How US is deferring war costs

As war spending on Iraq and Afghanistan nears the levels for Vietnam and Korea, concern is rising over the 'borrow now, pay later' approach.
By Ron Scherer
The Christian Science Monitor

To pay for World War II, Americans bought savings bonds and put extra notches in their belts. President Harry Truman raised taxes and cut nonmilitary spending to pay for the Korean conflict. During Vietnam, the US raised taxes but still watched deficits soar.

But to pay for the ongoing wars in Iraq and Afghanistan, the US has used its credit card, counting on the Chinese and other foreign buyers of its debt to pay the bills.

Now, as President Bush is promising to boost the number of troops in Iraq, there is increased scrutiny over how the US is going to pay for it all.

The US is spending about $10 billion a month on Iraq and Afghanistan. By the end of this year, the total funds appropriated will be nearly $600 billion – approaching the amount spent on the Vietnam or Korean wars, when adjusted for inflation.

However, the actual impact of the war on the economy is different than in the past, largely because the US economy is so much bigger now. During World War II, some analysts calculate that the US spent as much as 30 percent of its gross domestic product (GDP) on the war effort. The Korean War, at its spending peak in 1953, represented 14 percent of GDP; Vietnam was about 9 percent. The current war, however, is less than 1 percent of America's annual $13 trillion GDP.

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