"Traditional conservatives recognized that war is
the primary cause of overweening government in
human history; thus, they promoted peace. Since
the rise of the neoconservatives, however, the
right has forgotten this important lesson, which has to be relearned."
From War to Welfare
How Taxes and Entitlements Begin with Militarism
by <http://www.independent.org/aboutus/person_detail.asp?id=487>Ivan Eland
March 1, 2013, 12:20pm
Also published in
<http://www.theamericanconservative.com/articles/from-war-to-welfare-595/>The
American Conservative on Wed. February 27, 2013
Conservatives should be leery of jumping into
wars not only because American power may become
overextendedespecially in a time of fiscal
crisisbut because war makes government expand
rapidly at home, even in areas outside of
national security. Although conservatives
routinely criticize Franklin Delano Roosevelt’s
New Deal for ushering in the era of big
government, the deeper origins of the American
welfare state lie in the warfare state.
During warsespecially big conflicts that require
mobilization of the entire society to fight
theminterest groups see the government doing
things it didn’t do, or wasn’t allowed to do,
previously. After the conflict, newly empowered
bureaucrats and constituency groups benefiting
from wartime expansion lobby to keep at least
some of the new measures in place. The creation
of the Food Administration during World War I,
for example, ultimately led to the expectation in
the farm sector that government regulation could prop up farmers’ incomes.
Even more fundamental, however, is the impact
that war has on a government’s ability to finance
its expansion at home. The potential for tax
revenues determines how big government can grow
and the number and size of programs that can be
supported. (Even deficit financing is based on
confidence in the government’s ability to raise
funds through taxes.) And war is the force that
has most often led to new and greater sources of
nourishment for Leviathan. According W. Elliot
Brownlee, author of Federal Taxation in America:
A Short History, “moments of sweeping change in
tax regimes have come invariably during the
nation’s great emergenciesthe constitutional
crisis of the 1780s, the three major wars [the
Civil War, World War I, and World War II], and the Great Depression.”
A case in point is the income tax, one of the
most intrusive and economically irrational taxes
a government can impose. One commissioner of
Internal Revenue went so far as to say in 1871
that the income tax was “the one of all others
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.” Unlike sales
or excise taxes, which inhibit consumption, the
income tax penalizes economically productive work
and the just rewards for itthereby dragging down prosperity.
The federal income tax originated during the
emergency of the Civil War, the nation’s first
modern conflict. During that episode, spending by
the federal government increased from less than 2
percent of the Gross National Product (GNP) to an
average 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, and
so the U.S. adopted the same device. By end of
the Civil War, the wealthiest 10 percent of all
Union households were paying income tax, which
accounted for about 21 percent of federal tax
revenueswith excise taxes comprising 50 percent
and tariffs accounting for 29 percent.
The Civil War-era income tax was abolished in
1872, and the federal government returned to
financing itself through its traditional
antebellum means: excise taxes on particular
goods and tariffs on imports (that is, two
consumption taxes) and sales of public land. Yet
the wartime policy had set a precedent, and after
foreign trade (and thus tariff revenues) fell
during the depression of the 1890s, the income
tax was resurrected. Grover Cleveland, an
otherwise very conservative president, accepted
the income tax in exchange for lower tariff rates.
In 1895 the Supreme Court ruled that the new tax
was unconstitutional because the U.S.
Constitution required any direct tax to be
assessed among the states according to
population; taxing individuals according to their
incomes did not meet that requirement. But in
1913 the constitutional problem was surmounted by
the ratification of the 16th Amendment, which
specifically allowed the imposition of an income
tax. This time the tax had roots in the populist
and progressive movements: the broad public
perception was that the burden of tariffs and
excise taxes, which accounted for most federal
revenue, fell disproportionately on the non-wealthy.
Domestic movements may have reintroduced the
income tax, but it was World War I that led to
the income tax replacing tariffs and excise taxes
as the federal government’s primary form of
taxation. According to Brownlee: “The income tax
was a highly tentative experiment until 1916,
when America prepared to enter World War I and
settled on it as the primary means of raising
taxes for the war.” The Great War was
transformational in bringing permanent “big
government” to the United States, a change made
possible by the war’s enhancement of the income tax’s role in taxation.
During wars, tradeand thus tariff revenuegets
disrupted, requiring governments to levy greater
internal taxes to fund conflicts. The income tax
showed once again during the world war that it
had a great capacity for generating revenue.
After the war, the ballooning of tax receipts
underwrote the vast expansion of federal domestic
programs during the Hoover administration, FDR’s New Deal, and beyond.
But it took another war, World War II, to turn
the income tax from a burden on only the
well-to-do into a tax on most earners. From 1939
to 1945, the number of people paying income tax
rose from 3.9 million to 42.6 millionroughly 60
percent of the labor forceand income tax
revenues soared from $2.2 billion to $35.1
billion. The federal government could now take in
massive revenues from taxing middle class salaries and wages.
Franklin Delano Roosevelt and the New Dealers had
believed that a mass-based income tax was the
best way to guarantee a permanent stream of funds
to support federal programs. They were right. In
1940, before America’s entry into World War II,
the federal income tax accounted for only 16
percent of all government tax revenues. By 1950,
the federal income tax had grown to 51 percent of
all government tax revenues. The World War II tax
regime was supposed to be temporary, but it became permanent.
From the postwar period until the late 1970s,
the broad base of the mass income tax, combined
with economic growth and inflation that pushed
people into ever higher tax brackets, allowed the
federal government to swim in swollen revenues,
which were used to expand domestic and overseas
programs while cutting excise and corporate
levies. The augmented domestic programs made
possible by the income tax included healthcare
(for example, Medicare), education, welfare,
urban development, and federal aid to state and
local governmentsmost of the welfare state,
except for Social Security. But that too has its origins in wartime measures.
To encourage male breadwinners to enlist in the
military, ever since colonial times all levels of
government, including the federal government, had
paid pensions to widows and orphans who lost a
provider in war. But in 1862, as early Union
defeats tempered patriotic enlistment in the
North, the federal government increased the level
of compensation for such dependents and widened
the range of family members covered by the
payments to include not only widows and orphans
but elderly parents and siblings of those killed
in battle. After the war, this social program
came to serve a significant fraction of the population.
From the American Revolution to 1861, the
federal government had paid 143,644 pension
claims. From 1861 to 1890, Civil War pensions
amounted to more than five times that number. By
1889, U.S. pension spending alone was greater
than the entire federal budget before the Civil
War. By 1893, a whopping 40 percent of the
federal budget was allocated for disabled troops,
widows, orphans, and the elderly. The
patronage-oriented politics of the Republican
Partywhich dominated American politics in the
latter half of the 1800s and early 20th
centuryled to huge expansions of pension benefits to win votes.
In 1879, the Arrears Act caused many veterans,
who hadn’t realized they were disabled until the
government offered $1,000 or more for finding
aches and injuries, to flood the Bureau of
Pensions with claims. Although, according to its
commissioner, the bureau was the largest
executive bureau in the world, it had few means
to detect fraudulent claims, which were rampant.
During election years between 1878 and 1899,
Republicans used the bureau to dole out pensions
rapidly and heavily in key electoral states.
In 1890, a quarter century after the Civil War
ended, pension eligibility expanded to include
any soldier who had served 90 days or more during
the war and was unable to do manual laborwhether
or not he was injured during the conflict, or
even whether he had seen combat. Similarly,
widows of soldiers who had served in the war for
90 days or more got pensions, regardless of
whether their husbands had died in the conflict.
As historian Megan J. McClintock concludes:
Civil War pensions were not simply a military
benefits program ... but also a social welfare
system that contained assumptions about familial
relationships. Only those pension claimants whose
domestic arrangements met with approval received
federal moneys. In the case of mothers and
fathers, the ideal of filial devotion encouraged
the federal government to become a provider of
poor relief for the elderly in the late
nineteenth century. Ideals of familial relations
shaped policy directed at Civil War widows as
well, but with very different results. Rather
than simply benefiting from the expansion of
federal assistance, widows were subjected to
increasing government supervision of their private lives.
If a widow remarried, she was no longer eligible
for the pension. This created a perverse
incentive for women not to remarry but instead to
cohabitate or become prostitutes. Having fostered
this development, the government then had to
investigate whether either of these forbidden alternatives was happening.
McClintock provides a summary of the Civil War
mobilization’s dramatic effect on widening the
federal government’s social welfare role:
Forced by large-scale warfare to broaden its
social welfare role, the federal government
developed a family policy. In the postbellum
years, that family policy reconstructed households shattered by the Civil War.
The extensive involvement of the federal
government in Union households demonstrates that
the links between military recruitment and family
needs have shaped the evolution of social welfare
policy in the United States. Before the Civil
War, the federal government had assumed only
limited responsibility for military dependents
and virtually none for the civilian poor and
disabled. Pre-Civil War military benefits were
piecemeal and limited to veterans, widows, and
orphans; moreover, the federal government
abstained from social welfare spending for the
civilian poor, and local charity was stigmatized
and parsimonious. The nation’s first “modern” war
transformed the landscape of relief, forging new
ties between the federal government and families,
and between public and private economies, as the
government sought to increase the number of men
willing to leave their families in the 1860s and
to prepare future citizen soldiers for patriotic sacrifice.
According to Theda Skocpol, the Civil War pension
system degraded into what became America’s first
massive, federally funded old-age and disability welfare system:
By the time the elected politiciansespecially
Republicanshad finished liberalizing eligibility
for Civil War pensions, over a third of all the
elderly men living in the North, along with quite
a few elderly men in other parts of the country
and many widows and dependents across the nation,
were receiving quarterly payments from the United
States Pension Bureau. In terms of the large
share of the federal budget spent, the hefty
proportion of citizens covered, and the relative
generosity of the disability and old-age benefits
offered, the United States had become a
precocious social spending state. Its post-Civil
War system of social provision in many respects
exceeded what early programs of ‘workman’s
insurance’ were giving old people or
superannuated industrial wage earners in
fledgling Western welfare states around the world.
Skocpol adds, however, that public revulsion
against the expansion, excesses, and corruption
of the Civil War pension system from the 1870s to
1910 stalled the onset of the welfare state
properthen taking hold in other Western
countriesuntil the New Deal in the 1930s.
Americans may have been repelled by Civil War
pensions becausein a classic case of high taxes
leading to surplus government revenues leading to
excess spendingRepublicans supported lavish
pensions to groups in their political
constituency (Union veterans) to justify
continued high tariff walls to protect Northern
industries, which were among the most influential
supporters in their political coalition. The
interests of such industrialists coincided with
those of pensioner lobbies and the bureaucratic
empire of the Bureau of Pensions to widen the program over time.
By 1910, 45 years after the war, about 28 percent
of American men aged 65 or older were receiving
federal benefits. This led to the erosion of
public confidence in a system then as generous as
that of nascent welfare states around the world.
Nevertheless, in a pattern that has been seen
before, a precedent had been set and would be
available at the next crisisin this case, the
precedent that the federal government could
administer what amounted to a nationwide
retirement program. The groundwork for Social
Security had been laid. As Skocpol summarizes,
“Civil War pensions at their height were
America’s first system of federal social security
for the disabled and elderly”and the embryo of
other, even broader and more expensive federal programs to come.
Conservatives should not fail to recognize that
war is the most prominent cause of the massive
welfare state that has been erected in the United
States. Both taxes and spending as we know them
todayLeviathan’s head and tailspring from the
warfare state. Traditional conservatives
recognized that war is the primary cause of
overweening government in human history; thus,
they promoted peace. Since the rise of the
neoconservatives, however, the right has
forgotten this important lesson, which has to be relearned.
http://www.independent.org/newsroom/article.asp?id=3567
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