The Stimulus, the War and the War Tax

Ezra Klein's commenter kicks off an interesting discussion when he asks, of Klein's support for a surtax to fund the Afghanistan war, "aren't you one of those people who regularly proclaim that opponents of the so-called stimulus package are nuts, and that in fact we should have more stimulus, deficits be damned, because otherwise we'll all soon die painful deaths? Please reconcile those posts with this one, where you praise higher taxes in the name of deficit reduction."

As a firm believer that we should talk about money when we talk about war, I suppose I should answer that question for myself as well.

America is fighting both a recession and war. Both of these things cost money, and both of these things require the United States to spend money it isn't fully making in tax receipts. To fight a recession, I think the government should use expansionary fiscal policy and run up a deficit even larger than we have to specifically target high unemployment. An additional job stimulus could cost between $100 and $200 billion over one to two years. To fight the war, I don't know what we should do, but I know what we're doing, which is sending an additional 30,000 troops to Afghanistan for a timely and targeted surge. The Afghanistan surge will cost around $30 billion a year, according to funds-per-troop estimates from Brookings. So the unemployment fight costs more than the Afghanistan fight, but it also has a higher multiplier because we're spending that money to create jobs in the US rather than buying materiel for our troops and tribal allies in Afghanistan.

Both of these fights add to the deficit, and both require us to think long-term about how we're going to pay once the time comes when running short-term deficits to replace slacking private demand is no longer in our economic self-interest. We're going to have to raise taxes, or dramatically cut services (and probably both) to pay for this recession, and our growing entitlements. So I suppose I don't support a "war tax" any more than I support a "stimulus tax." Most taxes don't come with earmarks. I just support new, smart taxes to kick in when the recovery is robust and unemployment has fallen.

Finally, and this is where I loop back to Ezra, our country has a strange relationship with wars and funding, in which we too often treat war money as if it's not real money. He writes, "given the choice between $60 billion or so of war stimulus and using the inflection point of the Obama administration to reestablish the principle that wars cost money, I'd choose the latter." Would I risk the recovery on that vote of principle? Truly, I don't know that I would. I agree with him that fiscal responsibility doesn't stop at the water's edge, but paying down the war escalation is a limited gesture. We don't just need a political system with the guts to tax a war escalation we're about to have. We need a political system with the guts to tax the entitlements and programs we've already guaranteed. In Washington, passing those taxes will be the real war.