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3.07.03
Politics and Economy:
Economic Costs of War
More on This Story:
Overview

The Dow is down — these days often attributed to war jitters. Oil prices and health costs are up, and over 8 million people are unemployed. On March 8, 2003 the Department of Labor released new figures that were, according to news analysts, "far more severe" than had been predicted. Recently, THE WALL STREET JOURNAL ran a page one story on a worker who had sent out over 700 resumes without landing a job.

The White House now estimates the budget deficit will hit a record $304 billion this year. On March 6, 2003, the NEW YORK TIMES reported that the financial firm Goldman Sachs assessed the figure at $375 billion and warned that it was likely to head higher. These figures don't include the costs of a war with Iraq — government sources have been reluctant to attach a price tag.

On NOW's March 8, 2003 broadcast Bill Moyers talked with Lew Rockwell about the economics of war. Mr. Rockwell is a Libertarian, free-market conservative, and president of the Ludwig von Mises Institute. That's the organization he founded to advocate and promote the philosophy that the solution to fiscal and social woes begins with smaller government. During that interview Mr. Rockwell referred to the federal deficit, federal debt, the size of federal spending, and the dollar costs of war — all of which he views as "destructive" to the American economy.

The U.K. publication THE ECONOMIST, which has an editorial policy favoring war with Iraq, is nevertheless worried about the economic effects of a prospective war. In a recent series of articles, "The Cost of War," THE ECONOMIST looked at the many financial costs of a war: direct military costs; peacekeeping, humanitarian assistance and rebuilding and the macroeconomic costs to the world economy in oil prices, stock markets, the dollar and business and consumer confidence. ABC News, BUSINESS WEEK and U.S. NEWS AND WORLD REPORT all recently cited figures from Yale economist William Nordhaus. Nordhaus has estimated that the final cost of war including direct and indirect costs will range from $100 billion to $1.9 trillion depending on the duration and character of the conflict.

THE ECONOMIST also noted that governments regularly underestimate the costs of waging war. The U.S. government has not released comprehensive figures, but recent estimates include the following figures.

The Cost of Waging War

Congressional Budget Office Projection for a six-week war:  $50 billion
Congressional Budget Office Costs for First Gulf War (today's dollars):  $80 billion
Five years of peacekeeping costs (Based on figures from Balkans experience):  $75 to $500 billion
Sources: THE ECONOMIST; William Nordhaus, "Iraq: The Economic Consequences of War," THE NEW YORK REVIEW OF BOOKS; "War with Iraq: Costs, Consequences, and Alternatives;" American Academy of Social Science

Even without the costs of war added in the budget deficit, and government spending as a whole are increasing, a trend that troubles small-government advocates like Rockwell and deficit hawks alike.

  • The National Debt to the Penny
  • See how deficits are effecting your state

  • Historical Budget Deficits and Surpluses

    1970: Deficit in Billions of Dollars:  -2,842
    1975: Deficit in Billions of Dollars:  -53,242
    1980: Deficit in Billions of Dollars:  -73,830
    1985: Deficit in Billions of Dollars:  -212,308
    1990: Deficit in Billions of Dollars:  -221,195
    1995: Deficit in Billions of Dollars:  -163,972
    2000: Surplus in Billions of Dollars:  236,445
    2004 (projected): Deficit in Billions of Dollars:  -307,400
    Sources: U.S. Department of Treasury, Department of Accounting and Budget; Office of Management and Budget, "Budget of the United States Government, Fiscal Year 2004;" Bureau of the Public Debt, The Public Debt To the Penny


    Government Spending in Current Dollars

    1970: Spending in billions of dollars:
    Spending as percent of GDP:
     195.6
     19.3%
    1975: Spending in billions of dollars:
    Spending as percent of GDP:
     332.3
     21.3%
    1980: Spending in billions of dollars:
    Spending as percent of GDP:
     590.8
     21.6%
    1985: Spending in billions of dollars:
    Spending as percent of GDP:
     946.4
     22.9%
    1990: Spending in billions of dollars:
    Spending as percent of GDP:
     1,253,2
     21.8%
    1995: Spending in billions of dollars:
    Spending as percent of GDP:
     1,515.8
     20.7%
    2000: Spending in billions of dollars:
    Spending as percent of GDP:
     1,788.8
     18.4%
    2004 (projected): Spending in billions of dollars:
    Spending as percent of GDP:
     2,229.4
     19.7%
    Sources: U.S. Department of Treasury, Department of Accounting and Budget; Office of Management and Budget, "Budget of the United States Government, Fiscal Year 2004"

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