Public finance expert and HKS Senior Lecturer Linda Bilmes says the United States funded the $5 trillion Iraq and Afghanistan wars with an unaccountable and unprecedented scheme utilizing debt, accounting tricks, and outsourcing. 

FEATURING Linda Bilmes

HKS Senior Lecturer Linda Bilmes, an expert on public finance who has studied post-9/11 war costs for the past 20 years, says their staggering $5 trillion price tag was enabled by what she calls the “ghost budget.” Using an unprecedented combination of borrowing, accounting tricks, and outsourcing, presidential administrations, Congress, and the Pentagon were able to circumvent traditional military budget processes in a way that kept war costs out of the public debate and resulted in trillions being spent with minimal oversight. The result: corporations and wealthy investors raking in huge profits; massive waste and fraud; and—combined with the Bush and Trump tax cuts—a shifting of the burden of the costs of war away from the wealthy and onto middle- and lower-income people and future generations. Of course by any metric, the U.S.-led wars in Afghanistan and Iraq were costly. Human life? At least 430,000 Iraqis, Afghans, and Pakistani civilians dead, along with more than 7,000 U.S. military personnel and thousands of civilian contractors. Democratic progress? Afghanistan is once again an authoritarian theocracy under the Taliban, and instead of transforming Iraq and the region, the invasion and occupation undermined popular sentiment toward democracy, unleashed sectarian violence, and strengthened autocratic regimes. But the budgetary problems are something we can address now, Bilmes says, with congressional reforms and prudent planning for the long-term costs of the wars, including caring for veterans. “The Ghost Budget” is also the title of Bilmes’ next book, which will be published next year. 

Linda Bilmes’s Policy Recommendations: 

  • Create a veteran’s trust fund with an oversight board to pay for the long-term costs of caring for military personnel who served in Afghanistan and Iraq, costs which will not peak for as much as 50 years. 
  • Amend existing laws to automatically cover Iraq and Afghanistan veterans for toxic exposure to burn pits. 
  • Pass legislation requiring that a certain amount of funding for long-term veteran care be set aside for every dollar appropriated for war spending. 
  • Restrict the ability of the White House and Congress to use the emergency and OCO (Overseas Contingency Operations) funding mechanisms to spend money on conflicts and to move war spending back into the main defense budget process. 
  • Address budgetary dysfunction in Congress by strengthening and empowering the House and Senate budget committees and streamlining their complicated and confusing budget subcommittee structures.  

Episode Notes

Professor Linda J. Bilmes, the Daniel Patrick Moynihan Senior Lecturer in Public Policy at the Harvard Kennedy School, is a leading expert on budgetary and public financial issues. Her research focuses on budgeting and public administration in the public, private, and nonprofit sectors. She is interested in how resources are allocated, particularly defense budgets, costs of war, veterans, sub-national budgeting and public lands. She is a full-time Harvard faculty member, teaching budgeting, cost accounting and public finance, and teaching workshops for newly elected mayors and members of Congress. Since 2005, she has led the Greater Boston Applied Field Lab, an advanced academic program in which teams of student volunteers assist local communities in public finance and operations. She also leads field projects for the Bloomberg Cities program. She served as the assistant secretary and CFO of the U.S. Department of Commerce under President Bill Clinton. She currently serves as the sole U.S. member of the United Nations Committee of Experts on Public Administration (CEPA), and as vice-chair of Economists for Peace and Security. She serves on the board of directors of the Institute for Veterans and Military Families at Syracuse University. She was a member of the National Parks Second Century Commission and served on the U.S. National Parks Service Advisory Board for eight years.  

She has testified to Congress on numerous occasions and has authored or co-authored numerous books, including The New York Times bestseller “The Three Trillion Dollar War: The True Cost of the Iraq Conflict” (with Joseph E. Stiglitz) and “The People Factor: Strengthening America by Investing in Public Service” (with W. Scott Gould). She was also featured in the Academy-award nominated documentary "No End in Sight," and was the recipient of the 2008 Speaking Truth to Power Award from the American Friends Service Committee. A member of the Council on Foreign Relations and a Fellow of the National Academy of Public Administration, Bilmes earned a BA and an MBA from Harvard University and a PhD from Oxford University.

Ralph Ranalli of the HKS Office of Communications and Public Affairs is the host, producer, and editor of HKS PolicyCast. A former journalist, public television producer, and entrepreneur, he holds an AB in Political Science from UCLA and an MS in Journalism from Columbia University.

Design and graphics support for PolicyCast is provided by Lydia Rosenberg, Delane Meadows and the OCPA Design Team. Social media promotion and support is provided by Natalie Montaner and the OCPA Digital Team. Editorial support is provided by the OCPA Editorial Team: Nora Delaney, Robert O’Neill, and James Smith

Preroll: PolicyCast explores evidence-based policy solutions to the big problems we’re facing in our society and our world. This podcast is a production of the Kennedy School of Government at Harvard University. 

Intro (Linda Bilmes): So the United States, ever since the Revolutionary War has paid for its wars by raising taxes and cutting non-war spending. And that was the playbook through the war of 1812, the Civil War, the Spanish-American War, World War I, World War II, the Korean War, the Vietnam War and so forth. That was the way we always paid for wars. And actually, presidents raised taxes a lot. President Truman raised top marginal taxes during the Korean War to 92%. And President Roosevelt had raised top marginal taxes above 90%. And President Johnson very reluctantly had raised top marginal taxes to 70-plus percent. So we had, throughout our history, borrowed a little, but mostly we had raised taxes and cut other kinds of spending. Now in the post-9/11 wars, the wars in Iraq and Afghanistan and surrounding region, we actually completely broke with precedent. Not only did we not raise taxes, but we cut taxes three times in 2001, in 2003 and in 2017, and we raised spending across the board across pretty much everything else. So what we did instead was that we borrowed all of the money that was used to pay for these wars, and we also budgeted for these wars in a really different way than we had budgeted for previous wars. 

Intro (Ralph Ranalli): Welcome to PolicyCast. I’m Ralph Ranalli. Pick any metric, and it will show the staggering cost of the United States-led wars in Afghanistan and Iraq. Human life? At least 430,000 Iraqis, Afghans, and Pakistani civilians dead, along with more than 7,000 U.S. military personnel and thousands of civilian contractors. Democratic progress? Afghanistan is once again an authoritarian theocracy under the Taliban, and instead of transforming Iraq and the region, the U.S. invasion and occupation undermined the cause of democracy, unleashed sectarian violence, and strengthened autocratic regimes. But when most people think of cost, they think in terms of money. And that’s where things get truly mind-bending. Recent estimates put the cost of the wars at at least $5 trillion dollars. To put that into perspective, with that much money you could make the Social Security Trust Fund solvent and have a couple trillion left over to, say, give every American child a free college education for the next 25 years, or upgrade the entire U.S. electrical grid for the clean energy transition. Yet unlike in all of America’s prior wars, there was very little debate in Congress or the public about the wars’ staggering costs. HKS Senior Lecturer Linda Bilmes, an expert on public finance who has studied post-9/11 war costs for the past 20 years, says that’s because the White House,  Congress and the U.S. military were able to circumvent normal military budget processes with a combination of accounting tricks, borrowing, and outsourcing that resulted in trillions being spent with lax oversight that encouraged fraud and which helped corporations and wealthy stockholders to reap massive profits. She calls it “The Ghost Budget,” and she’s here with me to explain. 

Ralph Ranalli: Linda, welcome back to PolicyCast. 

Linda Bilmes: Thank you. Lovely to be here. 

Ralph Ranalli: So I'd like to get to the ghost budget and what it is in a minute, but if you don't mind, first I'd love for you to set the scene. So it's the early 2000s and the 9/11 attacks have happened and there are wars going on in Afghanistan and Iraq, and you and Columbia Professor Joe Stiglitz start looking at the costs of those post-9/11 wars. Can you talk a little bit about what inspired you to research the costs of those wars and the reasons behind them for the past 20 years. 

Linda Bilmes: Well, I started looking at the cost of the wars in 2002 and continued looking at them, particularly through the invasion of Iraq in 2003 and 2004. And I started looking at the costs really, because my students were asking me, "Where can I find out how much we're spending? How do I know how much it costs? Where are the projections for how much we're going to spend on this? Where do I find this in the defense budget?" And actually when I looked, we couldn't answer that question. So that was the real genesis of this. 

I first published an op-ed in the New York Times in 2005, I believe, saying that we were probably going to spend a trillion dollars on this war. And at that time, that seemed like an incredibly large number and people were wondering how I possibly had come up with that number. But one phone call I received from someone I didn't know named Joe Stiglitz said, "Actually, I think you're right, and I think this may be an underestimate." So he asked if we could join forces, and we started working together and worked together for what turned out to be more than a decade on tracking the cost of these wars. 

Ralph Ranalli: That led to a book you two published called The Three Trillion Dollar War, which was about Iraq and Afghanistan. 

Linda Bilmes: Yes. 

Ralph Ranalli: And now what’s our current understanding of the total cost for those wars? From what I’ve read it's 5 trillion dollars? 

Linda Bilmes: Our book was published in 2008, and we called it The Three Trillion Dollar War: The True Cost of the Iraq War. And at that point we had settled on the 3 trillion figure because using a variety of methodologies in our model, that was the absolute minimum that it could end up costing. Now the war continued further for more years than we thought. It was more expensive than we expected. It turned out to be the most expensive conflict in U.S. history.  

The cost is somewhere between $5 and $8 trillion depending on what you include in the cost. In our estimates, which are around $5 trillion, we don't include the interest paid on all the money borrowed for the war, but I am also part of a consortium, the group out of Brown University. They do include that and some other costs, including some of the costs in Homeland Security and other costs associated with the conflict. But it's fair to say that the war is around $5 trillion. Now it's important to understand that some of that is accrued promises to those who have fought in the war, money that has already been approved for veterans of these wars, but not yet paid out. And one of the reasons that these wars are so expensive is because of the long-term commitment we have made to veterans of these wars, which is quite different than to veterans of previous wars. 

Ralph Ranalli: Can you put that $5 trillion figure into some sort of context for our listeners? How do you help people wrap their head around that number and put it into some sort of context in terms of the federal budget? 

Linda Bilmes: Well, what I usually say to my students is that the first thing that's difficult when you think about trillions is the trillion rhymes with million and billion, but it's actually a lot bigger. So if you had a pile of $1,000 bills, which we don't make any more, but if you had a thousand dollars bills and you had a million, that would be about four inches high. And if you had a billion, that's about 350 feet, 400 feet high, which is, like, Washington Monument kind of height. And a trillion is 65 miles into the sky. So it is much, much bigger. And it's hard because these words rhyme to bear in mind how big this is. Now, I served for many years on the National Park's Board, for example, the national parks, all the parks, which is more than 400 units, very beloved in the United States. The amount of money for the budget of the national parks per year is under $3 billion for all of them put together. And here we're talking about $5 trillion or more. So this really is an extraordinary number, and it is more than we spent on the Second World War. 

Ralph Ranalli: Which brings us to the root of that $5 trillion in spending, which you have dubbed, the Ghost Budget, which is the title of the new book you’re publishing next year. So I’ve read that what it comes down to is that these wars were paid for in a radically different way than the previous wars. Can you talk about this concept of a ghost budget and that history of previous wars, how they were paid for, and how that was different from how the post-9/11 wars were paid for? 

Linda Bilmes: Sure. So the United States, ever since the Revolutionary War has paid for its wars by raising taxes and cutting non-war spending. And that was the playbook through the war of 1812, the Civil War, the Spanish-American War, World War I, World War II, the Korean War, the Vietnam War and so forth. That was the way we always paid for wars. And actually, presidents raised taxes a lot. President Truman raised top marginal taxes during the Korean War to 92%. And President Roosevelt had raised top marginal taxes above 90%. And President Johnson very reluctantly had raised top marginal taxes to 70-plus percent. So we had, throughout our history, borrowed a little, but mostly we had raised taxes and cut other kinds of spending. 

Now in the post-9/11 wars, the wars in Iraq and Afghanistan and surrounding region, we actually completely broke with precedent. Not only did we not raise taxes, but we cut taxes three times in 2001, in 2003 and in 2017, and we raised spending across the board across pretty much everything else. So what we did instead was that we borrowed all of the money that was used to pay for these wars, and we also budgeted for these wars in a really different way than we had budgeted for previous wars, which is that we had, after the initial beginning of the war, we had brought them into the regular Pentagon budget where they went through the whole regular system. 

So in these wars, we kept the budgeting for them outside of the regular mechanisms. We funded the first 10 years of Iraq and Afghanistan through what's called emergency money, which doesn't go through the regular system at all. And we borrowed the money. So I coined the phrase, the “ghost budget,” to sort of capture the fact that it was sort of there but not there in the public consciousness. And I used the name the "ghost budget" because if you read the 200 reports of the special inspector general for Afghan reconstruction or for Iraq reconstruction, or the Pentagon Inspector General reports, one of the words that you find most frequently is the word “ghost.” As in we spent money on this, but it doesn't exist. You find ghost schools, ghost teachers, ghost projects, ghost buildings, ghost soldiers, ghost police. Throughout these reports, there is this concept of this ghost, which is not just money that was spent and wasted because we didn't need to spend that much. It's not just- 

Ralph Ranalli: Or a project didn't work out. 

Linda Bilmes: The project didn't work out. It's not just profiteering. It's where the actual project or soldiers or brigade turned out to be a phantom that we had spent money on. 

Ralph Ranalli: I think I’m probably like many of our listeners struggling to understand how something that lasts 10 years can still be classified as an emergency, which is how that first decade of the money was treated. Was there no statutory definition of what an emergency is? And what was the history of the use of that emergency funding mechanism? How was it used before this? 

Linda Bilmes: Right. Well, so emergency money is supposed to be used in two circumstances. One is for an unforeseen actual emergency. So for example, an earthquake or a hurricane or something where the objective is you couldn't possibly have known about it in advance and importantly, and you want to get the money out fast. You're not going to sit around in the middle of a hurricane and say, "Oh, let's just count every single penny." You just want to get the money out quickly. So you waive a lot of the oversight requirements or new programs that start up in the middle of the year. So something happens, there's a new program enacted, you couldn't have budgeted for it. It's like emergency money. 

And what has happened historically is that at the beginning of wars, there has been emergency money because it wasn't foreseen in advance. And then after the initial period, the money has been gradually brought into the military system where it goes through all of the kinds of checks and balances and what's called the PPBS system in the Pentagon and goes through all of the congressional committees and so forth. Now, in this case, for 10 years, we funded the Iraq and Afghanistan Wars as an emergency. So even when we had built a hundred bases in Iraq and we had more than 200,000 U.S. troops. So what was clearly going to be happening in the next fiscal year, we were still funding this as a quote-unquote "emergency," which means that this money, even though we were spending tens of billions of dollars per year, did not go through any of the oversight mechanisms that regular appropriations must undergo. 

Ralph Ranalli: So for the following 10 years, you've written that Congress switched gears and went from using emergency money to a different funding mechanism called OCO or the Overseas Contingency Operations Fund. And from there much of that money went into the Pentagon’s O&M—Operations and Maintenance—Fund. Can you explain the significance of those two funding mechanisms? 

Linda Bilmes: Yeah. Well, during the election in 2008, candidate Obama was a critic of the emergency funding for Iraq and Afghanistan. And after he was elected, increasingly, there was some attention when he took office in 2009 about how this could be reformed and so forth. And eventually what happened was a change, but not a complete change to funding it through what was called OCO, Overseas Contingency Operation Funding, which was a title that had sort of been a holdover from a small amount of money that was used this way during the Kosovo war.  

Now, what OCO money did was it was a different category, kind of a hybrid category that fell in between emergency money and regular appropriations money. It was announced sort of a year in advance. The announcement kind of came out of a very long-term speculation. So the Pentagon would say, "Well, we think we're going to need $70 billion next year for next year's budget for this OCO account." OCO then was brought into the Pentagon budget mostly. Some went through the State Department budget, a very small amount. It became a kind of slush fund in that it could be used for a lot of things because the nature of OCO, a lot more of OCO than of regular appropriated money went into what is called the Operations and Maintenance account within the Pentagon, which is the most flexible account. So in particular, this was important because about half of the manpower being used in these wars was private contractors, and the Pentagon was able to flex the number of contractors and the contractor accounts and so on with this more flexible account. So it was a kind of convenient thing that could be used to deal with the particular circumstances of the Iraq and Afghanistan war. And it still didn't have to go through all the same kind of vetting and oversight as regular Pentagon money, but it was not quite as egregious as the emergency designation. 

Ralph Ranalli: You did an extensive amount of research, including talking to former presidential chiefs of staff, budget office directors, inspectors general, congressional committee staffers, and you came up with three main factors you think made this possible. Can you explain those factors for us? 

Linda Bilmes: For my research, I was trying to understand how it came about that we spent $5 trillion or more on wars in Iraq and Afghanistan with minimal vetting, minimal public hearings, minimal attention through the executive or congressional branches. And in order to understand this, I interviewed hundreds of individuals, including several presidential chiefs of staff of both parties, number of senior military officials, all the inspector generals at the Pentagon and in the Iraq and Afghanistan area, a number of congressional staff, and others. And what I concluded was that this came about as a result of three main factors.  

First of all, there was the overall budget dysfunction that many Americans are aware of. Since the Budget Reform Act in 1974, '75, post-Watergate, the budget system has had less presidential control, more congressional control. Since then, the system, as we're familiar with, has become dysfunctional. Prior to 1974, we never had a shutdown. We've had 23 shutdowns since then. Prior to that, there were hardly ever continuing resolutions. We've now had 200 continuing resolutions that stop gap measures. And the volatility and unpredictability of the congressional budget process made the Pentagon very reluctant to fund the war through a regular kind of appropriations because they never really knew when the budget was going to happen. And my late friend, Ash Carter, who criticized this whole system repeatedly said that the problem was he didn't know if he'd have a budget. So that budget dysfunction was certainly a factor in this really weird way that we were paying for these wars. 

A second factor is that we were in a situation of historically low interest rates. At the same time, there was huge demand for U.S. treasuries. So we had never been in this situation before where particularly after the 2008 financial crisis, the U.S. could borrow money effectively for nothing. And so what happened is we were able to borrow trillions of dollars and that we were refinancing at lower and lower rates. So even though we were adding so much to the national debt, if you look at the annual percentage of the budget pie that goes to paying the interest on the debt, we didn't see it change. So we went from piling on trillions of dollars of debt and it moving from like 7% of the national pie to 8% of the national pie. We just didn't see a big difference. So we had this unusual circumstance and a very international debt market, international treasury market, things that we didn't have in previous wars. So we had this kind of unlimited credit card that we could borrow from at decreasing rates. 

And third was the fact that the ghost budget was very convenient for all parties. It was convenient for successive administrations because by not really budgeting for it for next year, you could pretend that it was going to come to an end. You could pretend that the deficit wasn't going to be as big for next year. 

Ralph Ranalli: Even though it was clear you were going to spend a hundred billion the next year. 

Linda Bilmes: But it didn't show up in the projections. And then from the Pentagon side, in addition to the fact that this was convenient, this was sort of necessary, they felt. Because of the unpredictability of the budget process, they were able to use this money to plug up a lot of things that had been on their request list for a long time because it was very fungible, flexible money because it went into the most flexible account. And in addition, they were able to use it to pay for the huge and unprecedented presence of contractors in Iraq and Afghanistan, which had not been the case. We had used contractors, but not to anything like this extent in previous wars. And one of the aspects of the reliance on contractors in this war was that the Pentagon didn't have that much control over how many U.S. troops were deployed because that was a political decision. 

So whichever president there was would say, "Well, we're going to have a surge. We're not going to have a surge. We're going to add 20,000 troops, we're going to pull 20,000 troops." And they wouldn't know necessarily until the last minute, but they still had the same activities going on. So they had the flexibility to backfill and get another 20,000 contractors in on short notice because of this way that this was budgeted. So all of these things, the interest rates and the economically benign environment, the budget dysfunction, and the sort of convenience factor for the Pentagon and for the successive political leaders and for Congress, we didn't have to make any trade-offs or make any cuts or raise any taxes. All of these factors contributed to making this possible. 

Ralph Ranalli: So this wasn't just the first war that America put on the national credit card, this was also the first war that the Pentagon outsourced on a wholesale basis. You've said that the number of contractors sometimes exceeded actually the number of military personnel and that they did all kinds of jobs. And you also say they had what you called a distortionary effect. What does that mean? 

Linda Bilmes: Well, so let me talk about the contractor element for a moment. Now, the U.S. has always used private sector contractors in wartime, going back to the Revolutionary War. What was unprecedented in the Iraq and Afghanistan conflict was the extent to which they were used to much, much, much greater extent, comprising typically half or even more of the fighting force, but particularly being used across the board for a very, very wide range of activities. So fighting, repairing, transporting, security guarding, doing virtually every kind of activity that was required. 

There were a number, I believe, of consequences to relying so heavily on the private sector. One consequence was that the U.S. public was already quite divorced from what was actually going on in Iraq and Afghanistan because we weren't paying any taxes or anything, and we weren't fighting because there was a very, very small percentage, lowest percentage ever of Americans who were actually engaged in serving the military there. And so the fact that we had private contractors sort of backfilling was another thing that kind of divorced the public from the actual frontline soldiers. Now, the second area of concern, and of course many people have raised this issue, is the fact that private sector companies have a different incentive system than the U.S. military. And this is not to say that any of the individual private contractors were not there helping their country because many of them were. And I know many of them served with remarkable efficiency, and we couldn't have repaired a single helicopter without private sector help. So they were a critical part of the war. But the companies did extremely well from the war. There was a wave of consolidation among the biggest defense contractors. They earned returns in the stock market that were 60% ahead of the standard return. And so they did well, they had a good war, and they made a lot of profits off the kind of unlimited spigot of U.S. money. 

But I think at the end of the day, one has to question the incentive system of the private sector, and I have worked in both the public and the private sector, so I understand the difference. And if you were in the private sector, you are responsible by law to your shareholders for making money. That's your responsibility. And we were putting half of the military effort in the hands of private sector with legal responsibility to earn money for their shareholders whilst at the same time having the other half of the manpower serving the U.S. military. So that led to, I think, many, a lot of moral hazards throughout and is really questionable whether that is the right, whether that certainly made the war more expensive than it needed to be. There's also a question about whether it prolonged the war and led the war to be much longer than it needed to be. 

Ralph Ranalli: in addition to the incentives and prolonging the war, there were also some abuses that were committed by contractors because of a lack of oversight, the most famous being probably Abu Ghraib where there was physical and sexual abuse, torture, and at least killing of at least one prisoner in the Abu Ghraib military prison, which had a large contingent of contractors working there. What were the other major issues with the contractors?  

Linda Bilmes: I think there were many different aspects of the reliance on contractors that were problematic. I mean, there was profiteering going on, there was a certain amount of corruption. There were a number of very significant large contracts that were non-compete, no-bid contracts that were given out. There were contracts that were wildly favorable to the contractor on things like specialty fuels and other things that were difficult to get. But I think that the fundamental issue was that the way it was structured, we were entirely dependent on this blended force of contractors and military officials. You could not have done this without the contractors. And we also had contractors that were U.S. contractors and contractors from all over the world who were there on many, many different nationalities leading to a very sort of complex management task. But I think that there were many contractors who served heroically and were not compensated adequately for their individual heroism. There were contractors who were stuck in all kinds of remote areas, repairing helicopters and other vehicles and equipment and so forth with embedded troops. They were in every possible kind of situation.  

But the question is more a fundamental one about, is this the way that we should be structuring our armed forces, or did the presence of so many contractors lead to kind of perverse incentives in which there were stakeholders in the war, in whose interest it was to perpetuate the wars and were their situations in which we ideally should not have had contractors at all, as we saw very clearly in the situation with Abu Ghraib and in a number of other areas. 

Ralph Ranalli: So I was struck by something I read about when Roosevelt raised taxes for World War II, how he made a point about being very egalitarian about it. He mentioned both the industrialist and the farmer, and it was basically him saying the entire gamut of the socioeconomic spectrum needs to be participating in this effort. But can you make a case that... Given the totality of everything that's happened, what we've really seen is fundamentally a burden shifting from where the burden was felt by everyone including the wealthy, to where now the wealthy are sort of excluded from that responsibility. Those trillions of dollars, they didn't disappear. That didn't disappear. That went to shareholders, and it went to hedge fund managers and hedge fund investors. And meanwhile, we weren't raising their taxes. We were cutting the top marginal tax rates. And we are accruing this enormous debt, which is pushed off onto future generations. If you ask the debt hawks in Congress, the way to pay for that is to cut entitlements which benefit generally moderate- and lower-income people. Can you make a case that in the aggregate, what we've seen is a burden shifting of the cost of war from the upper income classes to the lower and the middle-income classes? 

Linda Bilmes: So the question you ask about burden shifting in terms of the cost of war is a really, really important point and it's certainly one of the aspects of all this that struck me the most in my research. Going back to World War I, when President Wilson made a number of speeches about how he needed to raise taxes on the wealthy because the wealthy were benefiting through being the owners of manufacturers of equipment and bullets and weaponry and so forth. And he embraced this issue and talked very specifically about the need to impose income taxes on higher-income Americans, which didn't exist at that time, in order to alleviate this exact kind of a situation. And then during World War Two, there were dozens and dozens of speeches by Roosevelt and a number of members of Congress around the fact that everyone needed to pay their share, that they needed to raise taxes in order to ensure that everyone was paying to the extent they could, that everybody was contributing. And he made a number of speeches about how it's not a burden, but it's a privilege to be able to pay taxes for this. And President Truman really outdid them all by giving more than 200 speeches about the need to, as he put it, "Pay as you go." That was his phrase. And he made 200 speeches about how we could not put the burden of this war debt onto the next generation, because of course, there were a lot of debts overhanging from World War II. And he said, "We want to pay this off. We can't put another big debt onto this generation, and so we have to raise taxes. We have to pay as we go." And he actually managed to pay for through higher taxes the entire Korean War, which was quite an expensive war. 

When you come to President Johnson, he of course has a different way of expressing himself, a little less lofty. You can hardly find a speech in which he does not say, "I've got to figure out a way to pay for this fucking war and still put clothes on the people of America and care for the poor." And he's constantly talking about this trade-off and talking about... He doesn't say war without the F-word, really. He talks about it all the time that he's going to have to do this and how to do it without cutting his domestic plans. Now, given the eloquence and the amount of effort reading the congressional hearings, the presidential speeches, the budget transmittal memos, the State of the Union addresses of all of these presidents and congressmen and Council of Economic Advisors, transcripts and so forth for all of these previous wars, it is really striking how none of that happens during the post-9/11 wars. And through data mining, we compared the words, the number of hearings, the number of times these words were used, and it drops off dramatically. 

But I would use as an example, even though in the Ukraine context, President Biden has very clearly set forth the case for why it is the right thing, he believes to support and give money to Ukraine. When it came to the impact, potentially early on after the Russian invasion in Ukraine, the potential increasing of gas prices, he massively depleted the US oil reserve in order to ensure that we didn't have to pay even a penny of additional gas taxes to pay for this. Now, I'm not criticizing President Biden because I understand the politics, but in previous wars, what would have likely happened would've been a presidential address in which he said, "We are so fortunate that the only thing we're asking you to do is pay 2 cents more at the gas pump in order to pay for this," because that's the way they thought about it. And that just isn't happening now and seems to have been lost as a result of the post-9/11 conflict. 

Ralph Ranalli: So Linda, this is the time in the episode where we put the policy in PolicyCast. So can you give me a couple of concrete policy recommendations that would make military funding more accountable and minimize the chances that this kind of thing happens again in the future? And maybe also address some of the fallouts, like say, with veterans. 

Linda Bilmes: Well, there are a few policy changes that I have recommended on the basis of some of the things we learned from the post-9/11 wars. Let me start with the veterans’ issues. We have accrued at least $2.5 trillion dollars of long-term veterans’ costs, which are not tracked anywhere. These are promises that we have made to veterans. Veterans’ benefits are now more generous than they were in previous wars. We have vastly more survivors than we had in previous wars. We have much better communications among veterans about what they're eligible for. We now have much better outreach to veterans and so forth. And the problem is that we've not made any provision anywhere for this big debt. So unlike in Social Security, there is no board that is looking at the long-term accrued liabilities here. There's no real fiduciary or actuarial activity going on. So I have proposed that for every dollar that is appropriated for war spending, we should be appropriating money for long-term veterans’ care with it, because right now we just bury that even though we know it's going to exist. And we also know it's going to happen as it has in all previous wars, a long time into the future. And I've also proposed that we establish a veterans’ trust fund. We have more than a hundred trust funds for various things. And although a veterans’ trust fund does not instantly solve this problem, it does mean that we have at least trustees and an actuarial structure in which to think about and list the long-term debt for medical care as well as mandatory benefits for veterans.  

And I would say that this recommendation that I testified to Congress and called for this in 2010 and have done this on a number of occasions, has become even more acute in the last couple of years as we have now passed laws to give veterans benefits for exposure to burn pits, which adds another, at least 30 more categories of ailments. Now our veterans who were serving in Iraq and Afghanistan were exposed to these burn pits, which were 24-hour, giant, toxic sort of football stadium-sized pits of toxic fumes. And there are a lot of people who've come back and they're just not quite the same because they had that exposure. And at the same time, we have also now started giving in what is called presumptive to the veteran, which means that you don't have to prove that you were actually right next to it. You just have to prove that you were there. We are giving benefits for such exposure to Agent Orange to our Vietnam veterans. So this adds another layer of benefit, which were earned and which veterans are entitled to. But again, we haven't made any provision for this in the budget or in our long-term financial statements. That's one set of changes. 

Secondly, I don't think that we should be paying for wars after the first year as emergencies. Now we've seen the same playbook now with the funding request for Ukraine where the president requested emergency money, there was emergency money funded, then there was a lot of fussing around. So we've used various kinds of accounting tricks to try and come up with more money. Now, after a lot of almost shutting down and almost defaulting and almost changing speakers and so forth, Congress has finally approved a defense bill, which is nearly a trillion dollars, including the nuclear triad at the energy department. But there's no money for Ukraine apart from a small amount of money, which is still coming out of the old OCO fund. And so this is still separate. And on the one hand, people say, "Why do we need another $60 billion for Ukraine when we've already just passed an $850 billion defense budget? What's that going for?" On the other hand, if we do pass money for Ukraine, and I think there's a very strong argument to be made for doing so, this money will be even into the third year of this conflict appropriated as emergency funds, which means that it's not subject to the controls and vetting and approvals and oversight as regular money either within or outside of the Pentagon. So it is still in the hurricane sort of sphere, which a number of other people have problems with. So we have kind of taken all these bad habits that we developed over 20 years of Iraq and Afghanistan funding, the bad habits, being using emergency money, using hybrid money, not having oversight, not having transparency, relying heavily on contractors, not having the funding be subject to any tax increases or trade-offs or economic analysis. And we're doing it all over again. And I think that those things should be changed. 

In addition, I think that in tandem, I'm not the only one who thinks that the budget system has become entirely dysfunctional, and we need to change that. And there are some relatively simple changes that can be made even within the hyper-partisanship, such as strengthening the budget committees, which right now have to produce budget resolutions, but have no teeth and streamlining the number of subcommittees, which have sort of multiplied and are overlapping to such an extent that the system has become so complicated that no one can really understand what they're actually responsible for, and a number of other process reforms that would make the system a little bit better and less volatile. 

Ralph Ranalli: That's great. Well, Linda, I would like to thank you for this conversation and for the light you've shed on this very consequential subject. It’s one I think, prior to your work, people really didn’t know enough about, and hopefully they do now. 

Linda Bilmes: Thank you so much, Ralph. 

Outro (Ralph Ranalli): Thanks for listening. Please join us for our next episode, when my guest will be Harvard Kennedy School Dean Doug Elmendorf, who will be stepping back into a professor’s role at the end of this academic year. We’ll talk about policy and politics, the role of values in government and higher ed, and the often inverse relationship between the importance of evidence-based policy advice and how much many people trust it. So please, if you haven’t already, subscribe to PolicyCast on Apple Podcasts, Spotify, or your favorite podcast app so you don’t miss an episode. And leave us a review while you’re there. 

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