The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Guns versus Butter…Not Really

07/13/2010

Recently, there has been considerable debate within the economic community about the cost of the wars in Iraq and Afghanistan. Some argue the cost should only include the money appropriated by Congress, which is a little over $1 trillion. (See http://www.costofwar.com/)

Others argue you should include the continuing cost of veterans’ care over their lifetimes or the wages a fallen soldier would have earned in his lifetime or interest on the money borrowed and other derivative costs. I’ve seen estimates from $3 trillion to $6 trillion. It is interesting to arbitrarily accept the lowest estimate of $3 trillion and compare it to the funds appropriated by Congress for the 2008 TARP ($700 billion) and the 2009 Stimulus Package ($787 billion)

That makes the wars twice as costly as TARP and Stimulus combined. To be fair, there are many other costs associated with the Great Recession, adding trillions to that as well, but I’ve seen no research on that yet. What makes this interesting is these war costs came just before the cost of huge deficit spending required by Keynesian economics to re-start the economy. This will become known as the “Keynesian Endpoint”, which means it doesn’t work past this point. We were already so deep in debt from the wars that the needed deficit spending is more than we can afford.

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