Does anyone have any non-partisan information on how the Iraq War has impacted the US economy?
Does anyone have any non-partisan information on how the Iraq War has impacted the US economy?
The economy has added jobs every month for the past four or five years and unemployment is at or near an all time low of 4.8%, I believe. So in terms of job growth and unemployment, I'd say there's been no negative impact. You'll notice that most Dems,for the most part, aren't talking about the economy these days, whcih probably means it's doing well.
On average, it has been good for the economy. Wars, in general, create improved economic condtions when the war is contested on foreign soil. Manufacturing and others involved in supplying the war effort can really reap some nice rewards. The government coffers take a hit as dead servicemen pay no taxes, but this is a small amount compared to the riches taken in by the private sector.
The Iraq invasion has achieved its primary goal, which was a massive transfer of wealth from current and future taxpayers to politically connected government contractors.
Desmund wrote:
The economy has added jobs every month for the past four or five years and unemployment is at or near an all time low of 4.8%, I believe. So in terms of job growth and unemployment, I'd say there's been no negative impact. You'll notice that most Dems,for the most part, aren't talking about the economy these days, whcih probably means it's doing well.
Do you think this is a direct result of the Iraq War, Bush's Tax Cuts, or another reason? Although deficit financing is working in the short run what will be the effects of the increasing debt? The $200+ billion a year interest payment can become quite a burden?
This may be true; but hundreds of thousands, if not millions, of tax paying Americans work for the big government contractors.
Disparity in wealth between top 1% and bottom 90% is the greatest it's been since 1928.
seriousmindsonly wrote:
Does anyone have any non-partisan information on how the Iraq War has impacted the US economy?
this, as i'm sure you recognize, is an incredibly complex and fairly subjective question, so i doubt you'll find anything truly "non-partisan". if you do, i'd like to see it too.
here are just a few of the factors to consider:
- increased government spending, by what, a couple hundred billion per year? for the last 4-5 years
- that increased spending is going to have nominal positive effects on the economy in the short run. the government money flows directly to soldiers and contractors. in either case, the money then flows indirectly to other areas of the economy. shipping companies make money sending more items back and forth to iraq, telecommunications companies, air carriers, the contractors' employees spend more money on consumer goods at home, the soldiers when they return and the families when they are gone spend more money than they would in the absence of a war, etc.
- the increased spending will increase incomes and thus tax revenue, partially offsetting the deficit spending
- however, the deficit spending will still increase national debt, thus increasing interest expense for the government going forward. this will be a drag on the economy in general.
- the war may cause harm to US corporate earnings abroad and investment from abroad in US companies and securities because it causes an increase in negative feelings towards the US in general (or if you are an optimist, maybe it had the opposite effect)
- the increased deficit spending will generally add to inflationary pressure (more dollars chasing more or less the same goods). that will take away from the other positive economic effects.
and of course, all of these things, and the many others i didn't list, interact dynamically. and the true effects of deficit spending won't be felt for many years. nor will we know whether we might have walked into stagflation (i.e., inflation without economic growth) in part because of this deficit spending (the Fed would have a role in that outcome as well, independent of the war).
in other words, because of the assumptions you have to make to interpret the data dynamically, and especially to take into account future effects, it's very difficult to have an unbiased report.
i think the main components though are pretty much not in contention - deficit spending that led to more jobs and more economic growth and greater inflationary pressure. i think many would agree that a similar result would occur with any deficit spending (or tax cut) of a similar size. the only variable is where the money goes in the first instance (it will generally be spent multiple times). for a war, it goes to soldiers, their families, large military contractors who provide services (and their employees and shareholders), and large military manufacturers (and their employees and shareholders).
Interesting question. Personally, I oppose the war more out of economic reasons than anything else. People continually spout off standard rheoteric such as serious mind's "Wars, in general, create improved economic conditions [sic] when the war is contested on foreign soil" without providing any supporting evidence.
One thing I find interesting is that believing that wars help the economy really necessitates that you believe big government is good (at least from an economic perspective). Wars are the ultimate in big government. Financed by taxes and foreign borrowing, armed forces are government employees, equipment is government owned and large private contractors are paid by the government for government-approved projects. It is hard to get much more big government than that. Unless you look to WWII and add in rations on consumer goods and price controls.
The argument that manufacturing jobs, etc. created are evidence of the benefit, that can be be true for other examples. Instead of sending troops to Iraq, we will send them to Detroit and Pittsburgh to combat the war against losing American industry. The government will then pay private contractors billions of dollars to build large factories and other car and steel projects. This contractor work will create many jobs for people who will then pay taxes and spend money that helps other businesses. The troops will be employed and they will be better off because they are making cars instead of going on patrol and being shot at. The other big plus is that unlike bullets, bombs and missiles which are not typically reusable, the cars and steel can be sold which would generate more money.
I don't think this is a great idea. War, just like the troops going to Detroit, is an allocation of resources to one cause at the expense of others.
How much money have we spent in Iraq? $100 billion, $200 billion? $500 billion?
Think about the concept of a billion - 1,000 million x 500 = 50,000 million or put another way, you could make 50,000 people millionaires. Think about the economic good that could be done if you were to give 1 million dollars to 50,000 small companies or businesses.
The impact of the Iraq War has not yet impacted the US economy.
some facts. wrote:
War, just like the troops going to Detroit, is an allocation of resources to one cause at the expense of others.
unless you finance it by borrowing :).
(good post by the way. it helps that i agree with the basic premise - it's the extra government spending that matters in the macro sense, not the activity on which it is spent).
They will get their chance before the election.
Desmund wrote:
You'll notice that most Dems,for the most part, aren't talking about the economy these days, whcih probably means it's doing well.
The paper linked below is slightly dated, but gives a good feel for the estimates. As a disclaimer - some conservative economists felt that Bilmes and Stiglitz overestimated the secondary costs to the war (e.g. higher oil prices), but generally agree with the rest of the paper
http://www2.gsb.columbia.edu/faculty/jstiglitz/download/2006_Cost_of_War_in_Iraq_NBER.pdf
Abstract:
This paper attempts to provide a more complete reckoning of the costs of the Iraq War, using standard economic and accounting/ budgetary frameworks. As of December 30, 2005, total spending for combat and support operations in Iraq is $251bn, and the CBO's estimates put the projected total direct costs at around $500bn. These figures, however, greatly underestimate the War's true costs. We estimate a range of present and future costs, by including expenditures not in the $500bn CBO projection, such as lifetime healthcare and disability payments to returning veterans, replenishment of military hardware, and increased recruitment costs. We then make adjustments to reflect the social costs of the resources deployed, (e.g. reserve pay is less than the opportunity wage and disability pay is less than forgone earnings). Finally, we estimate the effects of the war on the overall performance
of the economy. Even taking a conservative approach and assuming all US troops return by 2010, we believe the true costs exceed a trillion dollars. Using the CBO's projection of maintaining troops in Iraq through 2015, the true costs may exceed $2 trillion. In either case, the cost is much larger than
the administration's original estimate of $50-$60bn. The costs estimated do not include those borne by other countries, either directly (military expenditures) or indirectly (the increased price of oil). Most importantly, we have not included the costs to Iraq, either in terms of destruction of infrastructure or the loss of lives. These would all clearly raise the costs significantly.
if you've read some of the paper, can you tell us whether it takes into account economic benefits of war spending? or whether it "simply" tallies the costs.
At the BFC (not BBC, the BFC) it is reported that, if one includes ALL entitlement programs and the war, the total due bill comes out to $29T.
People my age will be hiding in the hills a decade or so hence to avoid being euthanized by Gen-X & Y so they can get their hands on our savings to pay off the debts.
Yeah, and this POTUS did a GREAT job defending the borders along with Ted "the great pumpkin" Kennedy. Sure bring in more refugees who will get aid and assistance without paying any taxes (ref Howie Carr, WRKO - Boston MA 680 AM).
What happened to all that Iraqi oil money that Cheney & Bush & Wolfowitz (How's the galpal there Paul?) & Crystal & Tenet & Rumpsfelt and Co. said would pay for the war after we got finished sweeping up all the garlands and flowers our troops would be greeted with?
Pat Buchanan was right all along.
We are sunk.
While I haven't gone through the calculations in much detail, I don't believe so.
However, the aggregate demand (AD) benefits of war are in IMO highly exaggerated. Most of those soldiers were already employed before the war, and most of the equipment already existed (so this is different than WWII where spending actually increased on these items). While the government certainly increased spending on hazard pay, civilian contractors, etc etc, I think that amount pales in comparison to the other costs of the war.
If you really want to push the benefits of war spending, just remember the opportunity cost of what wasn't bought. For example, with a fraction of the money spent on the war, we could have funded free universal health coverage, or free upper education for everyone, or funded new basic research in science and technology. While all these choices including the war have a basic AD effect, I would argue that these latter choices would have larger social benefits in the long run.
Just my two cents
$1 TRILLION in debt has been loaded onto our children and grandchildren.
Anybody remember 5 years ago when Rush Limbaugh campaigned for Bush's tax cuts saying that there would be a projected $8 Trillion surplus by 2014?
"The impact of the Iraq War has not yet impacted the US economy."
very true, its not like the war is gonna automatically hurt the economy.
war jump started the ecomony, but how many poeple have gone into battle for us(how many did we lose) wartime statistics are scewed because of course unemployment will go down, there will be more jobs in arms, dead people mean a job just opened, sure the numbers look good for now but what is the cost and I'm not JUST talking money?
this whole war was bullshit anyway, we send in troops after Usama Bin Laden then when we get close we go to iraq looking for bombs then we say we are freeing the citizens(if that was why then why are we not in darfur fighting the genoceide), whats next?
some facts. wrote:War, just like the troops going to Detroit, is an allocation of resources to one cause at the expense of others.
Well said. You can't talk about benefits of war spending (or any other kind of spending) in absolute terms. Spending choices are relative. Is war spending inherently more of a boon to the economy than, highway spending, alternative energy spending, health spending, education spending, or (fill in your favorite kind of government or consumer spending)? Is deficit government spending better than more consumer saving/investment, for that matter? Is it better than balancing the budget?
It seems patently evident to me that pouring resources into a war effort that creates very little in the way of lasting, beneficial products (e.g., fuel, vehicles, bombs, food and clothing for troops all have very short life spans) is a comparatively inefficient way to spur the economy.
nobody special wrote:
If you really want to push the benefits of war spending, just remember the opportunity cost of what wasn't bought.
i'm certainly not one to exaggerate the benefits of any way, especially this particular one, but i do want to attempt to be objective in the analysis. if you spend one government dollar and halliburton receives it, the trail doesn't simply end there. that dollar will be spent and respent over and over again. you and others are absolutely correct that there are much better ways to spend government money to spur economic growth (without getting into a debate over whether money flowing to the rich or the poor is more likely to spur more growth). nevertheless, it seems incomplete to me to look at war costs without making an effort to offset the costs with gains.
being beyond charitable, an economist could look at the iraq war cost and claim a "gain" of preventing a second 9/11. (please don't flame me for this statement, it's not one i believe in.) i don't know what the economic cost of 9/11 has been estimated to be, but i would assume it's in the 10s of billions, if not more.
in a sense, i'm just reinforcing the point that the calculation is inherently subjective.