War bonds
War bonds are debt securities issued by a government to finance military operations during wartime. In the United States, the concept gained prominence during World War II, initiated by President Franklin D. Roosevelt as a means to raise funds for the war against the Axis Powers. The U.S. Treasury Department launched various series of savings bonds, making them affordable for everyday citizens. Bonds were sold at 75% of their face value, maturing in ten years, allowing individuals to contribute financially to the war effort.
Promotional campaigns, including themed drives and endorsements from celebrities, were employed to boost public participation and support. Between 1942 and 1946, eight bond drives were conducted, consistently surpassing their financial goals and ultimately raising around $185 billion. Despite the apparent enthusiasm, much of the bond sales were dominated by large investors, indicating a mixed level of public engagement. Nonetheless, the sale of war bonds played a crucial role in financing military operations and shaping public sentiment toward the war effort during this era.
War bonds
Financial instruments sold by the U.S. government during World War II to raise revenue to help pay for military operations
Successive campaigns to sell war bonds allowed the federal government to raise funds to pay for expenses incurred to support the war effort, especially between 1942 and 1945, and helped galvanize public support for the country’s participation in World War II.
As early as 1940, President Franklin D. Roosevelt began planning for what he saw as the inevitable entry of the United States into armed conflict with the Axis Powers. Knowing a war would be costly, Roosevelt solicited ideas from his advisors on ways to finance wartime operations. While several advisors recommended instituting a war tax, Secretary of the Treasury Henry Morgenthau encouraged the president to sell bonds. Morgenthau argued that by doing so the president would not only raise needed money, but he could also use bond sales as a means of encouraging average citizens to take a stake in the war effort. Although Roosevelt was initially skeptical that promotion schemes might be perceived by the American public as propaganda, he agreed to Morgenthau’s plan.
War Bond Drives
In the spring of 1941 the U.S. Treasury Department began offering three new series of savings bonds, including Series E bonds in denominations as low as twenty-five dollars to make it possible for ordinary citizens to purchase them. Bonds could be purchased for 75 percent of their face value, and would reach maturity—that is, their full value—in ten years. To encourage sales, the government also sold savings stamps for ten cents each, giving people who could not immediately afford to purchase bonds a program that would allow them to save up to buy them. Initially called defense bonds, war bonds were designated as “war bonds” after the Japanese bombed Pearl Harbor in December, 1941.
Initially, the Roosevelt administration intended simply to offer bonds for sale continuously without special promotional campaigns. By the spring of 1942, however, it became apparent that sales could be greatly increased by mounting special drives. These were to run for limited periods with specific financial goals and use themes designed to build support among citizens on the home front for the country’s involvement in the conflict. Carefully orchestrated campaigns using posters, radio announcements, and newspaper advertising helped promote the idea that funds raised from bond sales were providing the equipment and supplies needed by America’s fighting forces.
Numerous Hollywood celebrities joined in the effort to promote bond sales; even comic-book heroes and cartoon characters were used to encourage people to purchase bonds. Workers were encouraged to enroll in payroll deduction programs, and everyone was asked to pledge 10 percent of earnings toward purchase of war bonds. This initiative helped the government achieve another important objective: By reducing funds available to citizens for spending on scarce consumer goods, upward pressure on inflation was reduced during the war.
Success of War Bond Drives
From 1942 until 1946, the federal government conducted eight bond drives. The first, designated the “War Loan Drive,” was conducted in November and December of 1942. It had a goal of $9 billion but surprisingly raised $13 billion. The second drive, launched in spring, 1943, was even more successful, raising $18.5 billion against a $13 billion goal. The Treasury Department set a higher goal of $14.5 billion for the third drive, conducted in the fall of 1943, and managed to raise $18.9 billion. The fourth and fifth drives also exceeded expectations, bringing in $16.7 billion and $20.6 billion. The sixth drive, launched just after D Day in June, 1944, raised $21.6 billion.
An economic reality masked in the impressive sales of the drives is the fact that the majority of bonds were sold to large investors. Individual Americans were supportive but not at the levels the Roosevelt administration hoped they would be. The seventh drive, known as the “Mighty Seventh,” begun just after Germany surrendered in May, 1945, had a modest $14 billion goal but generated $26.3 billion for the government. The final “Victory Loan” campaign, launched in October, 1945, and targeted at generating funds to finance America’s postwar needs, brought in another $21 billion, bringing the total raised by all war bonds sales to $185 billion.
Impact
The sale of war bonds was remarkably successful in raising a significant portion of the funds necessary for the U.S. government to finance military operations. While studies done in decades after World War II have revealed that not everyone in the country was enthusiastic about supporting the war effort in this way, campaigns to sell bonds had a strong, positive impact on public opinion regarding the conflict, especially during the period between American entry into the war and the Allied invasion of Europe in June 1944.
Bibliography
Blum, John Morton. V Was For Victory: Politics and American Culture During World War II. New York: Harcourt, Brace, Jovanovich, 1976. Includes a brief account of the Roosevelt administration’s strategy for selling war bonds and its methods for using bond sales as a means of securing public approval of the war effort.
Kimble, James J. Mobilizing the Home Front: War Bonds and Domestic Propaganda. College Station: Texas A&M University Press, 2006. Comprehensive analysis of each of the eight bond drives conducted by the Treasury Department, focusing on techniques used to persuade Americans to purchase bonds as a means of showing support for the war.
Morse, Jarvis. Paying for a World War: The United States Financing of World War II. Washington, D.C.: U.S. Savings Bond Division, 1971. Historical account of the federal government’s initiative to use bond sales as a means of financing wartime operations.
Olney, Lawrence. The War Bond Story. Washington, D.C.: U.S. Savings Bond Division, 1971. Detailed account of the U.S. Treasury Department’s program to sell war bonds, written by a key official who helped manage the effort.
O’Neill, William L. A Democracy at War: America’s Fight at Home and Abroad in World War II. New York: Free Press, 1993. Comments on the Roosevelt administration’s campaign for selling war bonds as part of a larger strategy to make the public feel they had a stake in the conflicts in Europe and the Pacific.
Samuel, Lawrence R. Pledging Allegiance: American Identity and the Bond Drive of World War II. Washington, D.C.: Smithsonian Institution Press, 1997. Provides an overview of the Treasury’s bond program and examines in detail the responses of important subgroups of American citizens to the government’s efforts to generate support for the war through the bond program.