The United States had entered the conflict in Vietnam as the world’s superpower following its decisive victory over the Axis powers in World War II, but left Vietnam with a humiliating defeat, shockingly high casualties, American public sharply divided and its leaders uncertain of what lay ahead in foreign policy. The nation’s longest and most debilitating war – the only war the U.S. ever lost, had far-reaching consequences and impact on most aspects of American life from the economy, culture to domestic politics and foreign policy – some of which continue to do so today.The Vietnam War damaged the U.S. economy severely. The U.S. had poured some $168 billion into the war, but the real cost of the conflict was its impact on the economy.
After a few truly good years during 1962 – 1965 when there was low inflation, almost full employment and a favorable balance of trade<span>, </span>President Lyndon B. Johnson, who succeeded President Kennedy after his assassination in 1963, declared a “War on Poverty” through his “Great Society” programs while escalating the war in Vietnam at the same time.
However, his decision to finance both “guns and butter” – a major war and the Great Society simultaneously, without a significant increase in taxes unleashed an acceleration of inflation peaking at a runaway double-digit in mid 1970s.
Not until 1969 did President Johnson decided to introduce a 10% income tax surcharge, which is considered by many economists “too little and too late” and in turn also slowed down the economy. It’s worth mentioning that Congress would not allow that “surcharge” to be implemented until President Johnson agreed to cut $6 billion from domestic spending on Great Society programs. Despite their relative success, Johnson could have undoubtedly spent more on these programs had he not had to pay for the war abroad, which Martin Luther King, Jr. had referred to as a “America’s tragic distraction” at the beginning of Johnson administration
