This is fundamentally dishonest: if we’re going to have a war, let’s
face the costs – both human and economic – squarely. Congress has no
business hiding the costs of war through accounting tricks.
As the war in Iraq surges
forward, and the administration ponders military action against Iran,
it’s important to ask ourselves an overlooked question: Can we really
afford it? If every American taxpayer had to submit an extra five or ten
thousand dollars to the IRS this April to pay for the war, I’m quite
certain it would end very quickly. The problem is that government
finances war by borrowing and printing money, rather than presenting a
bill directly in the form of higher taxes. When the costs are obscured,
the question of whether any war is worth it becomes distorted.
Congress and the Federal
Reserve Bank have a cozy, unspoken arrangement that makes war easier to
finance. Congress has an insatiable appetite for new spending, but
raising taxes is politically unpopular. The Federal Reserve, however, is
happy to accommodate deficit spending by creating new money through the
Treasury Department. In exchange, Congress leaves the Fed alone to
operate free of pesky oversight and free of political scrutiny. Monetary
policy is utterly ignored in Washington, even though the Federal Reserve
system is a creation of Congress.
The result of this
arrangement is inflation. And inflation finances war.