The “Ghost Budget”: How America Pays For Endless War

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.

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.