1. Taxation: The US government raised significant revenue through increased taxation during the war. The Revenue Act of 1942, for instance, significantly raised personal and corporate income tax rates. This taxation helped generate income that was directed toward war efforts.
2. Borrowing: The US government borrowed extensively to cover the costs of the war. It issued war bonds, which were purchased by individuals, institutions, and businesses. These war bonds were essentially loans made to the government, with the promise of repayment plus interest at a later date.
3. Economic Expansion: The war stimulated significant economic growth in the United States. Industries that produced war-related goods and supplies, such as shipbuilding, aircraft manufacturing, and munitions, experienced rapid expansion, creating jobs and generating revenue. This increased economic activity contributed to the financing of the war effort.
4. Wartime Controls and Rationing: The government implemented various wartime controls and rationing measures to manage resources more effectively. This included rationing of goods such as food, gasoline, and rubber. By prioritizing the allocation of resources for the war effort, the government was able to save costs in certain areas while ensuring essential goods were available for military and civilian needs.
5. Lend-Lease Act: The Lend-Lease Act of 1941 allowed the US to provide military equipment and supplies to Allied countries without immediately demanding payment. This act essentially extended credit to these nations, who would later repay the US after the war. The Lend-Lease Act helped finance the war efforts of Allied countries and strengthened their ability to fight against the Axis powers.
6. Inflation: The war also led to some degree of inflation, which impacted the purchasing power of the US dollar. While inflation can have negative economic effects, it provided the government with additional revenue as it eroded the real value of outstanding debt.
It is worth noting that the financing of World War II also had long-term implications for the US economy and its fiscal policy. The war left the US with a large national debt, which subsequent governments worked to reduce and manage over time. The experience of the war also influenced later economic and fiscal policies and decisions.