George W. Bush was the first modern president to cut taxes during wartime. Now, the unpaid $2 trillion bill for the wars he fought - and chose to fight - is long overdue. While President Obama and the Republican leadership in Congress jockey to position their budget cutting plans, it's time for both parties - and all Americans - to pay the price we claim liberty demands. Here, then, is the Bipartisan War Tax Act of 2013.
2013, that is, because now isn't the time to raise income and other taxes. (Nor, for that matter, to reign in critical infrastructure spending and needed relief for the states.) While clearly gaining steam, the recovery from the Bush recession is still in its early stages. And, lamentably, President Obama and Congress just weeks ago inked a compromise two-year extension to the Bush tax cuts which will add another $800 billion in red ink to the U.S. national debt, much of it in new windfalls for the wealthiest Americans needing them least.
While there are countless scenarios for a war tax designed to pay off the costs of the conflicts in Afghanistan and Iraq, here are some suggested guidelines Bipartisan War Tax Act of 2013:
- Everyone pays. From the moment President Bush told us to go shopping and to "get down to Disney World" in the wake of the September 11 attacks, Americans haven't been asked to fight, pay for or otherwise sacrifice to defeat Al Qaeda. As FDR put it two days after Pearl Harbor, "We are now in this war. We are all in it-all the way. Every single man, woman, and child is a partner in the most tremendous undertaking of our American history." That must as true of our wars (and deficits) now as it was then.
- The rich pay more. This proud American tradition was met by the well-to-do of the Greatest Generation, who paid a top income tax rate of 94%. (Those stratospheric rates stayed in place until 1963, and remained as high as 77% throughout the sixties.)
- The war taxes are temporary. Just as the Bush tax cuts theoretically were supposed to sunset after a decade, so it should be for the War Tax Act. (Future deficit hawks can argue about their extension.)
- They must raise at least $3 trillion over ten years.
That price tag needs some elaboration. In September 2010, the Congressional Research Service put the total cost of the wars at $1.12 trillion, including $751 billion for Iraq and $336 billion for Afghanistan. For the 2012 fiscal year which begins on October 1, President Obama will ask for $117 billion more. (That war-fighting funding is over and above Secretary Gates' $553 billion Pentagon budget request for next year.) But in addition to the roughly $1.5 trillion tally for both conflicts through the theoretical 2014 American draw down date in Afghanistan, the U.S. faces staggering bills for veterans' health care and disability benefits. Last May, an analysis by the Center for American Progress estimated the total projected total cost of Iraq and Afghanistan veterans' health care and disability could reach between $422 billion to $717 billion. Reconstruction aid and other development assistance represent tens of billions more, as does the additional interest on the national debt. And none of the above counts the expanded funding for the new Department of Homeland Security.
But that two-plus trillion dollar tab doesn't account for the expansion of the United States military since the start of the "global war on terror." While ThinkProgress explained that the Pentagon's FY 2012 ask is "the largest request ever since World War II," McClatchy explained:
Such a boost would mark the 14th year in a row that Pentagon spending has increased, despite the waning U.S. presence in Iraq. In dollars, Pentagon spending has more than doubled in 10 years. Even adjusted for inflation, the Defense Department budget has risen 65% in the past decade.
Even with the proposed $78 billion in cuts and troop reductions advocated by Gates and Obama over the next five years, "the bottom-line figure would still go up during that time, with projected spending totaling $643 billion in 2015 and $735 billion in 2020."
Even with the reduction in staffing forecast for 2015, the Army and Marine Corps would be larger than they were when the Iraq and Afghanistan wars began.
Which raises the question: why would perpetually tax-cutting Republicans agree to tax increases to pay for the wars in Iraq and Afghanistan?
Because the Republicans believe the global terrorism poses as an existential threat to the United States. And we know this, because they repeatedly told us so.
For his part, President Bush routinely compared his wars to World War II. The enemy, after all, was "an Axis of Evil." On Pearl Harbor Day 2005, Bush declared:
On September the 11th, 2001, our nation awoke to another sudden attack. In the space of just 102 minutes, more Americans were killed than we lost at Pearl Harbor. Like generations before us, we accepted new responsibilities, and we confronted new dangers with firm resolve. Like generations before us, we're taking the fight to those who attacked us -- and those who share their murderous vision for future attacks. Like generations before us, we've faced setbacks on the path to victory -- yet we will fight this war without wavering. And like the generations before us, we will prevail.
Bush wasn't alone in proclaiming, "another date will forever stand alongside December 7." After he introduced the "Islamic fascists" analog to Nazi Germany in 2006, Republican White House hopefuls Mitt Romney, Mike Huckabee and Rudy Giuliani echoed the talking point. Giuliani was joined in his effort by right-wing propagandist Norman Podhoretz, who argued in his 2007 book, World War IV: The Long Struggle Against Islamofascism, that with the conflict against Al Qaeda, Iraq and Iran, Sunni and Shiite, and other Islamic foes real or imagined, the next world war is already underway. As David Frum and Richard Perle put it:
"There is no middle way for Americans. It is victory or holocaust."
Disgraced former House Speaker Newt Gingrich summed it up this way:
In the 20th Century, America fought and defeated Nazism, Fascism, Imperialism and Communism -- four existential threats to our survival.
In this century, America is facing two different kinds of threats, though no less grave. This time, the threat does not come from nation-state superpowers, but from non-state networks, each pursuing an agenda based upon radical ideologies. The first motivates non-state terrorist networks to kill Americans both here and abroad.
(Newt's other, of course, is "Obama's secular-socialist machine.)
Like the Bush administration, John McCain argued that the American presence in Iraq would be no different than in South Korea. "We've been in Japan for 60 years. We've been in South Korea 50 years or so," McCain said n 2008, adding, "That would be fine with me."
So paying the $3 trillion bill should be no problem for McCain and his Republican colleagues.
Here's how it could work.
For ten years starting in 2013, income tax rates could be rolled back to something like their pre-2001 levels, but with some important exceptions. First, given the record income inequality and declining average household income now plaguing the United States, rates for the lowest brackets should not return to their Clinton-era levels, but instead rise by only 1% to 2%. The current top two family of brackets starting at $212,300 and $379,100 would go back to 36% and 39.6%, respectively. Importantly, in keeping with the wartime tradition that the rich pay substantially more, new brackets at $1,000,000 (42%), $2,500,000 (44%) and $5,000,000 (47%) should be introduced. (As this New York Times graphic shows, those levels would still be half of their World War II peaks.) In keeping with the "everyone pays" principle, the capital gains tax rate would return to its 1990's boom-era level of 20%.
These proposals should produce the needed revenue to offset the $3 trillion in past and future costs surrounding the wars in Afghanistan and Iraq. (By way of comparison, letting all of the Bush tax cuts expire would have added in $3.8 trillion in new revenue to the Treasury over ten years.) Other steps, like reigning in Medicare and Medicaid costs, raising the threshold for annual income exempted from Social Security taxes to $250,000 would more than meet the Obama Deficit Commission's goal of trimming the $14 trillion national debt by $4 trillion over the next decade. To boost revenue further, the War Tax could also include a 2% national sale tax. Call it a "Liberty Levy."
Many observers - and doubtless all Republicans - will object that the United States can't absorb tax increases of this magnitude. But economic history and the American notion of shared sacrifice say otherwise.
After all, the last time the top tax rate was 39.6% during the Clinton administration, the United States enjoyed rising incomes, 23 million jobs and budget surpluses. More important, the American tax burden hasn't been this low in generations. Thanks to the combination of the Bush Recession and the Obama tax cuts, the AP reported, "as a share of the nation's economy, Uncle Sam's take this year will be the lowest since 1950, when the Korean War was just getting under way." In January, the Congressional Budget Office (CBO) explained that "revenues would be just under 15 percent of GDP; levels that low have not been seen since 1950." That finding echoed an earlier analysis from the Bureau of Economic Analysis. Last April, the Center on Budget and Policy Priorities concluded, "Middle-income Americans are now paying federal taxes at or near historically low levels, according to the latest available data." As USA Today reported last May, the BEA data debunked yet another right-wing myth:
Federal, state and local taxes -- including income, property, sales and other taxes -- consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8% of income before rising slightly in the first three months of 2010.
"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress.
Even nuttier is the Republican myth that the Bush tax cuts of 2001 and 2003 had nothing to do with the record-setting deficits. CBPP found that Bush tax cuts accounted for almost half of the mushrooming deficits during his tenure; increased defense, DHS and international aid spending represented only 35% of the additional red ink. And as another CBPP analysis revealed that over the next 10 years, the Bush tax cuts if made permanent will contribute more to the U.S. budget deficit than the Obama stimulus, the TARP program, the wars in Afghanistan and Iraq, and revenue lost to the recession - combined. As the New York Times' David Leonhardt explained:
"The economic growth under George W. Bush did not generate nearly enough tax revenue to pay for his agenda, which included tax cuts, the Iraq war, and Medicare prescription drug coverage."
House Speaker John Boehner voted for all of it. Of course, as Utah Senator Orrin Hatch admitted in 2009, for Republicans during the Bush years:
"It was standard practice not to pay for things."
Well, that was then, this is now. And the first thing we need to pay for is American national security. And for Republicans, for whom the Iraq conflict and the global war on terror were necessary to protect the United States from an existential threat on a par with Nazi Germany and the Soviet Union, the first step is to support the Bipartisan War Tax of 2013. After all, as Franklin Roosevelt put it as Pearl Harbor was still smoldering on December 9, 1941
"It is not a sacrifice for the industrialist or the wage earner, the farmer or the shopkeeper, the trainman or the doctor, to pay 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 is it a privilege."
UPDATE: Almost on cue, Republican Senator Jim Demint (R-SC) and Rep. Mike Pence (R-IN) proposed new budget-busting legisation to make the Bush tax cuts permanent.
(This piece also appears at Perrspectives.)