America’s costly war machine

Ten years into the war on terror, the U.S. has largely succeeded in its attempts to destabilize Al Qaeda and eliminate its leaders. But the cost has been enormous, and our decisions about how to finance it have profoundly damaged the U.S. economy.


Really?  The damage has come from the war?

Many of these costs were unnecessary. We chose to fight in Iraq and Afghanistan with a small, all-volunteer force, and we supplemented the military presence with a heavy reliance on civilian contractors. These decisions not only placed enormous strain on the troops but dramatically pushed up costs. Recent congressional investigations have shown that roughly 1 of every 4 dollars spent on wartime contracting was wasted or misspent.


It’s not clear here what Blimes and Stiglitz think is unnecessary.  The all-volunteer force?  Maybe they’d prefer a draft, that would make things cheaper—you don’t have to pay well when no one has a choice to serve or not.  Civilian contractors?  Maybe a point to be made there, but most of the data seems to indicate that contractors save money over the long haul as much as it’s a pain for those of us in green suits to not be able to be self-sufficient on the ground.  Waste and abuse is a problem, ’twas ever thus, however.

To date, the United States has spent more than $2.5 trillion on the wars in Iraq and Afghanistan, the Pentagon spending spree that accompanied it and a battery of new homeland security measures instituted after Sept. 11.


Let’s put that into perspective, shall we?  $2.5 trillion over 10 years is $250 billion per year.  That’s roughly half of the deficit each year between October 2001 and September 2007, a quarter of the deficit for October 2007 to September 2008 (FY 2008), one seventh of FY 2009, one sixth of FY 2010, and one fifth of the deficit for just the first half of FY ’11 (October 2010 to Mach 2011).  Over the whole period the deficits are approaching 4 times what we have spent on the war.

How have we paid for this? Entirely through borrowing. Spending on the wars and on added security at home has accounted for more than one-quarter of the total increase in U.S. government debt since 2001. And not only did we fail to pay as we went for the wars, the George W. Bush administration also successfully pushed to cut taxes in 2001 and again in 2003, which added further to the debt. This toxic combination of lower revenues and higher spending has brought the country to its current political stalemate.


Entirely through borrowing.  Sure, but what else could be described that way from the Federal budget?  Anything that costs less than the average trillion dollars a year over the last 10.  For FY 2006 we can make this claim of Social Security or Medicare and Medicaid, or Everything except entitlement spending, interest on the debt, and Defense as well.  It’s a meaningless statement to make.

There is only one other time in U.S. history that a war was financed entirely through borrowing, without raising taxes: when the Colonies borrowed from France during the Revolutionary War.


Which leaves us with the question, “So what?”  Are we meant to think that the War for Independence was not worth it? 

Even if we were to leave Afghanistan and Iraq tomorrow, our war debt would continue to rise for decades. Future bills will include such things as caring for military veterans, replacing military equipment, rebuilding the armed forces and paying interest on all the money we have borrowed. And these costs won't be insignificant.


Not insignificant, but also not out of line with anything else that we spend money on.  Especially not with the explosive growth of the deficits since 2008.  It’s the mandatory spending that’s growing at a rapid rate, not discretionary spending, and as such a much more meaningful place to pin this rose.

History has shown that the cost of caring for military veterans peaks decades after a conflict. Already, half of the returning troops have been treated in Veterans Administration medical centers, and more than 600,000 have qualified to receive disability compensation. At this point, the bill for future medical and disability benefits is estimated at $600 billion to $900 billion, but the number will almost surely grow as hundreds of thousands of troops still deployed abroad return home.


Which is an argument for what?  Cutting care?  Probably not.  Veterans are far too valuable a bargaining chip in budget fights and in the ongoing effort to ensure that we can no longer project military power, by continuing to increase those costs.  It’s just more of the same, we shouldn’t have fought the war.  That’s a silly position as it can’t be changed now.

And it isn't just in some theoretical future that the wars will affect the nation's economy: They already have. The conditions that precipitated the financial crisis in 2008 were shaped in part by the war on terror. The invasion of Iraq and the resulting instability in the Persian Gulf were among the factors that pushed oil prices up from about $30 a barrel in 2003 to historic highs five years later, peaking at $140 a barrel in current dollars in 2008. Higher oil prices threatened to depress U.S. economic activity, prompting the Federal Reserve to lower interest rates and loosen regulations. These policies were major contributors to the housing bubble and the financial collapse that followed.


Complete tripe.  Oil price raises were the product of speculation in the market.  You can’t press interest lower than 0% which is where the Fed’s had it for longer than 2008, and the loose regulations were a product of the previous two decade’s activity in Congress, not some domino effect beginning with 9/11.

Now, the war's huge deficits are shaping the economic debate, and they could keep Congress from enacting another round of needed stimulus spending to help the country climb out of its economic malaise. Many of these war debts are likely to continue to compromise America's investments in its future for decades.


Show me that the stimulus that was passed did any good and we’ll talk.  You want to get serious about fixing this economy?  Raise interest rates, lower taxes (or don’t raise them), and reduce regulations—target those that favor big over small.

For years, the public failed to adequately question how it was possible that we could spend and borrow so freely, with so few consequences. But now the painful legacy of these decisions has become clear. Throughout the past decade, Congress routinely approved huge "emergency" appropriations to pay for the wars. This process preempted the usual scrutiny and debate that accompanies large spending bills. In part, this is because the U.S. lacks the basic accounting tools necessary for informed debate. Our future debts from the war are not listed anywhere in the federal government's budget. We don't even know for certain where the money has been spent. The Pentagon hasn't produced a clean financial audit in the 20 years since government auditing began, nor has it developed an accounting framework that would allow an assessment of the future costs of current decisions. This has almost certainly increased the overall cost of the war.


This is the only paragraph of this article that was worth publishing.  It’s also indistinguishable in many respects from similar comments made by Tea Party members, much less Harvard faculty members and Nobel laureates.

Our response to Sept. 11 has weakened both the current economy and our future economic prospects. And that legacy of economic weakness — combined with the erosion of the credibility of our military power and of our "soft power" — has undermined, rather than strengthened, our national security.

Our unquestioning approach to entitlements and ‘damn the torpedoes’ approach to Social Security is every bit as citable as a contributing factor to the debt and much more so to our economic weakness.  The erosion of our power is a feature, not a bug, of the current administration’s policies and the authors’ lamenting it here is what lacks credibility.

Nearly 10 years into the Afghanistan war, the violence in that country shows little sign of abating. August was the deadliest month of the war yet for U.S. troops, and there were also multiple attacks on Afghan security forces, government officials and civilians. The surge in violence comes as NATO is drawing down and handing over security control to national forces. But tens of thousands of U.S. military personnel are scheduled to remain in Afghanistan through the end of 2014.


That’s what we signed up for.  August’s fatality count is skewed by one large event, 25 lives lost in one helicopter crash—with such a low casualty rate—the lowest in any war we’ve ever engaged in, it’s hard for them to make those statistics as dire as their ‘well intentioned’ arguments require.  If anything,  spikes in violence and enemy activity should signal that it’s too soon to hand over security control.

The costs of fighting the war on terror have already been far higher than they needed to be. The U.S. should not take on even greater war debt without understanding the true costs of continuing down that path.


Define “need to be” with regard to national security or with regard to a new 9/11 type attack.  What’s the “real cost” then?

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