Post War Credits

Post War Credits Martin G. Evans Professor Emeritus, Rotman School of Management University of Toronto The cost of the Second Iraq War is inexorably increasing. At the last count the financial cost is approaching $150 billion. We must pay for this war ourselves. It would be immoral and irresponsible to pass the cost of the war on to our children and grandchildren. The question is how to pay for it. In 1940 John Maynard Keynes published a small monograph entitled “How to pay for the war.” Later that year, the British Government incorporated some of his ideas into the Post War Credits scheme. This involved a forced saving deduction from an individual’s income; the savings were to be paid back after the war – in fact they only began to be paid back on a person’s retirement and people were still receiving post war credits as late as 1973 – almost thirty years after the war had ended. I suggest that the U.S. adopt a similar scheme – it has the advantage of paying for the war in the short term and creating individual retirement savings accounts in the longer term, which is a priority of the present Administration. A progressive forced loan of the form outlined in the Table would generate about $128 billion dollars a year – enough to put a big dent in the Iraq war’s cost. The scheme I propose here would be steeply progressive with the surcharge beginning at an income of $60,000. All income over $60,000 would be subject to a forced loan rate of 1%, an additional 1% would be charged on income over $100,000. After each increment of $50,000, there would be an additional 1% surcharge though the rate would even out at 16% of the portion of a person’s income over $500,000. This represents about a 1% increase in withholding at the lowest level but represents about a 45% increase in withholding for the millionaires among us. Income Forced loan rate. Additional withholding from income. under $60,000 0.0 % $0.00 $60,000 to $100,000 1.0 % 0 to $400 $100,000 to $150,000 2.0 % $400 to $1,400 $150,000 to $200,000 3.0% $1,400 to $2,400 $200,000 to $250,000 4.5 % $2,400 to $5,150 $250,000 to $300,000 6.0 % $5,150 to $8,150 $300,000 to $350,000 7.5 % $8,150 to $11,510 $350,000 to $400,000 9.0 % $11,510 to $14,150 $400,000 to $450,000 11.0 % $14,150 to $17,150 $450,000 to $500,000 13.0 % $17,150 to $28,400 $500,000 to $1,000,000 16.0 % $28,400 to $ 108,400 $1,000,000 to $2,000,000, etc 16.0 % $108,400 to $268,400, etc Alternative levels of withholding and different levels of progression could be administered if the scheme proposed here was thought to be too draconian. The important point is to get the war paid for by this generation. The funds in each individual’s loan account would accrue interest at the rate of 3%; this interest would accrue tax free in the individual’s account. At retirement, the account would be converted to an annuity with the repayment of the interest portion being taxable. This plan would ensure that the present generation paid the costs of its war and would have, as a bonus, the effect of generating retirement savings for the wealthier half of the country. Retirement funds for the poorer among us will have to await an administration more committed to the social safety net

Going to the Hogs

ate: November 3 2004
Sent to but not published by Boston Globe

The country is going to the hogs.

With the re-election of George W. Bush, the greedy business executives who looted their companies and the country have received a carte blanche. They are free to continue to pay wages below a living wage. They are free to offer jobs without health benefits though the benefits they receive are very nice, thank you. They can continue their drive to reduce regulations that are the protection of the public. They will be accountable to no one.

I lament for the nation.