f reedom of a ction 163Th e president and his advisors weighed how best to pay the enor-
mous cost of mobilization but often were compelled to sacrifi ce their
preferred solutions to political necessity. As with other wartime admin-
istrations, Roosevelt’s settled on a mix of new taxes and borrowing. Even
before the United States entered the war, policy makers lowered exemp-
tions, imposed a surtax on higher incomes, and increased corporate
taxes. Th e 1942 Revenue Act sharply lowered the personal exemption
that had spared most Americans the need to fi le a tax return and added
13 million new taxpayers to the system. Revenues continued to lag
behind administration goals, though, leading the Treasury Department
to propose a radical policy departure in 1943: rather than pay taxes on
income in the previous year, payroll deductions on current income
would be combined with the previous year’s obligations to generate a
one-time revenue surge.
But the measure, however sound as a device to boost revenues in a
time of national need, proved too unpopular in its original form. Over
administration objections, Congress approved taxing current 1943
income through withholding, but also forgave 75 percent of 1942 tax
liabilities. Th is pattern continued the following year as a rising federal
deficit prompted the president to request new taxes and Congress
responded with a bill (passed over a presidential veto) that off set some
of the increase with a freeze on or rollback of other taxes. For law-
makers, 1944 was an election year, and they had something besides a
war to win. ^
Despite the tax increases, expenditures still outpaced revenues,
forcing the Treasury Department to borrow heavily. Bond drives yielded
more than $150 billion, while also serving as an activity to engage the
broad public in supporting the war eff ort. As a measure of adminis-
tration success, the United States never faced the possibility of running
out of money to pay for the war, and infl ation, though worrisome at
times and a political fl ashpoint, never spiraled out of control.
Mobilization for total war also generated political eff ects that forced
Roosevelt to choose between political constituencies whose support he
needed. On one side stood the core of his New Deal coalition, orga-
nized labor and reformers deeply invested in the future of social reform.
On the other were aligned many of his political enemies, now indis-
pensable to war production and legislation required for the war eff ort.