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Will the US Economy Become a Victim of the Iraq War?

War is not only Hell -- but Hellishly expensive:

"In September 2002, the Congressional Budget Office, a nonpartisan research arm of Congress, estimated that the war would cost $1.5 billion to $4 billion per month. In fact, it costs between $5 billion and $8 billion per month.

The Pentagon says the "burn rate" -- the operating costs of the wars -- has averaged $5.6 billion per month in the current fiscal year, but that does not include some costs for maintenance and replacement of equipment and some training and reconstruction costs, experts say."

Recall our Pre-War Analysis from March 19, 2003 (Not-So-Hidden Agenda: Strategic and Economic Assessments of U.S. led Invasion in the Middle East) -- we predicted the War in Iraq would last up to 10 years and cost $1 trillion dollars over that decade. That length and expense was (at the time) considered an outlier, far beyond other expectations.   

Now, almost 2 1/2 years later, other analyses are (finally) catching up. A recent study from the Center for Strategic and Budgetary Assessments upgrades the estimates of what the war will cost to ~3/4 of a trilllion dollars (so we are getting closer to my $ trillion dollar estimate).

"The wars in Iraq and Afghanistan have already cost taxpayers $314 billion, and the Congressional Budget Office projects additional expenses of perhaps $450 billion over the next 10 years.

That could make the combined campaigns, especially the war in Iraq, the most expensive military effort in the last 60 years, causing even some conservative experts to criticize the open-ended commitment to an elusive goal. The concern is that the soaring costs, given little weight before now, could play a growing role in U.S. strategic decisions because of the fiscal impact.

"Osama (bin Laden) doesn't have to win; he will just bleed us to death," said Michael Scheuer, a former counterterrorism official at the CIA who led the pursuit of bin Laden and recently retired after writing two books critical of the Clinton and Bush administrations. "He's well on his way to doing it."

The Center for Strategic and Budgetary Assessments, a nonpartisan Washington think tank, has estimated that the Korean War cost about $430 billion and the Vietnam War cost about $600 billion, in current dollars. According to the latest estimates, the cost of the war in Iraq could exceed $700 billion.

Put simply, critics say, the war is not making the United States safer and is harming U.S. taxpayers by saddling them with an enormous debt burden, since the war is being financed with deficit spending."

You can get a visual sense of how much the war(s) have been costing the United States per year below; These data points reflect budget allocations, and do not include the epxenditures for military men and material already budgeted.

Click for larger graph

Chart courtesy of San Francisco Chronicle

One of the few vocal critics of the cost the Iraq war has generated has been Nebraska Senator Chuck Hagel (R). He has pointed out (repeatedly) that the present expenses are many multiples greater than what the White House had promised in 2003; Future expenses threaten to make the war even more costly.

Long term deficit hawks (and that should include equity investors) should take note of Hagel's obserervations regarding the ultimate impact of this spending: it is throwing U.S. fiscal priorities "out of balance," and "It's dangerously irresponsible."

Indeed.

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Source: 
CASUALTY OF WAR: THE U.S. ECONOMY
James Sterngold
Chronicle Staff Writer, Sunday, July 17, 2005
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/07/17/MNG5GDPEK31.DTL

Thursday, July 21, 2005 | 06:14 AM | Permalink | Comments (10) | TrackBack (0)
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Comments

Bravo for your prescience, Barry. It seems to me that this was the honest conclusion that those not blinded by the rosy scenarios the administration was pushing should have come to in the beginning.

Of course, they all had an agenda to serve.

Posted by: thrashbluegrass | Jul 21, 2005 9:15:21 AM