The costs of military engagement in Afghanistan and Iraq account for well over one-quarter of the increase in US national debt since 2001. Financing wars and defense build-ups in this way is an historical aberration. Americans have typically paid for wars through higher taxes.
The US response to 9/11 has been a major contributor to America’s current economic malaise.
The most economically costly decision post 9/11 was not whether to attack Iraq and Afghanistan, but how to pay for the ensuing conflicts and the related increases in defense and homeland security. War costs always linger well after the last shot has been fired. But this is especially true of the Iraq-Afghanistan conflicts. The $1.6 trillion or so already spent has been financed wholly through borrowing. Add to this a further $800 billion in defense increases that are not directly war-related and hundreds of billions of dollars in new homeland security measures. The resulting debt accounts for well over one-quarter of the increase in US national debt since 2001.
Financing wars and defense build-ups in this way is an historical aberration. Americans have typically paid for wars through higher taxes. Ronald Reagan, no fan of bigger government, raised taxes three times to pay for the cold war. To find a precedent for external debt financing, you have to go back as far as the Revolutionary War when the colonies borrowed from France to pay for the fighting.
Even this is not an exact parallel, because the Bush administration, far from raising revenues, actually cut taxes – both in 2001 when the Afghan operation was launched and again in 2003 after the invasion of Iraq. As Robert Hormats put it in “The Price of Liberty,” “We are living in a post 9/11 world with a pre 9/11 fiscal policy.”