USA running out of money by the time of IWO JIMA

FLAGS OF OUR FATHERS introduces an interesting snippet of fiscal and monetary policy financing the U.S. involvement in WWII. There is an older thread on this board, "USA going broke", that I recommend reading.

I came across a book that confirmed the movie. The U.S. Congress budgeted 98 billion dollars for 1945 and by the time of Iwo Jima, 88 billion had already been spent, largely on the war effort, and the rest running the U.S. government, paying salaries, necessary domestic spending, so forth. President Roosevelt increased the tax liability of Americans by expanding the tax brackets. Congress and the president cooperated in launching several bond drives, that is, asking Americans to hand over their workpay savings as temporary loans to the government in return for interest paid back after a specified number of years. As the movie claims, there was also the expedient of printing paper money.

Now printing paper money is not in itself an irresponsible idea. Every year the government needs to print x amount of paper currency, one, to replace worn-out bills, and two, to satisfy domestic and foreign demand for greenbacks. But like the ancient inventors of paper money discovered - the Chinese Song dynasty in the 11th century - no government should irresponsibly print money out of control. The German Weimar Republic of the 20s and 30s is the best example of the 20th century, although I should point out, the Germans were NOT that irresponsible. They knew better but a series of unforeseen and unfortunate economic circumstances forced them. What I'm saying is the the U.S. government in early 1945 knew that they had to tread very carefully in printing out paper money. There would come a point where printing more paper money would begin to inflict serious consequences on the economy.

HISTORY

This explains why after Japan's surrender the U.S. Congress - largely Republican - rapidly demobilized the Armed Services and the federal government cancelled ongoing contracts for tanks, airplanes, ships, and other high-dollar military equipment. The war was over and there was no real money to keep purchasing more. U.S. government spending HAD to be vastly reined in order to help keep the country monetarily solvent. This is understandable. What American history says is controversial is that Congress and the president - the federal government - should not have demobilized as far as they did. A larger, stronger, more credible military standing force should have been kept in order to maintain a credible response to the growing Soviet military threat in Europe. But that is all hindsight today.