Have the Wars in Iraq and Afghanistan Hurt the Economy?

BY busadmin  August 17, 2009 at 3:34 PM EST

U.S. soldier in Iraq; file photo

Question: I often hear that WWII finally ended the Great Depression. How can it be that a relatively short war (WWII) was so helpful to the economy but our current wars (Iraq and Afghanistan) are hurting the economy?

Paul Solman: WWII was “a relatively short war”? It was the most sustained and expensive military effort this country has ever made.

When you write of the impact of “current wars,” I assume you mean impact on the economy of the moment. But who says the current wars are hurting our economy?

They might have hurt it from 2003-2007, in many ways, as we’ve chronicled on the NewsHour: Here’s our May 2007 piece about how soldiers and their families bear many of the hidden costs of the war, and our March 2008 piece on how both of the short- and long-term cost estimates for the wars have been far too low.

The wars have certainly hurt the economy of the moment by running up both oil prices and the deficit. A higher deficit arguably drove long-term interest rates higher than they otherwise would have gone. The cost to the American soldiers and Iraqis, military and non-military alike, is immense. The price we’ll pay in taking care of casualties is likewise enormous.

But once the economy tanked, military spending was a source of consumption at a time when both families and businesses had cut back drastically. Who’s to say the economic crisis mightn’t have been worse without our current wars? Not the most EFFECTIVE stimulus spending, I grant you, as Nobel laureate Joe Stiglitz pointed out: A great deal of the war money is spent abroad and on oil itself (for transportation, e.g.). And for all the reasons cited above. But military spending has presumably given the economy something of a boost, all else equal.