I know you have not calculated it, but does this sound reasonable to you and to Mr. Ross? Maybe as an economist Mr. Ross should answer it. Does this sound reasonable to you? Have you made any such estimates? Mr. Ross. We have not made any such studies. Where was the article by Mr. Clayton published? The CHAIRMAN. This is Dr. James Clayton, an economist, in an article in the April issue of Playboy. Mr. Ross. The article was brought to my attention and I read it. Mr. Ross. I did read it. I suspect his statistics are reasonable. Mr. Ross. I do not know him personally; no. The CHAIRMAN. He is at the University of Utah, which is a very reputable institution. Is it not? Mr. LUNDBORG. Very much so; yes. The CHAIRMAN. The fact that it appears in Playboy should not throw you off. I mean they Senator JAVITs. It might distract them, Mr. Chairman. The CHAIRMAN. What is that? Senator JAVITs. It might distract them, not throw them off. Mr. LUNDBORG. Maybe we should be impressed by the fact that you read the economic articles in the magazine. The CHAIRMAN. I did not read it in the magazine, although I do not object to reading it. It is an excerpt sent to the staff. It is a reprint of "Our Mortgaged Future" by James Clayton. I will put the entire article in the record. He has made some very perceptive calculations about the cost of the war, which supplement the testimony you and Dr. Ross have given. The point I am making is that in order to get a full view of the cost we have to take into account not only the lives lost, but that very sad and very large number of now about 250,000 or 300,000 of severely injured soldiers plus, of course, that very large number, running into the millions, of veterans who are not injured. All of this together would, I think, cost in the neighborhood of what Mr. Clayton has estimated. He says: Viewed another way, the Vietnam war has produced more casualties than all British casualties in all the wars Great Britain has waged since William I conquered England in 1066. That is a rather dramatic statement. He gives all the various categories of casualties. He says: Veterans' benefits for our first five major wars are now virtually paid out. They have increased the cost of those wars an average of almost four times the original cost, primarily because it takes such a long time to pay out funds to veterans and their dependents. He says: Assuming no change in present laws, the total cost of Vietnam veterans' pensions will be about $220 billion. Since costs always increase with time, the final bill will undoubtedly be much higher. This has proved to be true in all of our wars. I want to put that in the record, not as a reflection, as we always have to say around here, of criticism of the programs for veterans' benefits, but simply to enable us to understand the impact of the war and whether or not the possible benefits which one might achieve by pursuance of the war outweigh the costs. (The article follows.) [From the Playboy magazine, April 1970] OUR MORTGAGED FUTURE (By James Clayton) The enormous cost of actual warfare distracts us from the far greater postwar burden-win or lose-bequeathed to generations yet unborn. In the second half of 1968, a new mood of realism about the financial impact of the Vietnam war began to emerge in high-level Government conferences and in the national press. The most notable example was a report delivered by Daniel Patrick Moynihan that said the budgetary savings from the war's end would be totally consumed through the early 1970s by current and proposed military and domestic programs, given projected population growth. Little money would be left over for social reform. The effect of the report was to dash the hopes of many socially conscious Americans that the billions of dollars being spent in Vietnam could be turned to urgent and exciting new projects as soon as the war is over. This new mood of financial realism may be the signal that the United States is now fully into phase two of the Vietnam war. Historically, phase one in almost any modern war is typified by a widespread mood of optimism, of viewing the war as a venture of honor or high moral purpose. Virtually no thought is given to costs or casualties. But as time passes and casualty lists grow longer, false hopes of a brief war and complete victory fade. If the war is indecisive, phase two s disillusionment and lassitude set in. The war is seen as either a monumental error or an unavoidable calamity due to the allegedly inherent evil in man. Phase three the aftermath of war-is rarely discussed. It is time we had such a discussion about the Vietnam war, as more discerning observers realize that the greatest anguish-and the greatest financial burdens-are yet to come. Like Yahweh, the gods of war visit the sins of the fathers upon the children unto the third and fourth generation-and beyond. The most enduring consequence of the Vietnam war, of course, is to be found in the casualty lists, for nothing is more permanent than death. As of January 24, 1970, the number of American battle deaths stood at 40,301, the number of 'wounded at 265,254. Only World Wars One and Two and the Civil War have produced more dead. If the present rate of conflict continues until the Congressional elections next autumn, American Vietnam-war dead may surpass the battle deaths from World War One. The number wounded in Vietnam has already exceeded those wounded in World War One. In short, the Vietnam war will go down in American history as our fourth and possibly our third major war. It is already our longest war. The Vietnam civil war will also be recorded as one of the major wars in world history. From its inception in 1945 until the French withdrawal in 1954, the French suffered 172,000 casualties and the Vietnamese an estimated 500,000. Since 1954, according to the Defense Department, approximately 750,000 persons have been killed in South Vietnam, including an estimated 595,000 enemy dead. If those wounded since 1954 are included and both the South and North Vietnam wounded are estimated at only twice the number of our own-an admittedly conservative calculation, since enemy dead are officially counted at 12 times our dead-the total military casualties in the Vietnam war to date are over 2,000,000. If we also count North and South Vietnamese civilians who have been killed or wounded, especially by our bombs (the total tonnage of which now amounts to almost one-third more than that of all the bombs dropped by the U.S. during World War Two), this figure would be well over 3,000,000. This is also a conservative estimate, because in virtually every war during this century, there have been more civilian casualties than military casualties. Historically, 3,000,000 casualties is a staggering number. According to comparative figures gathered by historian Quincy Wright and the late economist 44-296 0-70- -5 Lewis Richardson, the best authorities on this issue, the total killed or injured in all European wars from the 11th through the 16th centuries was 1,421,000. The Vietnam-war casualties to date have already doubled that number. Viewed another way, the Vietnam war has produced more casualties than all British casualties in all the wars Great Britain has waged since William I conquered England in 1066. The long-range effect of the Vietnam casualties will not be substantial insofar as the genetic make-up of the race or the birth rate in Vietnam or America is concerned. More young men are killed in this country in automobile accidents each year than are killed in Vietnam. Even major wars-such as World Wars One and Two, in which 40,000,000 and 60,000,000 people were killed, respectively— have little measurable permanent effect. What is lost, and lost forever, is the possibility that these dead and their children could have been employed in worthy activities and could have contributed to the progress of civilization. Who can say whether one might not have been another Michelangelo, or another might not have found a cure for cancer? Greatness aside, any death in a mistaken cause is a tragedy of immeasurable proportions. Distribution of the war dead also is worth noting. For the first time in American history, we may soon know who in our society actually pays the ultimate price of war. To emphasize the unpopularity of the Vietnam conflict, Congressman Paul Findley recently read into the Congressional Record the names of all the American Vietnam-war dead, state by state. Newsday magazine for August 2, 1969, analyzed the war dead of Long Island. With the assistance of a graduate student, Jerry Smith, I made a similar study for the state of Utah. Both studies agree in their essentials; and if these two areas are typical, when the casualty data are analyzed fully, it seems probable that the following patterns will emerge: (1) Most of the survivors of the dead (interviewed in Long Island) believe that the sacrifice of our fighting men has been in vain. (2) The great majority of those who died (again, according to the Long Island study) either believed in the war or believed it was not their business to question the war aims of the Government. (3) The overwhelming majority of the dead were from blue-collar families or families of clerical workers. (4) Those who died were typically white, aged 20, athletically inclined and had never attended college. (5) The dead tended to be Catholic, rather than Protestant, and Low Protestant rather than High Protestant. The consequences of these facts, once they become widely known, are difficult to measure; but one suspects that future generations—and especially workingclass families-will abominate the memory of Vietnam, though the working class will also receive more aid from pensions and educational benefits than other classes. Next to the loss of life, the most permanent consequence of war in our history has been the veteran's pension. Although some economists would not include these pensions as a war cost, because over the years they have become more like welfare payments, nothing in the history of U.S. public expenditures has been more costly than veterans' benefits. The original direct cost-major nationalsecurity expenditures-of all of America's wars prior to Vietnam was approximately 372 billion dollars. This figure is about ten times higher than our second most expensive purchase-public education. Veterans' benefits for these same wars-when finally paid-will amount to nearly 500 billion dollars, even if the rates and extent of coverage were frozen as of today, which, of course, they won't be. Veterans' benefits for our first five major wars are now virtually paid out. They have increased the cost of those wars an average of almost four times the original cost, primarily because it takes such a long time to pay out funds to veterans and their dependents. In the case of the War of 1812, veterans' benefits rose for 68 years after the war was over and were not fully paid out until 1946. 131 years after the fighting stopped. In no case have veterans' benefits from past wars lasted less than 113 years. The main reason these benefits are so long-lived is that most are paid out to dependents, rather than to ex-soldiers, and most have nothing to do with a Service-connected injury but, rather, are a form of welfare assistance. Moreover, benefit rolls tend to become more inclusive and payments tend to increase with time. More than 90 percent of Spanish-American War and 50 percent of World War One veterans are now receiving some kind of compensation. Also rising rapidly is the percentage of those using their GI Bill education benefits. In 1964, 34,000 men were using their GI benefits; today, more than 500,000. If veterans' benefits for the Vietnam war are anything like those for previous wars, we may expect them to increase annually (after a small initial spurt and decline immediately following the war) until about the year 2020. Then they will fall gradually until near the end of the 21st Century, when they will cease altogether. Assuming no change in present laws, the total cost of Vietnam veterans' pensions will be about 220 billion dollars. Since costs always increase with time, the final bill will undoubtedly be much higher. After veterans' benefits, the interest on war loans is probably the most significant long-range financial cost of war. It is difficult to measure interest costs, because the interest on war loans is not separated from other interest costs in the national accounts. Interest costs for war debts prior to the Civil War were probably less than 20 percent of original war costs. During the Civil War era, however, interest on the public debt jumped from less than $4,000,000 in 1861 to $144,000,000 in 1867. For the next 25 years, interest payments gradually fell, until they finally leveled off at about $30,000,000. These payments, which are attributable to the Civil War, raised the cost of that conflict by about one third. The rate of interest costs of recent wars is comparable. The noted economist John M. Clark, using Treasury Department data, once calculated the interest costs of World War One to 1929 at 9.5 billion dollars, or about 37 percent of the original cost of that war to that date. Henry C. Murphy, in his book National Debt in War and Transition, has shown that the Government borrowed 215 billion dollars to finance World War Two. That debt is still on the books and has cost us about 200 billion dollars in interest to date. This interest cost is now 70 percent of the original cost of World War Two. Although we have reduced our debt after every war prior to 1945, no serious effort has ever been made to reduce the debt from World War Two or from subsequent wars. The Korean War probably added an additional ten billion dollars to the already swollen war-debt ledger. If the principal for the Korean War is not paid off any faster than that for World War Two, the additional interest by 1978 will be about 20 percent of the original cost. If interest costs continue to climb and attitudes toward public debt do not change substantially, it is conceivable that interest costs for World War Two and the Korean War eventually may actually exceed the original cost of those wars. The amount of indebtedness for the Vietnam war is unknown. Since the war escalation of 1965, however, the public debt has risen almost 70 billion dollars. If this debt is treated like the Korean War debt-i.e., if no more than half of it is attributed directly to the war in Vietnam-then, by 1990, the interest costs on the Vietnam-war debt will be 35 billion dollars (at four percent per annum-a conservative estimated rate), with the entire principal still outstanding. Increased taxes have been an enduring consequence of war because of increased Federal borrowing. Income taxes began in this country as emergency war taxes. The Civil War made them a permanent feature of our Government system. By 1911, the high costs of financing the Spanish-American War, which required doubling tax receipts, pushed income from internal revenue above receipts from Customs duties. World War One increased internal-revenue receipts more than fourteenfold, from $380,000,000 in 1914 to 5.4 billion dollars in 1920. Percapita taxes increased nine times during that war. World War Two increased percapita taxes an additional seven times. If neither of these wars occurred, our per-capita tax rate would have been about one tenth of what it actually was in 1946, assuming no inflation-which is primarily caused by war, as we shall see. For this reason, it is misleading to view the present surtax either as temporary (as former President Johnson promised and as President Nixon still promises) or as the ultimate tax cost of the Vietnam war. From 1965 to 1967, the most recent date of available data, our per-capita taxes increased 27 percent. This is partly the result of an increase in military-retirement pay, which is now increasing $200,000,000 per year independently of other Department of Defense activities. Obviously, our taxes must go higher yet. The long-range taxation consequences of the Vietnam war are more likely to be an additional and permanent burden on top of an already large tax structure (itself mostly the result of past wars) rather than anything unique or presently unforeseen. Traditionally, much of the cost of war has been met through inflation. We have had four periods of extreme inflation and deflation since 1800-all produced by war. The Civil War and World War One each doubled prices. World War Two increased prices by 50 percent. The Korean War further increased the cost of living by about ten percent. Following the Napoleonic Wars, the previous upward surge of inflation tapered off during the 19th Century-a century of relative peace in Europe. Prices generally fell for 100 years. But the 20th Century has been a century of war and the price trend is sharply up. Prices are now five times higher than they were in 1900. If wars continue in the coming decades, the upward trend will continue and prices could be four times higher in the year 2000 than they are now. Despite the extreme steps being taken by the Nixon Administration, the inflationary effect of Vietnam will probably result ultimately in a ten percent reduction in the standard of living of the average American. Since 1964, the consumer price index has increased 16 percent. If only half of that increase is attributable to the Vietnam war-a conservative estimate then the inflationary cost of the Vietnam war to our G.N.P. to the first quarter of 1969 has been about 17 billion dollars in only four years. In the past, it has taken 10 to 20 years of peace to erase this war-caused inflation. If peace were to come this year, therefore, we could expect the inflationary effects of the Vietnam war to last at least until 1980 and cost a minimum of 30 billion dollars. Rapid price fluctuations in time of war have historically created a crop of newly rich, which has aroused widespread contemporary condemnation. Politicians and merchants-or, more recently, industrialists-have been the targets of this condemnation since the beginning of time. The widespread criticism of our present-day military-industrial complex is simply history repeating itself on schedule. This complex is the source of our newly rich. Although the lower income brackets gained most from the full employment accompanying World War Two, the major increases in income from the Vietnam war have clearly gone to the upper-income occupations. Within those income classes, the most noticeable benefits have gone to management and scientists in the ordnance, aircraft and electronics industries. These industries are concentrated in California, Texas, New York, Massachusetts, Connecticut, Pennsylvania, Ohio, New Jersey and Missouri. Moreover, the war has strengthened already existing trends of large corporations toward conglomeration and already existing tendencies in science toward applied rather than basic research. In the long run, we may expect the Vietnam war to further widen the economic gulf between classes. The newly created poor caused by war are often overlooked. Who today mourns the Tories of the American Revolution, the slaveholding planters of the Civil War or the farmers who, at the request of the Government, overexpanded during World War One? It is too soon to say who the newly poor of the Vietnam conflict will be, but those who have been left out of the war-generated prosperity are clearly recognized. By state, they are found chiefly in Wyoming, Idaho, Oregon, Montana, North and South Dakota, Kentucky, West Virginia, Arkansas and Oklahoma. Individuals on fixed salaries and pensioners with fixed incomes have been hurt by war-generated inflation and the unskilled have been left out of the 1,000,000 new but sophisticated jobs that have been generated by the war in Vietnam. The major research universities of this country also have paid a price by surrendering some of their independence and by neglecting teaching. Most others have suffered financially as funds that might have been used for education have gone for war. The more enduring political and social consequences of the Vietnam conflict are the most difficult to define and the worst served by the evidence of past wars. There are no landmark studies on the social or psychological consequences of war. Indeed, there is an absence of objective standards of measurement. Observers are, therefore, largely left to impressionistic insights full of paradox and ambiguity. Yet informed judgments-even if imperfect-are better than wholly objective silence. Over the centuries, war has tended to centralize Government: and during all major American wars, the power of the Federal Government has markedly increased. As economist Herman Krooss has shown, each of our three major wars has cost ten and a half times more than the previous one. With new financial obligations and new powers brought on by the war emergency, the Federal Government more than doubled in size during each of the last two major wars. The Vietnam war will continue, if not accelerate, this trend. One can expect no heroes to emerge from the Vietnam conflict, but political scapegoats will be sought by some to explain away the war's indecisive results and unfortunate consequences. Already, Professors Galbraith and Schlesinger |