The Iraq War and the US Economy

 

The Iraq war is a major factor in the deterioration of U.S. economy.  Just on economic grounds the Iraq is not sound.

           

When White House economic advisor, Lawrence Lindsay, said in 2002 that the Iraq war could cost $100 - $200 billion, the Bush administration immediately rejected such a large number, stating that the war would be quick and the Iraqi economy would pay for the reconstruction. 

 

President Bush has just submitted his “emergency” supplemental appropriation request to Congress.  He is asking for $72.4 billion for the continued occupation of Iraq and the war in Afghanistan for fiscal year 2006 (ending in September 2006).  This is in addition to the $320 billion already spent on Iraq and Afghanistan.  The President is calling for $460 billion in military spending in his 2007 budget, the highest military budget, in adjusted inflation dollars, since the Korean War in 1952. 

 

The Congressional Budget Office has predicted that the total cost of military combat alone could be $500 billion.  That total ignores the cost of reconstruction, the cost of caring for veterans, new recruitment costs and the interest payments the government now owes finance this costly war.  It’s time to start looking at the real cost of the war.

 

Nobel Prize winning economist and former chief economist for the World Bank, Joseph E. Stiglitz and the Kennedy School’s Linda Blimes have estimate the total cost to the American economy of the war in Iraq to be between $1 and $2 trillion!  The estimated $1 trillion cost for the Iraq war is enough to:

 

• Keep Social Security solvent for 75 years – twice over
• Pay for college scholarships for 48 million Americans
• Pay for over one hundred million kids to attend head start
• Fully fund global anti-hunger efforts for 35 years

 

To finance the wars in Iraq and Afghanistan the U.S. government is borrowing funds from foreign countries to finance the federal government’s deficit budgets—projected to be $423 billion in 2006.  Also, the trade deficit, which is also being financed by foreign counties, reached a record high of $725 billion in 2005.  (We buy a lot more than we sell to foreign countries).

 

In Empire of Debt, The Rise of an Epic Financial Crisis, the authors, Bill Bonner and Addison Wiggins, point out that the trade deficit is being financed by China, Japan, and other big exporting nations of Asia.  The Asian countries are getting by far the better of the deal owning enough U.S. dollar assets to buy a controlling interest in every corporation listed on the Dow Jones Index.

 

The Asians have enough U.S. Treasury bonds to destroy the U.S. economy.  Currently it is not to the advantage of China, Japan and other countries with a trade surplus to call on the U.S. to pay its debt – but this probably will not always be the case.  The shopkeeper will not extend credit forever.  The U.S. invades foreign countries in the belief that they are spreading freedom and democracy, but ask communist China to help pay for these wars.

 

 

As the U.S. debt and trade deficits continue to increase, the U.S. is becoming less competitive in the global market.  The U.S. needs to spend its resources not on war, but improving its products and services in order to become more competitive in the global market – not $73.2 billion to develop new nuclear weapons as called for in the President’s 2007 budget.

 

It’s simple, but seems difficult for both political parties and the business community to understand.  The U.S. needs to spend its resources in helping businesses develop new services and products.  Further, military spending diverts spending from domestic needs, affordable housing, improving our environment, public transportation, education, and health care.

 

Unless the U.S. changes the way it does business and changes its foreign policy, and the U.S. will continue to become an economic colony.