I'm familiar with the phrase and from what I understand it applies well to the USA and some other countries. But I don't know who coined this phrase, or which are the most important references (I'm guessing Robert Higgs and probably Rothbard) - please direct me to some references.
Also a few thoughts and questions on the nature of the welfare-warfare state argument:
I may be mistaken (apologies if this is an incorrect characterisation of any libertarian position) but I get the impression that some writers have implied that the welfare state necessarily implies the warfare state. But of course there are many welfare states which have tended to steer clear of warfare and even large-scale military expenditure (Scandinavian countries). Perhaps this misconstrues the nature of the welfare-warfare link. Perhaps it does not mean that all welfare states will seek out war, but only the big ones. So if Sweden were the largest country in the world (bigger countries split into smaller countries), would it almost necessarily become a welfare-warfare state? Or is the welfare-warfare state idea just supposed to shed light on some links that do come into play when politicians have the right (i.e. wrong!) ideology? In which case there is no logical imperative for states to be welfare-warfare, except insofar as bad men get to the top in politics.