The Finance Crisis Means the U.S. Can No Longer Continue Two War-Quagmires and Must Reconsider Military-Based Foreign Policy
Nobel prize winning economist Joseph Stiglitz predicts the Iraq war will cost the United States $3 trillion. Nouriel Roubini, the economist who predicted today’s financial crisis in 2006, predicts the U.S. will suffer its worst recession in 40 years, lasting up to two years with 9% unemployment and another 15% drop in housing prices. He predicts we are seeing only the first round of government injection of funds into the finance system.
Throughout the Iraq war and occupation peace activists have pointed to the cost of war as one reason why the occupation must end. The “cost of war” clock is almost universal on anti-war sites. But now, with reports that the $1.8 trillion spent on bailing out the U.S. finance system is not enough to save the U.S. economy, the cost of war and the military budget must be reconsidered. The U.S. will need to choose – continued occupation or creating a new economy.
Unlike the depression which ended in part because of World War II, this time military spending is contributing to economic demise. Military spending takes money from the rest of the economy and prevents a federal budget that invests in re-tooling the economy. Spending hundreds of billions on the Iraq and Afghanistan war, and hundreds of billions more annually on military spending is one reason why the U.S. economy is faltering. The DoD is expected to put forward an even bigger budget request before the next president takes office. This will force the next president to quickly confront whether the military continues to dominate U.S. foreign policy and the U.S. budget.
The long-term cost of a military-dominated foreign policy has been a massive disinvestment in the civilian economy. The U.S. has been facing a failing infrastructure for a generation but instead of spending money on regional and local rapid transit the U.S. spends it on overpriced military equipment. Instead of building schools so kids are not working out of trailers, it is spent on building hundreds of military bases around the globe. No doubt the hollowing out of the U.S. economy is in large part the result of lack of investment in keeping the economy strong, investing in workers, ensuring productivity and keeping manufacturing in the U.S. As President Eisenhower warned: “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.” Sadly, money for war was more important than money for human needs and has dragged the economy down.
It is fair to say that the U.S. government is addicted to militarism. Elected officials keep spending on the military even though it hurts the security of the United States by undermining the civilian economy. The military is the most heavily funded area in the discretionary spending of the federal budget. For as long as I can remember half of the discretionary spending of the U.S. budget has gone to the military. When the cost of Iraq and Afghanistan are included the military is more than half of all discretionary spending. This has meant decades of disinvestment in the civilian sector, no wonder the infrastructure is failing, the U.S. is behind other countries in creating new, clean energy sources, college education is becoming unaffordable and the health care problem has not been fixed.
The reality is war is only good for a small portion of the economy as most corporations do not profit from war. The companies that benefit are those that destroy everything in the ‘shock and awe’ campaigns that have become the hallmark of U.S. invasions. The second group that profits from war is the occupying companies that get paid to rebuild what aerial bombardment destroyed and support the massive overseas U.S. military presence. This includes not only the construction companies but the private security firms (which provide more troops in Iraq than the U.S. military) and the oil companies that profit from rising prices caused by destabilization of oil producing countries.
Oil is a good example of how war has become a major drag on the U.S. economy. Destabilization of Iraq has resulted in dramatic rises in oil prices until the economic crisis hit – a steady incline of rising prices. Exxon-Mobil became the most profitable company in world history in 2008 posting an $11.68 billion profit, $1,485.55 a second, in the second quarter of 2008. For them the Iraq war has been a victory. Yet, what did it do to the pocketbooks and household budgets of Americans?
When it comes to the rebuilding destroyed nations, the U.S. exports its culture of corporate corruption. There are insider deals made with companies like Halliburton and Blackwater. When the DoD auditor finds it impossible to audit Halliburton’s books – because of sloppy and incomplete records – are they punished? No, they are given another contract. Are they punished when there are reports of corruption, e.g., charging for empty trucks driving back and forth across the desert, or lavish living outside of Iraq, or overcharging for simple things like laundry? Of course not. Local contractors in Iraq could have done the job much more cheaply – and unemployment in Iraq would have been lessened undermining one attraction of the insurgency – but instead Vice President Cheney’s old company got the contract. Iraq rebuilt its nation after the first Gulf War much more effectively than the U.S. did in the current occupation. Corruption won out over common sense.
The Earth is facing the challenge of Global Climate Change yet rather than investing in the new energy infrastructure, or the research and development of inexpensive solar panels, investments that will create millions of jobs, the U.S. invests in war. In fact, the projected total US spending on the Iraq war could cover all of the global investments in renewable power generation that are needed between now and 2030 in order to halt current warming trends. The $700 billion that Congress has allocated for military operations in Iraq to date could have built over 9000 wind farms with the overall capacity to meet a quarter of the country’s current electricity demand. If 25% of our power came from wind, rather than coal, it would reduce carbon emissions by over 1 billion metric tons – equivalent to approximately 1/6 of the country’s total CO2 emissions in 2006.
And, the military is a gigantic user of fossil fuels. The war is responsible for at least 141 million metric tons of carbon dioxide equivalent since March 2003. To put this in perspective, CO2 released by the Iraq war to date equals the emissions from putting 25 million more cars on the road in the US this year.
War is bad economics especially wars conducted on borrowed money. The two quagmires the U.S. is currently in – Iraq and Afghanistan – are not being funded by current taxes – they are being funded by borrowed money. Thus, not only will these wars be a drag on the current budget, but a drag on the finances of our children and grandchildren.
And, what are the effects on American families and the American workforce when vets come home. Not only are there the medical bills that the underfunded Veterans Administration has to pay, but there are the damaged psyches of the vets. Iraq and Afghanistan, because they are occupations of countries that do not want the U.S. there, are unlike previous wars. There is no front-line to go behind for a break. Everywhere is a potential enemy. Nine out of ten soldiers serving in the occupations have been shot at or have seen comrades shot. As a result we are seeing hundreds of thousands coming home injured. What will it cost to re-socialize these veterans? What will it do to their families? How will they fit into the workforce?
The cost of the war has been underestimated from the beginning. The government convinced itself that Iraqi oil would pay for the war; that war taxes were not needed. It would have been unpatriotic for an economist to tell the truth – that fighting two, long wars at once could bankrupt the country. That was a truth that was not to be uttered as far as the militarist U.S. government was concerned.