Big Money, Small Money: The War and Student Loans

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Dean Baker
Truthout, January 18, 2007

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As President Bush prepares for his "surge" in Iraq, it is worth thinking about the growing cost of the war. While finances should never come first when talking about a war that has resulted in hundreds of thousands of deaths, it is reasonable to ask about the tab that Bush is running up.

This is especially worth doing because Congress feels constrained in other spending by its desire to reduce the budget deficit. That is why the legislation passed by the House reducing the interest rates charged on student loans phases in lower rates over five years. Congress felt it would be too costly to reduce the interest rate more quickly. The legislation ends the subsidy at the start of 2012, also out of a desire to save money.

According to the Congressional Budget Office, the cost of the student loan subsidy will be $8.1 billion over five years. This is $1.6 billion annually, or an average of about 0.05 percent of federal spending over this period.

Now let's consider the cost of the Iraq War. At current appropriation levels, the war is costing the government close to $100 billion a year. But, the direct appropriation is only part of the story. As a result of the war, the government must pay more money to attract people to enlist in the military and reserves. It will also incur additional expenses in future years, paying for medical care for veterans and disability benefits for those who are permanently injured. In addition, there will also be costs for replacing equipment that is damaged, destroyed, or simply worn out. A recent estimate put the total of these costs at close to $200 billion a year, and this is real money.

For purposes of comparison, we can just take the lower $100 billion figure for the war. This is more than 60 times what Congress was prepared to cough up for student loans. In other words, Congress will spend more each week on the war in Iraq than it was prepared to spend in a whole year making it easier for students to attend college.

Of course, it isn't just student loans that will be squeezed by limited resources. Congress will likely be cutting funding for a wide range of programs, from medical research to child care - all to meet deficit targets it laid down last week. No government program is perfect, but we know the benefits from student loans, medical research, and child care. It is very difficult to see the benefits from the continued funding of President Bush's war.

Opinion polls show that most people want to see the war brought to an end. However, at this point, Congress is still reluctant to explicitly challenge the president by cutting funding for the war. In this context, it important to understand that - given current budget constraints - the members of Congress who vote to continue funding the war are not just supporting the continuation of the war, they are also voting for cuts to many programs that the public values. In other words, a vote to fund the war is a vote to cut Head Start, K-12 education, and just about every other social program. Members of Congress should understand the meaning of their votes for war funding, and so should the public.


Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.