No, We Cannot Afford to Fund Yet Another War

"The fact that the Fed can whip up trillions of dollars does not negate the fact that wars are expensive."

By Connor O’Keeffe, Mises Institute

In a 60 Minutes interview over the weekend, host Scott Pelley asked President Joe Biden, “Are the wars in Israel and Ukraine more than the United States can take on at the same time?” The president answered, “We can take care of both of these and still maintain our overall international defense. We have the capacity to do this, and we have an obligation to.”

In a Sky News interview released Monday, Treasury Secretary Janet Yellen gave a similar answer when asked whether the US could afford to fund another war at this time: “I think the answer is absolutely. America can certainly afford to stand with Israel and to support Israel’s military needs. And we also can and must support Ukraine in its struggle against Russia.”

This is not true. To see why, we need to understand the military goals of Washington’s allies in each conflict.

Rear Admiral Daniel Hagari, the chief spokesman for the Israel Defense Forces (IDF), said Saturday that Israel’s goal in Gaza is “the rout of Hamas and the elimination of its leaders after the slaughter they perpetrated.”

The first phase involved cutting off food, water, and energy to Gaza and pummeling the strip with airstrikes while Israeli forces mobilized. Now the IDF are “in formation” for a ground invasion of Gaza City. Last Friday, Israel told the 1.1 million people living in northern Gaza to leave their homes and move to the southern half of the territory.

So, it appears that the plan is to send the army into Gaza City with the goal not merely to prevent Hamas from carrying out more attacks but to overwhelmingly defeat it as a movement and kill or capture its leadership.

But the Hamas attacks revealed blind spots in Israel’s monitoring of hostile activities within Gaza. So, Israeli forces may not have a clear idea of what they’ll find in Gaza City. Hamas is known to use an unmapped tunnel system to move around the city, and they have clearly been able to build and store a tremendous number of rockets undetected. Who knows what else they could be hiding.

As Hussein Ibish laid out in The Atlantic last week, the intended effect of Hamas’ terrorist attacks is “precisely the ground assault Israel is now preparing.” If a battle in Gaza City is what Hamas wants, we should not expect a quick and easy victory for the IDF. If an overwhelming defeat of Hamas is even possible, it will be enormously costly to achieve in terms of time, resources, and lives.

Ukraine presents a similar dilemma. Ukraine’s stated goal has been to drive Russian forces out of both the occupied portions of eastern Ukraine and the Crimean Peninsula. The American public has so far been forced to provide $44 billion, along with an amount of military equipment so massive that Washington’s stockpiles have been greatly diminished.

We were told the Ukrainian forces would begin retaking territory with the launch of the so-called counteroffensive this past summer. The campaign started on June 5. It pitted a US-armed, US-equipped, and US-trained Ukrainian force—though weakened by a fresh loss in the brutal battle for the city of Bakhmut—against a Russian army fortified by three rows of trenches and dense minefields.

Months later, Ukraine has suffered heavy casualties and equipment losses. Yet the Russian lines remain largely unchanged. Russia still controls nearly all the territory it did at the beginning of the year. And so again, if it’s even possible for Ukrainian forces to push the Russian army out of the Donbas and Crimea, it would be enormously expensive and cost a lot of lives.

Therefore, Biden and Yellen’s calls to fund the wars in both Gaza and Ukraine would put a heavy financial burden on the American people—forcing us to pay for military campaigns that will almost certainly fail.

I asked Mises Institute fellow Jonathan Newman about the American public’s ability to bear this financial burden. He said,

Right now, US consumers are in a tight spot. Their savings have dwindled, even after running through the pandemic stimulus, and their budgets are strained by the steepest price inflation in decades. Both housing and nonhousing debt are at record highs, and this is all while interest rates are climbing.

Increasing the tax burden at this time to fund wars in faraway lands would probably be unpopular. This is typically the case, which is why money printing has been the political class’s preferred method of financing wars. But as Newman explained, the burden is just as real:

The fact that the Fed can whip up trillions of dollars does not negate the fact that wars are expensive. Waging war requires a massive amount of real resources like steel, textiles, food, human labor, and computers. These things do not magically appear once the government decides to issue a new bond that eventually gets bought by the Fed with newly printed money. When these resources are commandeered for war, Americans pay for it in the form of higher prices. This inflation tax, while subtle, performs the same function as other taxes: it extracts resources from the private economy for the state’s purposes.

In other words, the current monetary system makes it seem as though Washington can fix all the world’s problems without the need for more taxes, but, in reality, our wealth is just confiscated indirectly through inflation rather than directly through taxation.

The savings-starved, debt-ridden, inflation-strained American public needs to heal. Forcing us to fund a deadly stalemate in Ukraine has been a disaster. And taking even more to bankroll the coming devastation in Gaza only makes things worse.

About the Author

Contact Connor O'Keeffe

Connor O’Keeffe produces media and content at the Mises Institute. He has a master's in economics and a bachelor's in geology.

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