There were three primary drivers of the Ghost Budget: unusual economic conditions, congressional budget dysfunction, and military assertiveness.

By Linda Bilmes, Just Security

Editor’s Note: This article is part of our Ending Perpetual War Symposium. The article derives from a chapter in Brianna Rosen, ed., Perpetual War and International Law: Legacies of the War on Terror (Oxford University Press, forthcoming 2024).

The post-9/11 wars in Iraq and Afghanistan were enabled by a historically unprecedented combination of budgetary procedures and financing methods. Unlike all previous U.S. wars, the post-9/11 wars were funded without higher taxes or non-war budget cuts, and through a separate budget. This set of circumstances – one that I have termed the “Ghost Budget” – enabled successive administrations to prosecute the wars with limited congressional oversight and minimal transparency and public debate. I adopted the name “Ghost Budget” because the term “ghost” appeared frequently in post-9/11 government reports in reference to funds allocated to people, places, or projects that turned out to be phantoms.

A line of military helicopters on an aircraft carrier

The Ghost Budget was the result of an interplay between changes in the U.S. budgetary process, a more assertive military establishment, and the conditions in global capital markets. It has had far-reaching implications for the conduct and course of the post-9/11 wars and for defense policy today.

Funding the Post-9/11 Wars

The “Ghost Budget” was the biggest budgetary anomaly in U.S. history. Prior to 9/11, U.S. wars were financed through a mixture of higher taxes and budget cuts, and funded mostly through the regular defense budget. One third of the costs of World War I and half the costs of World War II were met through higher taxes. During World War II, President Franklin D. Roosevelt described paying taxes as a “patriotic duty” as he raised taxes on business, imposed a “wealth tax,” raised inheritance taxes, and expanded the number of income taxpayers to roughly 80 percent of the workforce by 1945. Wars in Korea and Vietnam largely followed a similar pattern, with President Harry Truman pledging to make the country “pay as you go” for the Korean War. War funding was also a central issue in the Vietnam War, which ended when Congress refused to appropriate money for the South Vietnamese military.

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