Must have been one helluva loan
April 6, 2013 12:46 PM   Subscribe

In a nutshell; how much does the USA owe for "debt incurred in past wars", are there easy to understand figures for which wars specifically, and who does it owe it to?

The Wikipedia article for the military budget of the United States is very absorbing, has lots of detail and lots of (good references). The bit of fascination is in the budget breakdown for the year 2012, where there's a line:

Interest on debt incurred in past wars ... $109.1–$431.5 billion ... Between 23% and 91% of total interest

As a Brit, these figures seem almost unimaginably huge; that's just the interest, not the actual debt. And also startling, as it was only recently that the UK finished paying off the USA for debts incurred during World War Two.

I've checked out some of the primary sources and references, and gotten lost in figures and texts and whatnot. Am looking - if it exists - for a simple, easy to understand, breakdown of who the USA owes this money to (and how much) for previous wars. Does such a breakdown exist?
posted by Wordshore to Law & Government (7 answers total) 1 user marked this as a favorite
You're asking for a list of holders of U.S. Treasury bonds, the primary means for the U.S. to enter into debt.

And that list is, essentially, "every country and every bank on the planet," as these bonds remain (arguably) the safest possible investment in the world.
posted by Cool Papa Bell at 12:57 PM on April 6, 2013

US Treasuries are one way, but there are also War Bonds. I'm only a hobbyist in the topic of the history of finance, but you shouldn't be too surprised at your discovery -- the Bank of England was put together to fund a new naval fleet. In fact, you can still find Consols, perpetuities issued by the UK from the 1750's, to refinance the debt from the Napoleonic wars. There's also direct loans.

Since the bonds can be bought and sold on secondary markets, and most bonds get rolled over on maturity date, it would be hard to allocate the national debt to specific wars. You could probably estimate it using budget figures, but you'd also have to make a call on which debts were paid down first when governments reduce their outstanding debt.
posted by pwnguin at 1:32 PM on April 6, 2013

Did we ever pay back the loans from the French during the Revolution?
posted by Thorzdad at 2:39 PM on April 6, 2013

It isn't really possible to separate out war debt from other kinds of debt because money is fungible. For example, during 2003 the US spent a lot of money on the war in Iraq, but it also spent a lot of money on highways, food stamps, agricultural subsidies, foreign aid, social security, and so on. The US ran a deficit, but which spending was responsible for the deficit?

Regarding War Bonds, that was a thing during WWII, but it wasn't really intended to help finance the war. The real problem was that lots of people (women!) were working in factories producing war goods, and taking home money, without there being anything for them to buy, because most of what they were producing was going overseas to fight the war. The Roosevelt administration was afraid the result would be raging inflation.

Their solution was to create something which they could manufacture cheaply and sell for a high price, so as to soak up a lot of excess money out of the economy. That was war bonds. It's true that it was debt and those bonds had to be paid back (after the war) but that wasn't the real reason for them.
posted by Chocolate Pickle at 4:43 PM on April 6, 2013 [2 favorites]

By the way, another problem is identifying just how much military spending is actually "war spending". The US paid wages to all the people in the Army who served in Iraq. But they would have had to pay them anyway even if there had not been a war. So is that "war spending"?

When National Guard divisions started getting sent to Iraq, that unquestionably would count because in peace time the men in those divisions would be back home in civilian jobs. But for something like the Second Infantry division, those men get paid whether they're fighting or not. (There are bonuses for hazardous duty, but a surprising amount of our military gets those bonuses even when they are not at war.)

If what you count is excess spending, that's surprisingly low. It would count things like ammunition (bombs and bullets) and bribes (we did a lot of that), and a lot of money for transport, but the majority of expenses would be incurred whether there was a war or not.

For instance, Air Force pilots fly nearly every day. It's considered training. Their jets run through spare parts as a result. Now if they are flying into combat and their plane gets shot up, the expense of repairing that is a war expense. But the normal cost of mainenance for the jets would be happening whether there was a war or not. So do you count it as a war expense?
posted by Chocolate Pickle at 4:57 PM on April 6, 2013

Inflation adjusted DoD's spending nearly doubled over the course of US involvement in Afghanistan and Iraq after decades of being nearly flat (and yet greater than that of any other country by a large factor). I wouldn't call that "surprisingly" low. That's without even factoring in the growth in spending for veterans affairs, which also increased significantly over that period, and will likely continue to grow for years and stay elevated for a generation or more -- something that isn't yet factored in to most estimates of war spending.

As to who the money is owed to. That is a complicated question, but I'd argue that the easiest answer is probably also the best. It is owed to the holders of US Federal debt, in equal proportion to their holding of the overall US Federal debt. Surprisingly the largest share is held by the US Government, specifically, the social security trust fund, followed by the US treasury. About 1/3rd is held by foreign entities, both governmental and private. The remainder is distributed between state and local pension plans, state and local governments, and various private investors (banks, pension funds, mutual funds, individual investors...)
posted by Good Brain at 1:57 AM on April 7, 2013

So, reviewing this thread, I noticed I claimed that Consols were the result of a refinancing for a war that hadn't yet taken place. I regret the error; seems I commingled two sentences from the two Wikipedia articles I cited as one coherent thought in my brain. The point remains though, Consols are far older than WWII and some portion of them have not yet been purchased back. Assuming any Consols have ever been retired, I doubt they ever gave a thought about attempting to retire them by date, so some fraction of them might plausibly predate the Revolutionary War?
posted by pwnguin at 12:20 AM on April 10, 2013

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