Baseball91's Weblog

April 15, 2010

Those Tea Parties



In his book, “The Three Trillion War,” Nobel laureate Joseph Stiglitz and co-author Linda J. Bilmes state that the total economic impact of the Iraq War may be $4 trillion or more. And that was before the United States escalated things in Afghanistan.

Former White House economist Lawrence Lindsey was fired as economic adviser to President Bush partly because of his estimate of the dollar cost of the Iraq war. In an excerpt of his own book in Fortune magazine five years after, Lindsey wrote his projections were partly right. “My hypothetical estimate got the annual cost about right. But I misjudged an important factor: how long we would be involved.” Mr. Lindsey also stated his belief that one reasons the administration’s efforts were so unpopular was the choice not to engage in an open public discussion of the consequences of war, including its economic cost.”

Congressional Democrats had predicted the Iraq war would cost about $93 billion, not including reconstruction. Peter R. Orszag, director of the Congressional Budget Office, said, “It’s clear that operations in Iraq and Afghanistan have gone on longer and have been more expensive than the projections initially suggested,”

So far this has been a tax-free Iraq War, and not included in the Congressional Budget, as I recall a piece that was written in 2002. According to an item that ran on the MSN news page, the cost was carried over. I see little media coverage since that time indicting where the war shows up in the president’s budget.

William Nordhaus from Yale University wrote in the New York Review of Books in December 2002 in an article entitled “The Economic Consequences of War,” about the the long-term management of the economy, with the management of planning cycles. “The fabulous Nineties—with soaring stock market, falling unemployment, declining defense spending, budget surpluses, and bubbly optimism—were followed by the Bush administration which made no serious public estimate of the costs of the coming war. The public and the Congress are unable to make informed judgments about the realistic costs and benefits of the upcoming conflict when none are given. Particularly worrisome is the promise of postwar occupation, reconstruction, and nation-building in Iraq. If American taxpayers decline to pay the bills, this would leave a mountain of rubble and mobs of angry people in Iraq and the region. Closely related is a second syndrome, frequently found in past conflicts, of entering war prepared militarily but not economically. The finances of the nation have deteriorated sharply since George W. Bush took office. The annual federal budget has deteriorated by $360 billion from the spring of 2001 to the fall of 2002, and, even with a short war, budget deficits are likely to mount in coming years. The Bush administration has not prepared the public for the cost or the financing of what could prove to be an expensive venture.”

Nor has the Obama Administration. Market participants, wrote William Nordhaus in “The Story of the Bubble,” at this point do “remember how they lost $6 trillion on absurd and wildly overvalued speculations. A similar exuberance is unlikely to recur in the near future. More likely is an economy in which large federal budget deficits lead to cuts in existing civilian programs and doom critical priorities such as comprehensive health care.”

That tax-free Iraq War, as conceived by the Bush White House, was one ongoing economic consequences of war. There was now the subsequent tax-free Afghan War. These wars would soon change American history. Would you like to come over for tea?

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