending Lyndon Johnson's tax surcharge. That stance seems unimaginable for a Republican president today.

Take John McCain, who refused to back additional tax cuts in 2003 because, he explained, "throughout our history, wartime has been a time of sacrifice." Now, as his party's presumptive nominee, McCain offers a costly menu of new tax cuts that makes Bush look like Ross Perot.

From the Democrats' perspective then, why take the political risk of pushing tax hikes to finance a Republican war? Last year, when three senior House Democrats floated an income surtax to pay for the war, leadership shot it down with Bush-like speed. "Just as I have opposed the war from the outset," said Speaker Nancy Pelosi, "I am opposed to a war surtax."

As the House prepares to take up the war funding bill for the second time, one small effort to pay for one tiny slice of war-related costs is an almost-certain casualty of such politics. The measure includes expanded education benefits for returning veterans, but conservative Blue Dog Democrats have insisted on finding a way to pay the cost, $52 billion over 10 years.

As a result, the original House measure included a surtax of 0.47 percent on income of more than $1 million for married couples, $500,000 for individuals. According to Citizens for Tax Justice, this levy would affect three-tenths of 1 percent of taxpayers, who would pay an average of $8,770 more. Not much to ask from a group that saved an average of $126,690 last year from the Bush tax cuts.

Not much, that is, except to the White House, which declared this and any other tax increase "unacceptable." The Senate, for its part, couldn't be bothered to bring the House proposal up for a vote.

"We believe if we can spend $170 billion on Iraq that we should spend $5 billion a year on the people coming back from Iraq," said Majority Leader Harry Reid. "I don't know why that would have to be offset."

Here's the new, bipartisan fiscal policy: Soak the grandchildren. George Washington would have been appalled.

marcusr@washpost.com


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