The All Volunteer Military: Unintended consequences and a modest proposal

America’s war in Vietnam, its longest before Afghanistan, relied on the obligatory military service of its young men if drafted. When we turned 18, we were required to enroll with the Selective Service System and those of us who did not volunteer lived in terror for about ten years of eligibility that we would be “called up.” To protect the education of our more talented youth, deferments from the draft were given to those of us in college. Not surprisingly this did not go down well with those who could not or chose not to go to college and the fairness of the system was challenged. Thus, college deferments for anyone older than I was (lucky me) were ended and replaced with a lottery at the beginning of each year based on the selective service numbers we received when we first enrolled. Those whose numbers where at the top of the list were sure to be drafted and those closer to the bottom were sure not to be.

Because of the draft the majority of American families with sons were emotionally involved and connected to the war and as it became more and more unpopular this broad connection helped finally bring it to an end.

In 1967, a group of libertarian University of Chicago students and I founded the Council for a Volunteer Military to publicize the inequities of the draft and the benefits of an all volunteer military. We were not subject to the draft ourselves as our college deferments were grandfathered, and thus we were purely motivated by our sense of fairness and believe in the superior effectiveness of a volunteer Army. The Council’ directors were Jim Powell, Henry Regnery, myself as Executive Secretary, Danny Boggs, and David Levy (the one who is now a Professor of Economics at George Mason U). Our Sponsors included my teacher, Milton Friedman, as well as Yale Brozen, Richard Cornuelle, David Franke, James Farmer, Karl Hess and socialist Norman Thomas.

President Richard Nixon appointed Professor Friedman to a commission to study the viability of an all volunteer military headed by Thomas S. Gates, Jr. This led to Nixon’s replacement of the draft with higher pay and other employment conditions that made it possible to man our military with hired professionals. The result was a more expensive (the draft was effectively a tax on those drafted, who tended to be poorer to begin with) but significantly more effective military. After some years adjusting to the new approach, even the Generals praised the great success of our all-volunteer force.

As our military adventurism of recent decades has resulted in more and more American troops fighting and dying abroad, some observers have noted that the volunteer force left most American families unaffected directly by these wars thus undercutting the opposition they might otherwise express. This was obviously an unintended and negative aspect of the All-Volunteer Force (AVF). If there were no way to compensate for this negative consequence, the AVF would still be the best and fairest approach to manning our military. However, there is a simple way to help mitigate this negative feature, which has much merit in its own right.

Since 2001 our wars have cost us $1.6 trillion dollars ($10.5 million dollars per hour). This is just the direct budgetary cost and does not take account of the lives lost and other indirect costs and distortions to the economy, worsened relations abroad, etc. While the top 20-30 percent of income earners in the United States provide almost none of their sons and now daughters to fight these wars and thus might be more inclined to support them, they do provide almost one hundred percent of the taxes raised to finance our government. (In 2012, the latest income tax data available, about half of American families reported taxable income of which the top 50% paid 97.2% of all income tax revenue in that year. The top 5% of tax payers earned 36.8% of total adjusted gross income reported that year and paid 58.9% of total income taxes received.) None of the costs of these wars have been paid for by raising taxes or cutting other spending (except within the Defense Department, where equipment and weapons development expenditures suffered). The funds were borrowed from those buying U.S. treasury securities, adding to our debt that will have to be paid by our children.

My modest proposal, echoing one made a few years ago by U.S. Congressman David Obey, D-Wis., who on Nov. 19, 2010 introduced H.R. 4130, the “Share the Sacrifice Act of 2010,” is that any budget supplemental appropriations to cover the costs of fighting abroad must be paid for fully by an income tax surcharge. See Bruce Bartlett’s discussion of this issue: http://www.forbes.com/2009/11/25/shared-sacrifice-war-taxes-opinions-columnists-bruce-bartlett.html. By explicitly putting the cost on income taxes, any war and its financing will get the attention it deserves from the wealthier members of society who pay that tax. Taxing to pay for wars has the double benefit of adhering to principles of sound finance (properly paying for whatever the government spends), and of bringing the costs (at least the budgetary costs) of war to the pocket books of American voters.

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About wcoats

Dr. Warren L. Coats specializes in advising central banks on monetary policy, and in the development of their capacity to formulate and implement monetary policy. He is retired from the International Monetary Fund, where, as Assistant Director of the Monetary and Financial Systems Department, he led missions to over twenty countries. Before then, he served as Visiting Economist to the Board of Governors of the Federal Reserve System, and to the World Bank, and was Assistant Prof of Economics at the Univ. of Virginia from 1970-75. Most recently he was Senior Monetary Policy Advisor to the Central Bank of Iraq; an IMF consultant to the central banks of Afghanistan, Kenya and Zimbabwe; and a Deloitte/USAID advisor to the Government of South Sudan. He is currently a member of the Editorial Board of the Cayman Financial Review and until the end of 2013 was a member of the IMF program team for Afghanistan. His most recent book is entitled "One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina."
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2 Responses to The All Volunteer Military: Unintended consequences and a modest proposal

  1. Brian says:

    So you knew Danny Boggs? Didn’t he wind up as a federal judge?

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