01 April 2008

"Who will help me bake this bread?"

At the outset of the Iraq war, the Bush admin predicted that it would cost roughly oh $50 billion to $60 billion to oust your boy Saddam Hussein, restore order and install a new government.

Five years in, the Pentagon tags the cost of the Iraq war at roughly $500 billion and counting. There's a site that has one of those running tallies and its up to about $507 B. Which averages out to $4,681 per household, $1,721 per person for a total of $341.4 million per day - I don't have time to check the sites probably fuzzy liberal math, but most average it out to AT LEAST least $200 and at most 400M per day - and thats a hell of a ballpark. This war is approaching the amount spent on the Vietnam or Korean wars, when adjusted for inflation.

Some economists peg the long-term war cost at more than $4 trillion. other analysts say that $1 to $2 trillion is more realistic, depending on troop levels and on how long the American occupation continues. Keep in mind, we're talking TRILLIONS here. All of the war-price tallies include operations in the war zone, support for troops, repair or replacement of equipment, reservists’ salaries, special combat pay for regular forces and some care for wounded veterans — expenses that typically fall outside the regular Defense Department or Veterans Affairs budgets.
It is certain that the Democrats will provide tens of billions more in a military spending bill next month. Some Democrats are even arguing against attaching strings, such the coveted deadline for withdrawal, saying the tactic will fail as it has in the past.

The highest estimates often include projections for future operations, long-term health care and disability costs for veterans, a portion of the regular, annual defense budget, and, in some cases, wider economic effects, including a percentage of higher oil prices and the impact of raising the national debt to cover increased war spending. Debate aside, there is general consensus that Congress will have allocated slightly more than $600 billion for Iraq operations through the 2008 fiscal year.

To pay for World War II, Americans bought savings bonds and tightened their belts. Truman raised taxes and cut nonmilitary spending to pay for the Korean conflict. During Vietnam, the US raised taxes but still watched deficits soar. But to pay for the ongoing wars in Iraq and Afghanistan, the US has used its credit card, counting on the Chinese and other foreign buyers of its debt to pay the bills.

Unlike in previous major wars, the US has cut taxes at the same time it has increased military spending. It's fair to say all of the money spent on the war has been borrowed, but eventually everything has to be paid for that being said, the actual impact of the war on the economy is different than in the past, largely because the US economy is so much fucking bigger now. During World War II, some analysts calculate that the US spent as much as 30% of its GDP on the war effort. The Korean War, at its spending peak in 1953, represented 14% of GDP; Vietnam was about 9 %. The current war, however, is less than 1 % of America's annual $13 trillion GDP. So the US can most certainly afford the war but because the US is borrowing to finance the war, the cost will be borne by future generations. Translation: it's still going to be one of the most expensive wars we have ever fought.

The neocons, Rumsfeld, Cheney, Wolfowitz, Roth, Van Halen, (just making sure you're paying attention) etc. were just totally unrealistic. Before the war, White House economic adviser Lawrence Lindsay estimated the cost at $100 to $200 billion. So the White House got rid of him and "re-estimated" the cost at $50 to $60 billion. It's now over $500 billion and by the time you add in the costs hidden in the defense budget, the money we'll have to spend to help future veterans, and money to refurbish a military whose equipment and material have been greatly depleted, the total tab to the federal government will almost surely exceed $1.5 trillion.

But is it a "smart" way to fund a war? That's a very subjective question. I think the idea was basically to have a nice fierce war without bothering any of us with it financially. They didn't wanna cut taxes, heavens forbid, and we weren't gonna buy war bonds or recycle our truck tires and scrap metal and so then the only way to pay for war is to borrow from other people, namely the Chinese.

I think Bad Religion may have said it best: "When I look back and think, when I ponder and ask myself why? I see my ancestors spend with careless abandon, assuming eternal supply" and why shouldn't we? That's the American way, right?

I think if the gov were to finance a war through heavy direct taxation, people would know in realistic terms and FEEL just what the war is costing them and they don't want that. This was never a popular war and so the politicians think taxing us to fund the war will erode enthusiasm for whatever "crusade" our "rulers" have gotten us into. Problem is we haven't been enthusiastic since Sept 12.

Therefore the gubment prefers to cover part of the costs of war through borrowing which will inevitably be inflationary. In one way or another in war time real wages have to suffer. There must be either falling net money wages with stable general prices, or stable or rising money wages with a more than offsetting general rise in commodity prices. Politicians prefer borrowing in secret because it throws a veil of monetary illusion over the lowered real wages of those still employed on the home front.

Joseph Stiglitz (World Bank bigshot) and Linda Bilmes (Harvard nerd) just wrote a book called "The Three Trillion Dollar War". I'm sure it reads like an inorganic chemistry textbook but its apparently ALL about the shit we're discussing here. Might be worth picking up on audio book perhaps. All those books bore the fuck out of me.

1 comment:

Unknown said...

Love the title. And *awesome* article. You are a fantstic writer. ~Leesh