The ongoing war in Ukraine. The United States' military strikes against Houthi rebels in Yemen. The increasing call for support for Israel in the war against Hamas. Continual conflicts with terrorist organizations throughout the world. It seems that much of the world, including the United States, is in a perpetual state of war. 

How did we get to this point? Harvard Kennedy School faculty member Linda Bilmes, the Daniel Patrick Moynihan Senior Lecturer in Public Policy, explains one of the ways the United States has been able to remain in the fight, and the accompanying economic dangers, in a recent piece in Just Security. 

Bilmes coined the term “ghost budget” to describe a set of circumstances that has funded all post-9/11 wars without higher taxes or non-war budget cuts, and through a separate budget process. “I adopted the name ‘ghost budget’ because the term ‘ghost’ appears frequently in post-9/11 government reports in reference to funds allocated to people, places, or projects that turn turned out to be phantoms,” Bilmes writes. 

In such conditions, administrations can prosecute wars with limited congressional oversight and minimal transparency and public debate, she notes. 

Bilmes identifies three catalysts of the ghost budget: economic conditions, congressional budget dysfunction, and military assertiveness. And she explains how, post 9/11, these factors enabled administrations to keep borrowing and spending, almost unconditionally.

Unlike previous wars, the post-9/11 conflicts “took place in an era of free-flowing international markets,” Bilmes writes. The U.S. government's access to global capital markets has allowed it to borrow trillions of dollars, until recently at historically low interest rates, even while reducing taxes.

“The absence of new taxes has insulated the public from the mounting cost of wars and broke the expectation that wars would inevitably involve higher taxes,” Bilmes writes. “Afghanistan was the first time since the American Revolutionary War, that war costs were covered almost entirely by debt.”

By comparison, higher taxes covered one third of the costs of World War I and half the costs of World War II. President Roosevelt called it a collective patriotic duty, and raised taxes on businesses, imposed a wealth tax, raised inheritance taxes, even increased the number of income taxpayers to demonstrate the sacrifice of war.

“It is not a sacrifice for the industrialist or the wage earner, the farmer or shopkeeper, the train man or the doctor to may more taxes, to buy more bonds, to forego extra profits, to work longer or harder at the task for which he is best fitted; rather it is a privilege,” Roosevelt said 1941. President Truman raised top marginal income tax rates to 92% during the Korean War and President Johnson imposed a tax surcharge during Vietnam.

People lined up for sugar rationing during World War II.
People stand in line for sugar rationing during World War II, 1942, experiencing the “changing fortunes of war” as President Roosevelt said in a Fireside Chat. (Photo by Office of War Information/Interim Archives/Getty Images)

 “As Immanuel Kant predicted in Perpetual Peace,” Bilmes noted, “The ability to keep borrowing and spending with minimal oversight allowed the United States to keep fighting indefinitely.” 

The result, Bilmes said, is that money is no longer a serious deterrent to war. Ghost budgets make it easier to prolong fighting at any cost.

Linda Bilmes wearing a white shirt with glasses on her head and smiling.

“The absence of new taxes insulated the public from the mounting cost of wars and broke the expectation that wars would inevitably involve higher taxes.”

Linda Bilmes

Budget dysfunction, as Bilmes terms it, has also contributed to the problem. Post-Watergate budget reforms shifted power away from the president and to Congress and overhauled how the federal government enacts budgets. But this has weakened the process, leading to government shutdowns, near-defaults, and other crises. In the absence of a reliable budget process, the use of  emergency funding became commonplace. “Congress was freed from the need to find politically painful spending cuts elsewhere to pay for the war," Bilmes writes, “and [emergency spending] enabled the Pentagon to prosecute the wars without worrying about whether Congress would pass the defense appropriations bills on time.” This has removed the costs of some wars almost completely from the “regular” budget process: “To date,” Bilmes noted in the paper, “99% of U.S. assistance to Ukraine has been funded by supplemental emergency funds.”

Finally, Bilmes points to the military's assertiveness. After a decade of budget cuts following the end of the Cold War, the Pentagon in 2001 was “actively seeking to increase its budget,” Bilmes writes. The nature of emergency and other supplemental appropriations “opened the floodgates to a spending bonanza,” and allowed the Defense Department to “shift war funding into other categories to obtain items on its long-time 'wish list' that were tangentially (or not at all) related to the wars in Iraq or Afghanistan.”

Regardless of the merits of military involvement, Bilmes writes that the easy availability of war funds encourages successive administrations to see the world through a “Pentagon lens,” or military intervention as the default foreign policy option. 

The full article by Bilmes is featured in Ending Perpetual War. Her latest book, The Ghost Budget: Paying for America's Post 9/11 Wars, will be published by Cambridge University Press in 2024.

Banner image: Ukrainian President Volodymyr Zelenskyy and U.S. President Joe Biden hold a news conference on December 12, 2023 in Washington, DC. Zelenskyy is in Washington meeting with Biden and Congressional leaders to make an in-person case continued military aid as Ukraine runs out of money for their war against Russia. (Photo by Alex Wong / Getty Images)

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