Comparing the US financing sources during World wars and pandemics (Spanish flu vs. COVID-19)

Our Letter centres around George J. Hall’s and Thomas Sargent’s article ‘Three world wars: fiscal-monetary consequences’ published in the Proceedings of the National Academy of Sciences of the United States of America (PNAS) in 2022 and representing a study of the US financing sources spanning over a century. We expand the analysis of the US financing sources (taxes, bonds, money) to combat the world wars and COVID-19 by adding another crisis, namely the Spanish flu (1918–1920). We assess the fiscal-monetary comparability of wars and pandemics and investigate whether the finding that taxation was less used to combat COVID-19 (as compared to WWI/WWII) applies to a comparable disease. By replicating their methodology, we reconstruct the US financing sources to combat the Spanish flu and conclude that this pandemic was financed more similarly to WWI/WWII than to COVID-19. While our findings reconfirm – COVID-19 is an exception both when compared to WWI/WWII and to the Spanish flu –, we provide explanations for this different mix of financing sources. Future research could investigate whether the ‘war on COVID-19’ followed by that one in Ukraine might re-create overlapping crises as for WWI and the Spanish flu.