War Costs, Affluence, and Democracy

The inflation-adjusted cost of the wars in Afghanistan and Iraq have now exceeded that of the Vietnam War, Lori Montgomery reports in the business section of WaPo, but the cost has been virtually unnoticed because of our relative affluence.

The global war on terror, as President Bush calls the fighting in Iraq and Afghanistan and related military operations, is about to become the second-most-expensive conflict in U.S. history, after World War II.

War Cost Iraq vs. Vietnam Since the Sept. 11, 2001, terrorist attacks, Congress has approved more than $609 billion for the wars, a figure likely to stand as lawmakers rework their latest spending bill in response to a Bush veto. Requests for $145 billion more await congressional action and would raise the cost in inflation-adjusted dollars beyond the cost of the wars in Korea and Vietnam.

But the United States is vastly richer than it was in those days, and the nation’s wealth now dwarfs the price of war, economists said. Last year, spending in Iraq amounted to less than 1 percent of the total economy — about as much as Americans spent shopping online and less than half what they spent at Wal-Mart. Total defense spending is 4 percent of gross domestic product, the figure that measures the nation’s economic output. In contrast, defense spending ate up 14 percent of GDP at the height of the Korean War and 9 percent during the Vietnam War.

And this time, the war bill is going directly on the nation’s credit card. Unlike his predecessors, Bush is financing a major conflict without raising taxes or making significant cuts in domestic programs. Instead, he has cut taxes and run up the national debt. The result, economists said, is a war that has barely dented the average American’s pocketbook and caused few reverberations in the broader economy.

All-and-all, it would seem a good thing that we’re becoming richer and can afford both guns and butter. To the extent that the wars in Iraq and Afghanistan are making us more secure — and I grant that there is significant debate on that issue — then financing it in such a way that is largely painless is a net good. Further, it’s not unreasonable that future generations would pay part of that cost, since defeating the jihadists would redound to their benefit as well.

Will Wilkinson, though, notes that it has the negative consequence of making it easier for the government to fight an unpopular war:

Government is generally inefficient relative to markets because, among other things, periodic voting is a terribly slow feedback mechanism compared to the rapid adjustment of market prices. A policy can be failed for a long time before voters catch on and demand at the polls that it be changed. When voter demand and taxpayer cost are disconnected in the way debt-financing disconnects them, the problem of slow feedback is made even worse, practically ensuring the persistence of expensive, failed policies.

I think that’s right, whether we’re talking about defense policy or any other issue. Then again, making people feel large amounts of economic pain all at once for investments designed to yield benefits in the longer term would stifle good policies as well as bad.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Triumph says:

    To the extent that the wars in Iraq and Afghanistan are making us more secure — and I grant that there is significant debate on that issue — then financing it in such a way that is largely painless is a net good. Further, it’s not unreasonable that future generations would pay part of that cost, since defeating the jihadists would redound to their benefit as well.

    Actually, no one in their right mind thinks that the Iraq invasion has “made us more secure.” It certainly isn’t going help “defeating the jihadists.”

  2. carpeicthus says:

    Further, it’s not unreasonable that future generations would pay part of that cost, since defeating the jihadists would redound to their benefit as well.

    Yeah, if we were actually doing anything like that, it would be great. $750 billion to quite possibly make things worse for future generations is another story.

  3. carpeicthus says:

    Posted at the same time as Triumph. *common-sense high five*

  4. Anderson says:

    Actually, no one in their right mind thinks that the Iraq invasion has “made us more secure.”

    What about Dick Morris?

    One of the things, though, that I think the antiwar crowd has not considered is that, if we’re putting the Americans right within their arms’ reach, they don’t have to come to Wall Street to kill Americans. They don’t have to knock down the trade center. They can do it around the corner, and convenience is a big factor when you’re a terrorist.

    I’m still amazed that he said that. Maybe Cindy Sheehan will beat him up.

  5. spencer says:

    comparing nominal expenditures between two different periods is essentially meaningless.

    But on the other side one must consider the possibility that the major reason the war is going so poorly is that the military has not been given the resources they need to win.

    In other words, if we had actually spent another couple of percentage points of GDP on expanding the military four years ago we might have achieved our goals in Iraq.

    This administration has acted as if “freedom is free”.

  6. yetanotherjohn says:

    When thinking about costs, government mistakes, shifting burdens into the future, etc., three words come to mind… social security…Medicare.

  7. Andy says:

    but the cost has been virtually unnoticed because of our relative affluence.

    You mean because we’re operating at a huge budget deficit and no one is paying the real costs of living large and blowing a trillion bucks in defense spending.

    If every taxpayer had been getting an extra $1000 war tax bill every year since 2003, the cost of war would definitely be noticed.