Working to help fund ongoing wars without sharp tax increases or increased foreign borrowing has led Nebraska’s Sen. Ben Nelson (D-Nebraska) to introduce a new measure: the US War Bonds Act of 2009.
The legislation, introduced Tuesday, would authorize the Treasury to issue and market War Bonds to the American people to help pay for the wars in Afghanistan and Iraq.
“We need shared sacrifice and fiscal discipline in financing the war effort,” Senator Nelson said. “I don’t believe our first instinct should always be a rush to tax. The government has gone to great lengths to address the economic downturn, and adding new taxes right now could undermine those efforts. We need to work to reduce federal spending wherever possible and reduce the growth in spending to finance the important missions in Afghanistan and Iraq.”
The Bush administration ran up trillions of dollars in war costs, and after President Barack Obama announced last week that he has plans to add 30,000 troops for the war in Afghanistan, some lawmakers are feeling a sense of urgency on how to fund the war in Afghanistan and the Iraq war. The Afghanistan war is estimated to cost $30 billion in the coming year. Also, the US public debt is currently more than $7.6 trillion dollars, and nearly $3.5 trillion – 46 percent – of the debt is held by foreign investors, Nelson said.
He said that war bonds are a cost-effective way “to reduce our dependence on foreign creditors and create an outlet for Americans to express their patriotism and support for our service members and America’s mission. War bonds allow us to borrow from ourselves, rather than other countries.”
The US War Bonds Act of 2009 finds a precedent in World War II savings bonds. From May 1, 1941, through December 1945, the War Finance Division and its predecessors were responsible for the sale of nearly $186 billion worth of government securities. Of this, more than $54 billion was in the form of War Savings bonds.
“Although the times and economic circumstances are different than the 1940s, America’s commitment to protecting freedom and our way of life has not waned,” Nelson said. “My hope is that we can tap into the same spirit of patriotism and create a sense of participation in the war effort akin to that shown by the greatest generation.”
US savings bonds are considered some of the safest investments in the world, Nelson said. They are available in predetermined denominations and mature over a period of time while accruing interest. After a number of years, the owner of the bond can collect the face value cost of the bond plus interest. All US savings bonds are backed by the full faith and credit of the United States government.
In the House side, Appropriations Committee Chairman Dave Obey (D-Wisconsin) recently proposed how to fund the Afghanistan war when he proposed creating a war tax.
However, he received opposition from House Speaker Nancy Pelosi and many others in the House of Representatives. Obey presented the idea of a war tax to pay for increasing troops in Afghanistan.
Congressman Barney Frank (D-Massachusetts), the chairman of the Financial Services Committee, Congresswoman Anna G. Eshoo (D-California), Congressman Sam Farr (D-California), Congressman Raul Grijalva (D-Arizona), Congresswoman Betty McCollum (D-Minnesota), Congressman Jim McDermott (D-Washington), Congressman Jim McGovern (D-Massachusetts), and Congresswoman Linda Sanchez (D-California), Congressman John Murtha (D-Pennsylvania) and Congressman John Larson (D-Connecticut) joined Obey as original co-sponsors of the measure.
They proposed imposing a war surtax beginning in 2011.
“Regardless of whether one favors the war or not, if it is to be fought, it ought to be paid for,” Obey said. “The only people who’ve paid any price for our military involvement in Iraq and Afghanistan are our military families. We believe that if this war is to be fought, it’s only fair that everyone share the burden.”
Obey’s proposal, the Share the Sacrifice Act of 2010, calls for the president to set the surtax so that it would fully pay for the previous year’s war cost.
However, the bill would allow for a one year delay in the implementation of the tax if the president determines that the economy is too weak to sustain that kind of tax change, and it would exempt members of the military who have served in combat since September 11, 2001, along with their families and the families of the fallen.
“If we don’t address the cost of this war,” Obey said, “we will continue shoving billions of dollars in taxes off on future generations and will devour money that could be used to rebuild our economy by fixing our broken health care system, expanding educational opportunities and job training possibilities, attacking our long term energy problems and building stronger communities.”
Pelosi said she opposed the war tax proposal, but said that if Obama asked for a war tax, the House would make a decision about it.
Also, Sen. John McCain (R-Arizona) told CBS News that creating a war tax is unnecessary. Instead, he said, the government could end pork barrel spending and earmarks. McCain said that that would amount to about $60 billion from this year’s appropriations bills.
In addition, Sen. Carl Levin (D-Michigan), chairman of the Senate Armed Services Committee, told CBS News that Congress will have to pass a war supplemental bill, but he said he doesn’t think there will be a vote on one this year. Levin, who also dismissed having a war tax, said, “I don’t think any tax increase in the middle of a recession – except a tax on the upper income bracket, which has done so very, very well, even in the middle of a recession – can happen.”