Missed Opportunity: The Cost of the War in Iraq

In the language of economists, opportunity costs represent what is lost or what must be given up when a decision is made to spend money or focus resources in one area to the exclusion of another. A business, for example, might choose to invest capital on retooling its factory rather than purchasing new office furniture for its corporate headquarters based on many economic factors, usually which opportunity will have the greatest net impact to the bottom-line.  In the same way the federal government must decide how  limited annual revenues will be spent. Not with the end result to maximize profits as in the private sector, but to bring the greatest benefit to the country as a whole. The Bush Administration, in its decision to invade Iraq and maintain an occupying force there for the past 5 years, has spent  hundreds of billions of dollars, a figure that analysts predict will enter the trillions in the not so distant future.

What are the opportunity costs of the war in Iraq? There are many ways to consider and answer this question. First and foremost it must be pointed-out that the money being “spent” on the war in Iraq is largely borrowed funds in that the US government operates at a current deficit of $9.3 trillion dollars, [1]  so when considering how and why the government spends it’s worth noting that the greatest opportunity cost of all is the cost of running the country at an extremely high deficit. This is true not only in terms of the cost to service such a debt, but in the cost of the general weakness a deficit economy encumbers on a country. Given the nation’s wealth, the US should easily be capable of not only operating under a balanced budget, but of being the country that makes loans to its weaker international counterparts, not the other way around. Clearly that’s far from the case at this point in history.

It is currently estimated that the war in Iraq runs at about $175-275 million per day, depending on the source cited and the metrics used to derive the daily cost. At the low end, that’s $63.9 billion per year, however, the current funding request for the war and war related expenditures is expected to hit $82 billion plus an additional $73 billion the Bush Administration is proposing in additional funding for FY08  bringing the total cost of the war in Iraq through FY08 to well over $600 billion. [2] According to the National Priorities Project, “Taxpayers in the United States will pay $155.5 billion for proposed Iraq War Spending for FY2008. For the same amount of money, the following could be provided: [3]

44,330,909 People with Health Care or
160,931,429 Homes with Renewable Electricity or
3,478,615 Public Safety Officers or
2,698,795 Music and Arts Teachers or
25,660,964 Scholarships for University Students or
15,637 New Elementary Schools or
1,209,236 Affordable Housing Units or
66,294,593 Children with Health Care or
21,332,592 Head Start Places for Children or
2,646,531 Elementary School Teachers or
2,336,286 Port Container Inspectors.

At the annual rate of $155.5 billion, the US could create a robust economy unrivaled worldwide. With such a direct infusion domestically, the revenues generated would pay for any debt incurred, bolster the dollar, balance the budget and create surpluses in short order. As it is, aside from the military industry, money spent on the Iraq war is leaving US shores never to return in any significantly beneficial way.

At a time of economic struggle and impending recession, money that currently escapes the US to be used overseas could provide real and long-lasting stimulus in the form of green technologies, infrastructure investment, global competitiveness, and community development, just to name a few. The missed opportunities represented by the war in Iraq are well-illustrated by examining a few key areas of the US economy and demonstrating how an influx of investment by the government could not only provide more security than the wars overseas, but shore-up our economy  for the future.

Security
The Office of Homeland Security recently celebrated its fifth anniversary. Analysts examining the goals and accomplishments of the new federal agency found, ironically enough, that the single most significant achievement of the agency was the creation of the agency itself (color coded alerts not withstanding). The invasion of Iraq was initially launched in the name of national security, but while we’ve spent billions in the Middle East battling a threat that never materialized, the physical borders between Canada and Mexico are no more secure, air travel safety is only slightly improved, the coasts and shipping ports have seen little significant attention, and Osama Bin Laden is still at large.
With the exception of Bin Laden, expenditures on actual homeland security, i.e. money spent within our borders, would enhance the domestic economy by creating new jobs in the security industry and foster improved security technologies that could be exported to other countries facing similar concerns. So even as the Bush Administration and other proponents of the war in Iraq point to security as the primary impetus for initiating and perpetuating the war in Iraq, and with 4,000 US Troops dead and tens of thousands wounded, not only are we less secure at home, but our military has been weakened and demoralized in the process, making us less capable of defending ourselves and our allies in the event of a military crisis at home or abroad.

Infrastructure
The construction and maintenance of roads, bridges, dams, public parks and buildings is a vital industry across the US and can have an immense impact on the economy given appropriate funding and management from a local to the national level. Economic stimulus opportunities and jobs in every strata of the economy from investment in government bonds to construction workers are created when a government is willing to focus resources on infrastructure.

Instead, however, state and local governments, without the financial resources or significant federal assistance to take action,  watch helplessly as their roads fall further into disrepair and bridges age precipitously. It is predicted that the Minneapolis bridge failure in August of 2007 will become an increasingly common story and concern in the future across the U.S. There is also concern that airports, tunnels, ports, and railroads will be increasingly affected by climate change in their vulnerability to extreme weather patterns and flooding, especially in the Gulf region where scenarios like the aftermath of Hurricane Katrina will become more and more commonplace. [4]

Climate Change/Green Technology
Global warming not only represents the most serious ecological crisis in history, it is also a golden opportunity for any country that can develop technologies to halt and ultimately reverse the effects of greenhouse gases to be sold worldwide. While the US has spent hundreds of billions of dollars fighting a war it should never have started, other technologically advanced countries have invested in the research and development necessary to avert the climate crisis and positioned themselves to lead the industry.
Cleantech Venture Network reports that North American venture capital investment in green technologies and businesses totaled a record $2.9 billion for 2006, representing a 78% increase over 2005.[6]   This isn’t unreasonable growth fueled by wild speculation and baseless valuation at the hands uninformed stock market newcomers a la the dot.com boom in the 90’s, this is the private sector’s savviest venture capitalists seeing a future that’s already here for new investment opportunities that promise high yields to those first-in.

In an effort to develop clean energy, Abu Dhabi has started to build what it says is “the world’s first zero-carbon, zero-waste car-free city,” investing $22 billion in the project. In addition, the government of Abu Dhabi has announced a $15 billion project to further develop green technologies over the next 5 years. In addition to the long-term benefits to the environment, Abu Dhabi and other equally motivated countries stand to gain economically in the potential export of the results of their investments to other cities worldwide. [5]

But as the U.S. government labors under misguided fear fighting a futile war that will only result, at best, in facilitating and perpetuating its addiction to oil. And as U.S. citizens pay crippling prices at the gas pump and watch their economy slide into recession,  growth-oriented countries and private investors look forward to a future that not only cares for the environment and reduces the effects of global warming, but that fosters a healthy industrial economy with high employment and robust growth.

Society at Large
Poverty, hunger, education, health care, child services, care for the elderly, the social security system, job training, veteran services and homelessness are just a few of the societal ills in need of far-reaching solutions that are cynically and often tragically ignored or slighted by politicians who act in “big picture” terms for “our protection.” In its rush to war the Bush Administration has spent hundreds of billions and ultimately trillions to fight phantoms overseas of their own creation for motives on which one can only speculate, but that clearly have little or nothing to do with the child who goes to bed hungry every night or the senior citizen who must sell his family home to pay for medicine or hospital fees not covered by Medicare.

In a wealthy country such as the United States, the idea is patently absurd that there is a scarcity of financial resources to provide for our security at home, to build, improve and maintain our infrastructure, to develop and produce the technologies required to solve the global warming crisis, and to create a social system that really does “promote the general welfare.”

If the U.S. can squander hundreds of millions each day on a war that will do little good for and potentially a great deal of harm to our national economy, surely it can redirect all or part of those same funds to promote change, institute fairness, revitalize economic growth and create a future for our county and the world that we will be proud to pass on  for the benefit of generations to come.

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FOOTNOTES
[1]  U.S. National Debt Clock
http://uspolitics.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=uspolitics&cdn=newsissues&tm=18&f=20&tt=2&bt=0&bts=0&zu=http%3A//www.brillig.com/debt_clock/

[2] National Priorities Project - Budget Briefs
http://www.nationalpriorities.org/budget_briefs
[3] National Priorities Project – Federal Budget Trade-Offs
http://www.nationalpriorities.org/cms/tradeoffs?location_type=1&state=888&program=574&tradeoff_item_item=999&submit_tradeoffs=Get+Trade+Off

[4] Studies: Climate Change Threatens U.S. Roadways http://www.npr.org/templates/story/story.php?storyId=88116192

[5] BBC News: Work starts on Gulf ‘green city’
http://news.bbc.co.uk/2/hi/science/nature/7237672.stm

[6] Detroit Business News
http://detroit.dbusinessnews.com/shownews.php?newsid=103252&type_news=latest

OTHER SOURCES
War at Any Price? - The Total Economic Costs of the War Beyond the Federal Budget
A Report by the Joint Economic Committee Majority Nov 2007
http://jec.senate.gov/Documents/Reports/11.13.07IraqEconomicCostsReport.pdf

Brookings Institute Iraq Index
http://www.brookings.edu/saban/iraq-index.aspx

Brookings Institute: America’s Infrastructure: Ramping Up or Crashing Down
http://www.brookings.edu/~/media/Files/rc/papers/2008/01_infrastructure_katz_puentes/01_infrastructure_katz_puentes.pdf

iCasualties.org
http://icasualties.org/oif/default.aspx

The Nation: Threats Of War, Recession Going Ignored
http://www.cbsnews.com/stories/2008/01/18/opinion/main3728991.shtml

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