Conservatives should be more leery of jumping into wars, not only because wars kill and the American superpower might become overextended--especially in a time of fiscal crisis--but also because war makes the government expand rapidly at home, even in areas unrelated to national security. This essay shows how domestic government programs and tax regimes seemingly unrelated to war originated during such periods of conflict. The assess-merit confirms what Randolph Bourne famously stated: "War is the health of the state" (1918).
Although social scientists tend to neglect war as a major cause of changes in social policy (Skocpol 1992, 39-40), some noted historians have concluded that war making is the true driver of state making, dwarfing other causes. For example, as early as 1906, German historian Otto Hintze wrote that war was the principal cause of state development: "[T]he form and spirit of the state's organization will not be determined solely by economic and social relations and clashes of interests, but primarily by the necessities of defense and offense, that is, by the organization of the army and of warfare" (1975, 183).
And American history has certainly confirmed James Madison's axiom that warfare is the mother of other sources of government oppression:
Of all the enemies of public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instrument for bringing the many under the domination of the few. (1865, 491) Although these thoughts come from an American founder whom many conservatives revere, conservatives often push back and argue that even if evils stem from warfare, war is nevertheless sometimes necessary.
Two problems arise with this standard rejoinder. First, in American history wars were usually less necessary than the excuses given for them, especially U.S. involvement in brushfire conflicts since World War II. (1) Second, Madison, if anything, understated war's evil consequences to the republic.
Wars Cause Government to Grow, Even Domestically
The Madison quote might lead one to conclude erroneously that war's expenses, which lead to debt and taxes, are the only causes of the erosion of liberty when conflict arises. At minimum, however, Madison was also uneasy with standing armies because they threaten people's liberties. This paper goes even further and details domestic government programs (that is, the welfare state) that are seemingly unrelated to war efforts at first blush, but originated or expanded in times of conflict and by means of the new taxes initiated or increased during war to pay for them.
For example, although conservatives routinely criticize Franklin Delano Roosevelt's Depression-era New Deal for ushering in the era of big government, the origins of permanent big government in the United States are really rooted in World War I. Marc Allen Eisner argues that "[t]he New Deal is best understood as part of a larger history, one that dates back at least to U.S. entry into World War I. The models of state-economy relations and administration developed during the war, new patterns of state-group relations, and the experiences of those who were involved in the mobilization process constituted the core elements out of which the New Deal regime was constructed. In essence, this places the war and the 1920s in a more important place than many contemporary histories would allow when seeking to identify the origins of the modern state and to determine what, in reality, was 'new' about the New Deal" (2000, 299-300).
Eisner concludes that "[o]ne may still assert that [Herbert] Hoover and Roosevelt viewed the calamity of the Great Depression from the perspective of active participants in the war mobilization effort, and each in his own way sought to apply the lessons of war to the events of the depression." He adds that many of Roosevelt's advisers during the Depression were veterans of the wartime agencies and added their prestige to the use of the wartime model to fight the economic downturn (2000, 301, 304).
By what mechanism does war establish an opening for creating or expanding government programs or taxes? War--usually regarded as a significant societal or in some cases existential crisis--creates an opening for the state to take autonomous action that conflicts with dominant interests in the society, which normally have policy locked down during peacetime (Skocpol 1979, 31). In the legal realm, the government can use the war emergency to implement policies that would normally get pushback from people and groups concerned about the usurpation of private-property rights, the expanding role of government in society, and the tipping of the constitutional balance of power in the executive's favor at the expense of other governing branches. During wars--especially big conflicts that require mobilization of the entire society, such as World Wars I and II--interest groups see the government doing things it didn't do or wasn't previously allowed to do and realize the possibilities for this trend to continue when the war is over.
After the conflict is done, the newly empowered state bureaucrats and the constituency groups benefiting from wartime expansion lobby to keep at least some of the measures in place--a process termed the "ratchet effect" (Higgs 1987). For example, during World War I the creation of the Food Administration led to the expectation in the farm sector that government regulation could be used to prop up farm incomes. More generally, President Herbert Hoover said in 1931, "We used such emergency powers to win the war; we can use them to fight the depression, the misery and suffering from which are equally great" (qtd. in Eisner 2000, 261). Finally, the president typically has to "pay off" members of Congress, especially those of the opposition part),, to back the war with the commitment that he will support their domestic projects and spending.
Because the potential for tax revenues determines how big the government can get and the number and size of programs that can be supported, let us first examine how major changes in the tax system have accompanied war.
Important Tax Changes Accompany War
In Federal Taxation in America: A Short History, tax historian W. Elliot Brownlee concludes: "What would be without precedent ... is a decisive shift to a new tax regime in the absence of a national crisis or emergency. The moments of sweeping change in tax regimes have come invariably during the nation's great emergencies--the constitutional crisis of the 1780s, the three major wars [the Civil War, World War I, and World War II], and the Great Depression" (2004, 2).
Greater revenues are always needed to fight a war. When conflict arises, tax systems are often changed or expanded to augment the state's coffers for use in buying added weapons, ammunition, personnel, fuel, and other war materiel. Yet the changes in tax systems usually linger long after the war is over. War overcomes the naturally fragmented nature of American government, giving central authorities more power, which they in turn use to tout the importance of public patriotism and "sacrifice" to justify altering the tax system, further increasing that enduring power. Also, if the tax changes were part of a winning war effort--as they were in all three of the aforementioned major wars--they acquire a legitimacy that endures after the war is over. Thus, after the war ended, with these augmented tax revenues, increased domestic spending could replace war spending.
The Income Tax
The income tax is one of the most intrusive and economically irrational taxes the government can impose. It usurps liberty by necessitating government snooping into the private details of people's lives to ensure tax collection. Commissioner of Internal Revenue Alfred Pleasonton noted in 1871 that the income tax was the tax "most obnoxious to the genius of our people, being inquisitorial in its nature, and dragging into public view an exposition of the most private pecuniary affairs of the citizen" (1871, 41).
Unlike sales and excise taxes, which focus on inhibiting consumption, the income tax directly penalizes economically productive work and the just rewards for it--thereby dragging down prosperity. The income tax is unfortunately now the dominant form of federal taxation.
The federal income tax originated during the emergency of the Civil War, although many at that time regarded it as unconstitutional. The Civil War, the nation's first modern war, required huge amounts of additional government revenue to prosecute. Spending by the federal government increased from less than 2 percent of gross national product (GNP) to an average of 15 percent of GNP. The Republican leadership admired how the British Liberals had used income taxes to finance the Crimean War instead of imposing higher taxes on property (Brownlee 2004, 31, 33).
The income tax was abolished seven years after the Civil War ended, in 1872. But as with many other government programs and taxes in American history, the income tax began during war, was discontinued, and then was resurrected later. Excise taxes on particular goods and tariffs on imports--that is, two consumption taxes--were the primary means of financing the federal government before, during, and after the Civil War. The income tax was subsequently resurrected after imports--and thus tariff revenues--fell during the depression of the 1890s. Grover Cleveland, an otherwise very conservative president, unwisely accepted the income tax in exchange for lower tariff rates in 1894. But then in 1895 the Supreme Court ruled that the new tax was unconstitutional because the U.S. Constitution clearly required any direct tax to be allocated across the states according to population, and taxing people according to their incomes did not meet that...