Get your war bonds! Why doesn't the administration shout it?

National Review, Dec 22, 2003 by John J. Miller

THE United States wasn't at war when Irving Berlin composed a bouncy little tune called "Any Bonds Today?" But he knew war was coming, as the Nazis trampled the people of Europe:

   They fell ev'ry one
   At the point of a gun--
   America mustn't be next ...
   Buy a share of freedom today.

Berlin's song was part of a broad public effort, launched in the spring of 1941, urging Americans to buy defense bonds. Before the year was out, of course, the Treasury Department had a new name for these shares of freedom: war bonds. By 1946, Americans had bought more than $185 billion of them, well over $1 trillion in today's dollars.

They helped win the Second World War, in that they financed American involvement and rallied the nation behind an important cause. But there hasn't been a war-bond drive since--not in Korea, Vietnam, or the Persian Gulf. In the current war, the Bush administration could stand to come up with ways to revive the "we're all in this together" spirit. A new war-bond drive may be just the thing.

That's actually what Republican senator Mitch McConnell of Kentucky thought right after the 9/11 terrorist attacks. On September 14, he introduced legislation directing the Treasury Department to start a new war-bond program. "By investing in a U.S. war bond," said McConnell, "patriotic citizens will have an opportunity to make a direct contribution to the war against the scourge of terrorism and provide much-needed resources for the effort to rescue the injured, rebuild the broken, and retaliate against the enemy."

It seemed to make good sense--but the White House wasn't happy. Encouraging the public to buy war bonds conflicted with the Bush administration's goal of revving the economy with consumer spending. Officials didn't openly criticize McConnell's war-bond bill, but they tried to bury it with faint praise. The idea caught on anyway. Congress passed McConnell's measure and the Treasury Department announced that one of its most popular series of savings bonds would bear the name "patriot bonds."

To dub these items "patriot bonds" instead of "war bonds" was the first step in a strategy whose goal was to downplay the bonds as much as possible. It could have been worse: Democratic senator Tim Johnson of South Dakota had proposed the weak sister "unity bonds." Still, the term "patriot bond" does little to remind the public that there's a war to be won. This is doubly true when the government refuses to urge that Americans buy the bonds. Most people don't even know they exist.

This certainly wasn't the case 60 years ago, when the importance of buying war bonds was the object of a massive public-relations campaign. Celebrities from Fred Astaire to Lucille Ball volunteered their time. Carole Lombard died in a plane crash after attending a promotional event. Libertyville, Ill., earned its 15 minutes of fame for buying more war bonds per capita than any other town in America. Libertyville owed much of its success to Desperate Journey, a war movie starring Errol Flynn and Ronald Reagan. When the film premiered at a local theater, opening-night tickets required the purchase of a $25 war bond. Nationwide, kids were deeply involved as well, through the Boy Scouts and the Bugs Bunny Bond Rally.

A huge bond drive was a practical necessity during World War II. The war bonds weren't really earmarked for military expenses; they went into the federal government's general fund, just as patriot bonds do today. But money is fungible, and people understood they were making it possible for the United States to build tanks, bombers, and battleships. In an economy of full employment and scarce goods, bond buying also fought inflation. And bond drives put dead capital to work. Following the Great Depression, Americans were leery of placing their money in the stock market--many were more inclined to stuff their cash under mattresses. Bond drives helped change these unproductive habits for the better.

From an economic standpoint, war bonds are unnecessary today. The war on terrorism can be financed without special drives. Also, investors are more sophisticated than ever, which means that many of them may conclude that bonds don't make sense for them. During the Second World War, marketing research showed that people were willing to buy war bonds because they knew they would get something from their investment later on. Nonetheless, bonds make sense for many people today, especially for those with established incomes looking for secure ways to save money for the education of their children or their own retirement.

Moreover, war bonds must be understood as more than financial instruments--they're tools for building public support for the war effort. FDR's government understood this central function early on. Even before the first war-bond drive, a memo to Treasury secretary Henry Morgenthau noted that a special savings bond for small investors would "give to the American people a sense of the magnitude and importance of the national defense effort" and "do so by transforming people from being mere observers into becoming active participants in this effort."