Robert Samuelson Underestimates the Cost of War

Print
Thursday, 05 September 2013 07:55

Robert Samuelson used his column today to dismiss the idea that the nation could be "war weary." He correctly notes that a relatively small segment of the population has either served in recent wars or has close relatives who served. However his discussion of the costs is misleading.

He tells readers:

"From 2001 to 2012, federal spending totaled $33.3 trillion; the wars were 4 percent of that. Over the same period, the American economy produced $163 trillion of goods and services. War spending equaled nine-tenths of 1 percent of that.

"As important, no special tax was ever imposed to pay war costs. They were simply added to budget deficits, so that few, if any, Americans suffered a loss of income. It’s doubtful that much other government spending was crowded out by the wars."

It is difficult to get a precise estimate of the cost of the wars over this period, but one simple approach would be to look at the path of defense spending. This had been 3.0 percent of GDP in 2000 and was trending downward. After 2001 it averaged more than 4.5 percent of GDP. This difference over 12 years comes to 18 percentage points of GDP or roughly $2.9 trillion in today's economy. This calculation ignores the timing of the expenditures, but it should be sufficient for a ballpark number. It also excludes increased spending on veterans benefits that resulted from the wars.

As a practical matter, since the economy was well below full employment for most of this period, the wars would not have imposed much of an economic burden. They would have had roughly the same economic effect as paying people to dig holes and fill them up again.

However, we live in a country with deficit and debt fixations that are pushed by people like Robert Samuelson and his newspaper. These people have been yelling frantically about the need to contain spending and get deficits down. For a long time they warned about a boogeyman who would destroy the economy if the debt to GDP ratio exceeded 90 percent.

In this context the debt that we ran up as a result of the wars has been a very large burden. This debt has been a big weapon used by those who don't want the government to take steps to stimulate the economy and put people back to work.

In short, if we were having a serious discussion about economic potentials, then Samuelson would be right that the wars have not posed much of a burden. However in the political world where we actually live, the wars have been a big factor impeding our ability to boost the economy and create jobs.