Rich Man's War, Poor Man's Fight
- Rich Man's War, Poor Man's Fight
by Nicholas von Hoffman
June 27, 2006
Ask George Washington what he thinks about fighting a war on credit.
Back in his day, Congress printed money to pay for the Revolutionary
War but neglected to tax anybody to back up this funny money of
theirs. The bills were called continentals and in due course they lost
all their value, hence the once-popular expression, "not worth a
When your money is not worth a continental that means you are
suffering from inflation big time. It happened 230 years ago in our
War of Independence from the British. We are seeing it beginning to
happen now in our war with, well, whoever it is we are fighting. We
may not know the names, the whereabouts or the precise whys of the
Iraq War but the costs are approaching a trillion dollars.
The Continental Congress was controlled by rich people and rich people
do not like to pay taxes. Not then and not now, when we have another
Congress controlled by rich people. Different war, same stupidity.
For a long time after the financially disastrous mistakes of the 1776
period, American politicians at least tried to wage pay-as-you-go
wars. The Lincoln Administration introduced the first federal income
tax in an attempt to pay for the Civil War. It was not enough and thus
the greenback, as the paper dollar was called then, rapidly lost
buying power (inflation). Gold coins, of course, did not and it was
not until a decade or so after the Civil War that the government
succeeded in hardening up the greenback and putting it on a par with
the gold coin dollar. The hardening was done, however, at great pain
to the nation's farmers and factory workers, but ain't that usually
In World Wars I and II enormous efforts were made to pay the costs as
the wars were being fought. It was during the Second World War that
taxes were first deducted from paychecks. Taxes were hiked very high,
particularly on the rich. Perhaps the assumption was that, since they
had so much more materially at stake than the other 98 percent of the
population and had that much more interest in seeing that the United
States won the war, they ought to pay more. A victorious enemy would
be confiscating rich people's property, not family farms or factory
Even so, a relentless drive was put on to get everyone to help pay for
the conflict. On the home front ceaseless campaigns were conducted to
get people to buy US government "War Bonds." Children were encouraged
to buy "War Savings Stamps."
Nevertheless, even with so many billions in purchasing power drained
out of the economy via taxes and savings, prices still moved up.
Inflation stalked the land but not as injuriously as it might have if
the country had not been on a pay-as-you-go basis.
At first the Vietnam War was carried out without much deficit
spending. When President Lyndon Johnson left office in 1969, he passed
on to his successor, Richard Nixon, a more or less balanced budget.
Nixon, however, could not or would not hold the line and triggered a
war-born inflation that got so bad he tried to impose price controls
on the country.
Controls are a poor substitute for prudent financial management. They
could not hold back inflation but they contributed to the sense of
waste, disorganization and social chaos, which are the handmaids of
inflation. It took more than a decade of recession, lower wages and
confusion before the ship was righted again.
Now comes Iraq and an Administration which either through
miscalculation or doctrinaire bull-headedness has ignored what every
minister of finance from every developed country has known for 150
years. Instead of paying for the war, George W. Bush and his
Administration are laboring under the crackpot notion that the Lord
will provide. Well, the Lord--or the mechanics of business and
finance--is providing and what is being provided are dangerous dollops
It would be worse if it weren't for foreign lenders picking up the
debts the United States has run up pursuing the terrorist ghost
riders. As the buying power of the dollar weakens, fewer of those
obliging foreigners will lend us money. They don't want to be paid
back with dollars that, ravaged by inflation, are worth less.
The government will have to pay higher interest rates to attract
borrowers. There cannot be an adult left in America who hasn't learned
what inflation does to one's personal finance.
But not everybody's personal finance. People with lots of money have
ways of protecting themselves against the damage inflation does.
People without do not. And that may be the basis of the old saying:
"rich man's war, poor man's fight."
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