Robert Hormats of Goldman Sachs has a new book with a novel analysis of wars and spending. In “The Price of Liberty: Paying for America’s Wars,” Mr. Hormats takes a look at past wars and points out that the country has historically changed all its domestic policies when going on war footing. After Pearl Harbor, President Roosevelt told the country that “war costs money” and that “that means taxes and bonds and bonds and taxes. It means cutting luxuries and other-non-essentials.” Roosevelt converted the income tax, heretofore only a class tax, to a mass tax paid by average Americans, including some GIs. Then he powered into war, spending close to 40% of GDP on the conflict.

Before Roosevelt, Mr. Hormats argues, Jefferson, Madison, and Lincoln also secured the nation through sound finance. Presidents Eisenhower and even George H.W. Bush followed FDR’s tax hikes for war policies. Mr. Hormats’ position is that George W. Bush has done something different: followed a pre-9/11 fiscal policy in a post-9/11 world. Instead of spending on creating Medicare Part D, as well as cutting taxes, Mr. Bush ought to have been cutting back on the entitlements and raising taxes — at least according to Mr. Hormats. Since the American fiscal position is likely to deteriorate in future years, especially over the decades, we may, eventually, find we are no longer able to fund the War on Terror, the conflicts in Iraq and, likely, Iran.

Mr. Hormats, who has served several presidents, is right on the spending problem. He’s also pretty good on Hamilton’s vision as well as George Washington’s warning that the young republic must pay its debts early, lest it find itself “throwing upon posterity the burdens we ourselves ought to bear.” But the Iraq conflict, for all its trouble, is 1% of GDP, or one-third of the amount the country grows a year. What a contrast to World War II’s nearly 40%. And, we would argue, the reason for that difference is that the same Bush policies that so many deplore kept the denominator the relevant figure, the growth so strong as to make the war spending look like nothing. Roosevelt’s alternately syndicalist and anti-business policies by contrast, as Robert Higgs has pointed out, hurt the rest of the economy.

As for the war, Mr. Hormats’s assumption that a long war might be bad may be plain on its face — or not. After all, there are not a lot of critics of Mr. Bush who are arguing to ratchet up spending, FDR style, so it does approach a radically higher percentage of the GDP of this mighty economy. That might underwrite, say, a true occupation of Iraq, and one of Iran, if necessary, to bring a faster end to global war on Islamist terrorism and a return to the peace for which we all long. In other words, it is possible to subscribe to Mr. Hormats’s tradeoff, but to prefer different terms.