Taps Coogan – February 8th, 2021

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Back in 2010, the Congressional Research Service published a report that detailed the inflation adjusted cost of the military operations associated with America’s major wars. The report concluded that the military operations of World War II, the most expensive war in American history, cost the federal government $4.1 trillion in 2010 dollars. Acknowledging the limitations of translating big expenses over long periods of time, that equates to about $4.9 trillion today.

As for the methodology, the report notes:

“All estimates are of the costs of military operations only and do not include costs of veterans benefits, interest paid for borrowing money to finance wars, or assistance to allies.”

Fast Forward to Today

Since the Spring of 2020, the federal government has passed the following Covid specific stimulus bills:

1.) A $8.3 billion emergency coronavirus spending package on March 6th, 2020.

2.) A $192 billion package on March 18th, 2020

3.) The $2.2 trillion CARES Act on March 27th, 2020

4.) The $484 billion ‘top-up‘ for the Payroll Protection program on April 21st, 2020

5.) The $892 billion dollar stimulus bill that passed on December 21st, 2020, which was the longest bill in American history (nearly 5,600 pages) and marked the formal return of pork-barrel spending to Congress

In total, that amounts to just under $3.8 trillion dollars already ‘spent’ on Covid. Of course, roughly a trillion dollars of that spending hasn’t actually been spent yet, a detail which isn’t stopping Congress and the new administration from pushing through another $1.9 trillion stimulus bill. That latest bill would bring the total cost of the federal government’s Covid response to $5.7 trillion, nearly a quarter more than the cost of all US military operations in World War II.

While the final version of the latest stimulus bill is likely to be somewhat smaller than $1.9 trillion, its passage is a certainty given that Democrats are using the budget reconciliation tool to pass it regardless of Republican input or support.

It’s easy to lose track of how much $5.7 trillion really is. So, here is a simple exercise. Imagine everything you know about US military operations in World War II: the thousands of Navy ships built, the Normandy invasion, the Manhattan Project, the Italian Campaign, the air war, the Pacific Theater, the race to Berlin, the hundreds of thousands of tanks, planes, bombs, etc…, the mobilization of millions of soldiers. That cost about $5 trillion spread out over four years. Congress is poised to spend substantially more than the present day cost of all of that combined and they are doing it in a period of less than 12 months. That doesn’t include the baseline budget deficit of roughly $1.3 trillion per year, any increase in that deficit owing to the decline in tax revenues, or any increase in spending outside Covid stimulus bills.

Meanwhile, the actual decline in GDP in 2020 was about $700 billion (-3.5%). The Federal government is on pace to spend about $172,000 for every one of the roughly 33 million people who were jobless at the absolute peak of the unemployment crisis last Spring. Two thirds of those people have already returned to work.

World War II completely transformed the nation. The size of the federal government exploded relative to GDP and it never shrank all the way back. Taxes were raised across the board (not just on the rich) and taxes on income over $200,000 ($2.8 million today) were hiked to 94%! They were never lowered all the way back, particularly not for the Middle Class. The Federal Reserve was forced to formally peg long term interest rates for a decade to control the interest on the national debt. That policy was a major contributor to inflation hitting 10% in the early 1950s.

The current level of spending coming out of Washington is completely out of control and lest you think $5.7 trillion will be the final total, it won’t be. More ‘stimulus’ bills will follow, to say nothing of student debt forgiveness, a ‘Public Option’ for healthcare, infrastructure, the ‘Green New Deal,’ etc…

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