The United States’ astronomical defense budgets are casually thrown around in a lot of political
conversations today, but what is all that money being spent on? Especially when we’re actually
at war? We decided to investigate the most expensive war in history - World War II - which
cost over 4 TRILLION dollars, to discover just what the U.S. spent all that cash on!
Back when Hitler was raging throughout Europe and Japan was attacking Pearl Harbor,
the U.S. decided it needed to help the Allies stop the Axis Powers from taking over. To do so,
it spent around 4.1 trillion dollars over the span of three years and almost nine months.
In those days, the actual sum was $341.5 billion, but in those days,
people also paid 35 dollars a month in rent. So the $4 trillion is adjusted for today’s inflation.
At the peak of the war, in its final year - 1945 - the defense
budget of the U.S. rose to 37.5% of total GDP.
For comparison, in 2020 the U.S. defense budget was around 3.7% of GDP. Which is kinda the same,
as long as you ignore that the decimal point has shifted one, giant, step to the left.
As you can see, a huge chunk of the economy at the time was oriented towards the war.
In fact, the U.S. spent much more than any other country involved in the war ever did.
Some historians believe this exorbitant spending might have helped them win.
To get an idea of how high the U.S. defense spending of 341.5 billion dollars was,
the next highest-spending country was Germany, which spent a total of 270
billion dollars, even though they spent more years fighting in the actual war.
The Soviet Union came in at 192 billion dollars, while Japan spent 56 billion dollars total.
So what did the U.S. spend this money on?
Well, the first order of business was paying the over 16 million servicemen
and women who were fighting the war on three different continents.
The average private serving in World War II made around 50 dollars a month, or around 680
dollars adjusted for today’s inflation. Though this may seem like a ridiculously low amount,
even for the 1940s, army men actually took home more than those making the average U.S. salary,
even though income per capita in 1945 came out to 1,223 dollars per year..
Though this may seem illogical at first, when taking into account that the men’s food, shelter,
clothes, and many other necessities were provided by the army, Barron’s Magazine estimated that the
average single military man’s pay scaled out to the civilian equivalent of 3,600 dollars.
This pay was further boosted by the fact that any military man
making less than 1,500 dollars a year - which was the vast majority
of enlisted officers - would not have their income subjected to income tax.
Of course, the U.S. was aware that financial incentives such as these might encourage more
citizens to enter the war, which is why they passed the Pay Readjustment Act of 1942 a
few months after the bombing of Pearl Harbor. The previous salary for an army private was 21 dollars
a month, so the Pay Readjustment Act resulted in a more than doubling of the armed forces’ salaries.
Moving up the ranks, pay understandably increased even more. Generals at the time made $666.67
per month, which gave them an annual salary of around 8,000 dollars.
This means that of the World War II defense budget, tens of billions
were paid out to the servicemen and women laying down their lives for years at the
front. If we estimate that each soldier was getting a private’s salary for 3.75 years,
that comes out to around 36 billion dollars.
However, obviously there were plenty of people getting higher salaries,
not to mention that the army was also providing the soldiers
with billions and billions of dollars in food, shelter, clothing, and other supplies.
This was in addition to transporting them to three different continents around the world.
Though no exact numbers exist for how much the deployment of all those soldiers cost,
it’s fair to assume that of the 341.5 billion dollars spent at the time, subtracting the
amount spent on equipment, the 158.5 billion left over was mostly spent on training,
transporting, feeding, sheltering, clothing, paying, and otherwise supplying personnel.
A small percentage of that was also spent on military and government administration
costs - since as anyone who has come within five feet of the military knows,
the mountain of bureaucracy that must be waded through requires its own economy to function.
But as enjoyable as administrative paperwork
sounds, let’s focus on the military’s equipment instead.
US aircraft production was the largest part of the war economy. A total of 183 billion dollars was
spent on war production, and almost 25% of that, or 45 billion dollars, was spent on airplanes.
The money went towards producing over 300,000 planes between 1941 and 1945,
including 49,123 bombers, 63,933 fighters, and 14,710 cargo planes,
while paying over two million workers on the front lines of the production process. The
powers at war knew that whichever side ruled the skies would have a massive strategic advantage.
Some of the money was spent not only on production, but on technological
development too. It wasn’t enough to have more planes in the sky; it was important
for U.S. and Allied planes to have the most sophisticated equipment possible as well.
Heavy bombers like the B-29 Superfortress were developed thanks to unprecedented cooperation
between the Air Force, private contractors, and labor unions. The B-29 project cost 3
billion dollars, and resulted in giant technological leaps in radar systems,
bombsights, high-performance engines, and metallurgy, to name a few.
Next, between 13 and 18 billion dollars were spent on the construction of 5,777
ships by the US Maritime Commission during World War II. The federal government directed
the shipbuilding and funded entrepreneurs experienced with mass-production methods
to transfer these technologies over to shipbuilding for quicker production.
World War II shipbuilding included the production of ten battleships, 27 aircraft carriers,
and 907 cruisers and destroyers. Additionally, over 211 submarines were built during this time.
We’ve traveled by sea, flown by air…time to check what was being produced for fighting on land,
which is where most of the rest of the 183 billion production budget was spent.
Over 100,000 tanks and armored vehicles were produced by the U.S. between 1939 and 1945,
as well as 41,000 guns and howitzers. Additionally, 12.5 million rifles and
carbines as well as 41 BILLION rounds of ammunition were produced in factories.
At this point it’s important to point out that not all of these weapons and supplies ended up
being used by U.S. forces. In fact, many were produced before the U.S. even entered the war,
and used to supply the Allies in Europe.
Aditionally, we have to bring up the darkest chapter of the war:
The Manhattan Project. The research that developed and created the atomic bomb was
funded with 2 billion dollars at the time, or approximately 29 billion dollars in 2021.
For those wondering how a small team of scientists in a lab could have cost that much,
we have some surprising news: The Manhattan Project employed over 100,000 people.
It used a whole system of laboratories and plants throughout the country,
including labs at the University of Chicago and Berkeley, multiple uranium-processing complexes,
and the famous weapon design lab at Los Alamos, New Mexico.
At this point you may be thinking…how was all this funded? How is it that you’ve been driving
over the same pothole down the street for ten years and can’t get your city to spend the money
to send people to fix it, but in World War II factories everywhere were repurposed and billions
and billions of dollars were handed over to fund the most gargantuan war effort in recent history?
Well, the war was financed through a couple of different methods; most of which
honestly… probably wouldn’t work in the modern-day U.S..
First of all, it’s important to point out that the military took over the war effort
pretty quickly and was able to redirect a staggering amount of consumer production
towards military production without civilian groups having much power to stand in the way.
The government created a whole wide range of mobilization agencies which directed the
manufacture of necessary military goods and then purchased them for the armed forces.
Though most European wartime manufacturing was directed by councils composed of both
civilians and military officials, the Army and Navy had almost unfettered control over
the provision of both equipment and personnel for World War II.
In many places throughout the U.S., production all but ceased on items like cars,
non-military clothing, and non-essential foods.
This explains how production was re-oriented towards a wartime economy,
but not how it was paid for.
Well, because this was way before the time when the U.S. could just keep
shooting its debt up to the sky to see what happens, most of the money
spent on World War II was funded by war bonds and an increase in income taxes.
How much of an increase you may ask?
Trigger warning for fiscal conservatives: the income tax rate for the wealthy in 1945,
defined as those who made over 200,000 - around 3 million in modern day - a year, maxed out at 94%.
…..No, you heard that right.
That being said, the income tax rate was already between 66% and 79% in 1939 to begin with,
so the increase wasn’t as crazy as it sounds to our 21st century ears. For comparison,
the 2021 top marginal income-tax rate was 37%; even though let’s be honest,
not a single rich person actually paid that.
Tax rates for those in the lowest bracket, which included those making as little as
500 dollars a year, also jumped from 4% to 23% between 1939 and 1945.
In fact, the total number of U.S. citizens required to pay taxes
jumped from 7.6 million in 1939 to 49.9 million in 1945.
It’s fair to say that everyone was chipping in - whether they wanted to or not.
However, the vast majority of World War II’s funding - 63% to be exact - was covered
by war bonds. President Roosevelt purchased the first one on May 1,
1941, to set an example for the country. Celebrities endorsed them and widespread
marketing campaigns urged citizens to buy them. They were…not so subtle.
Everyone watching this has probably heard of war bonds, but how do they actually work?
Well, they were sold as a stable source of investment for many citizens. People would buy the
bonds at 75% of face value. The bonds would return a 2.9% annual interest after a period of 10 years,
to essentially be redeemed for the actual value they represented.
Since consumer prices also rose during that time, many civilians didn’t necessarily get
a good return on investment, but they wanted to contribute to the war effort anyway. Plus,
if they kept the bonds for a period of 30 to 40 years, many would end up making a small
profit of around 4%, since bonds were granted an interest extension for up to 30 or 40 years.
Bonds were available in denominations of $25, $50, $100, $500, and $1,000,
with a couple of higher-value denominations added later on for wealthier civilians. Even
children could spend the few cents they had on war stamps, which functioned similarly to bonds.
By the time the war ended,
85 million people had purchased 185.7 billion dollars worth of U.S. bonds.
This comes out to approximately 2,185 dollars in war bonds per person. Though obviously
that is an average, and not reflective of the actual amount an average U.S. citizen spent,
since wealthier investors could have skewed the curve, it’s still incredibly impressive
at a time when the average household - not individual - brought in 2,595 dollars a year.
World War II was a time of inconceivable suffering and violence for many countries.
Some of the biggest atrocities in recent history were committed during the conflict. If perhaps
one silver lining can be gleaned from this video investigating how the U.S. spent over
4 trillion dollars on a war, it’s that the whole country managed to organize
itself and band together to help stop a genocide and deadly aggressors abroad.
Now that you’ve discovered how the U.S. spent so much money on the most expensive war in history,
why not check out some of our other cool videos about past
wars? Or perhaps click on one of our many non-war related videos instead?