Financing the War and Selling the War

Financing the War and Selling the War

America’s military production and preparation was facilitated by massive government spending. Given the dire necessity of building a military and the benefits to workers and industry alike, few criticized the government’s use of borrowed money to finance the war effort. The greatest concern at the time was not the government’s ability to repay this money, but whether the sudden influx of federal spending would lead to inflation. The methods of financing the war, however, absorbed most of the extra money that was moving into the economy.

The Revenue Act of 1942Lowered the minimum income requirement for which wage earners must pay federal tax. Accepted by many as a necessary method to finance the war, the law forever changed the nature of taxation in the United States. doubled the amount of money the government received from individual tax returns and forever changed the nature of income tax in America. The law reduced to $1,200 the amount of money that was exempt from federal taxation for families. Since the average income of an American family was just over $1,200, most full-time wage-earners had not paid any federal tax prior to 1942. The following year, the government mandated that employers withhold taxes from each worker’s paycheck. By taking out small amounts from each check rather than presenting families with a large bill at year-end, this provision helped to ensure that federal taxes were collected. The number of Americans required to file and pay federal taxes jumped from 4 million to 45 million by the end of the war.

Roosevelt and Congress fought a fierce battle regarding these changes to the tax code, with the increasingly conservative House of Representatives and Senate rejecting many of the president’s requests for even steeper tax increases. Roosevelt favored taxation because he feared the consequences of too much borrowing. However, tax increases were a bitter pill for members of the House of Representatives who faced two-year election cycles. Because of these political considerations, the government followed the tradition of financing wars through heavy borrowing. Corporate and personal income taxes financed 45 percent of the war’s cost. The government made up the difference by borrowing nearly $200 billion, 20 percent of which was held by private citizens who had purchased war bonds.

Figure 8.4

Posters produced by the Office of War Information (OWI) urged Americans to purchase war bonds by connecting their investments to the war effort.

As had been the case in previous conflicts, these sales once again served the purpose of mobilizing Americans behind the war effort. Similar to the efforts of George Creel and others during World War I, the government recruited celebrities and athletes to headline bond drives. Purchasing a government bond was more than just a patriotic gesture; bonds represented a secure investment that provided guaranteed repayment with interest. The revenue from these bonds would help many families purchase more goods once the war was over and ensured that civilian production of items such as automobiles and new homes would resume. At the same time, repayment of these bonds decreased the likelihood that federal income tax rates would return to their prewar levels once the war was over.

Contrary to World War I, few Americans questioned the necessity of America’s involvement in the Second World War. The government’s Office of Censorship was limited to monitoring soldiers’ letters and preventing the release of sensitive information that might be of value to the nation’s enemies. The Office of War Information (OWI)A government agency tasked with improving morale and managing the public image of the war effort. The attack against Pearl Harbor resulted in few Americans opposing the war itself, freeing the Office of War Information to mobilize public opinion in support of various government initiatives rather than engaging in censorship. The OWI made films, radio broadcasts, pamphlets, and other forms of wartime advertisements, but it is most remembered for its colorful and creative posters. A division of the OWI created pamphlets and other materials distributed overseas designed to reduce the morale of enemy troops and civilians. was tasked with mobilizing the already favorable public opinion of the war effort into support for various government initiatives. The transition from censorship in World War I to a more tolerant view of dissent is demonstrated by a 1943 Supreme Court ruling that tolerated those who refused to salute the flag for religious or personal beliefs. The decision illustrated a departure from the state-mandated displays of nationalistic support in Germany and Japan, a theme that was often featured in OWI releases lauding America’s toleration for dissent in contrast to the totalitarianism of her enemies. In general, OWI propaganda sought to portray the war as a moral struggle between freedom and totalitarianism. Most OWI posters and films were upbeat, praising America’s industrial workers and soldiers and encouraging them to continue their efforts, rather than demonizing the enemy. Yet when it came to the war in the Pacific, OWI propaganda pandered to existing prejudices against the Japanese. Posters and films alternated between portraying the Japanese as diminutive monkeys or rats and hulking ape-like beasts. The imagery was increasingly violent, such as a poster advertising war bonds that depicted a caricatured Japanese head being decapitated from a rat’s body. Critics pointed out that anti-German posters were restricted to demonic images of Nazi leaders, while the war against Japan was increasingly presented as a war against a subhuman race.

The OWI employed a few thousand writers and artists who tended to favor not only the war effort but also the ideas of New Deal liberals. Most OWI publications promoted noncontroversial subjects such as general support for the troops, conservation of materials, and a partnership between industrial workers and the troops on the front line. Some OWI publications also sought to promote more liberal ideas, such as the notion that fair pay, medical care, and full employment were rights for which Americans were fighting. As a result, the OWI budget was vastly reduced by an increasingly conservative Congress.

The government granted wider latitude to conscientious objectors and dissenters than in previous wars, largely because so few Americans doubted the basic premise of their nation’s participation in the war. Contrary to World War I, America had been attacked and faced a clear moral decision to intervene in both Asia and Europe against the rise of totalitarian regimes. Even reducing the funding for the OWI did little to reduce prowar propaganda as private entities also sought to promote the war. Newspapers were full of daily editorials on the need to fight the Germans and Japanese, and Hollywood produced a litany of films eulogizing the valor of soldiers. While most of this propaganda focused on support for soldiers and celebration of industry, some of this propaganda played to the anger of Americans after Pearl Harbor and even pandered to ethnic and racial hatred.