The “Ghost Budget”: explaining U.S. budgetary deviations during the post-9/11 wars

Thesis

The post-9/11 wars in Iraq, Afghanistan, and nearby locations were characterized by the largest single deviation from standard budgetary practice in U.S. history. This thesis explains why and how the wars (from 2001 through 2019) were funded entirely differently from previous U.S. wars. Those differences include both the method of budgeting (circumventing usual procedures and limits) and how the wars were paid for and financed (without tax increases or spending cuts and relying exclusively on debt). This combination effectively established a parallel or “ghost” budgetary process, exempt from regular government spending constraints, which became institutionalized as a second source of military spending.

The development of a “Ghost Budget” is neither predicted nor explained by the existing scholarly writing on budgetary practice or theory. The literature on budgetary practice during war is limited. It does not adequately explain the political, military, and economic factors that led to the emergence of an institutionalized, second-tier defense budget.

The thesis makes three specific contributions to the literature on war finance. First, it presents evidence, based on data mining of historical documents, that the President and Congress paid less attention to the funding and financing of the post-9/11 wars than was the case in previous conflicts. Second, it demonstrates that the Ghost Budget outcome was the result of an interplay between changes in the Congressional budgetary process, a more assertive military establishment, and the conditions in global capital markets. Third, it analyzes the implications of this anomalous form of war budgeting, arguing that it decreases accountability for war spending and reduces legislative control over war policy.

Authors: Bilmes, LJ

• DOI: 10.5287/ora-0o6p077mm
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Keywords: Vietnam; Overseas Contingency Operations; War Funding; Afghanistan; War Finance; Post 9/11; War costs; War Budget; Backdoor Stimulus; Iraq; Budget; Defense Department; Korea
• Subjects: budgeting; Afghanistan; war funding; defense spending; War costs; Iraq; war finance