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10 Years On, the War on Terror Saps U.S. Economy

September 8, 2011 - 6:00pm

If World War II brought America out of the Depression, the post-9/11 "War on Terror" threatens to drag the country into one. So goes the conventional wisdom a decade after the life-changing attacks on the United States.

The nation has paid a dear price in blood and treasure to hunt down the terrorist organizations that hijacked four commercial jetliners and toppled the World Trade Center towers in New York City.

In addition to the 2,752 lives lost in the Sept. 11, 2001, attacks, more than 6,000 U.S. military personnel have been killed in Iraq and Afghanistan. According to estimates, wartime operations directly resulted in the deaths of 224,000 to 258,000 people, including 125,000 Iraq civilians.

The economic cost to America is harder to quantify, and no less disturbing.

Through 2012, the Congressional Research Service pegged the estimated cost of war funding at $1.4 trillion. But that figure has been called unduly conservative.

"I don't know what the president knows, but I wish it were a trillion," Boston University professor Neta Crawford told Reuters.

A Brown University report co-directed by Crawford estimates that $3.7 trillion to $4.4 trillion has been spent on wartime expenses, mostly on military missions in Iraq and Afghanistan. Going forward, the report projected these costs:

  • Anticipated benefits for veterans through 2050: $589 billion to $934 billion.
  • Additional Pentagon appropriations: $326 billion to $652 billion.
  • Projected war-related spending between 2012 and 2020: $453 billion.
  • Homeland Security spending: $401 billion.
  • "Social costs" paid by service members and their families: $295 billion to $400 billion.
  • Interest payments for debt incurred from borrowing for war spending: $185 billion.
  • War-related foreign aid: $74 billion.

Joseph Stiglitz, a Columbia University economist, calculated the costs between $3 trillion and $5 trillion -- and that was three years ago.

"With almost 50 percent of returning troops eligible to receive some level of disability payment, and more than 600,000 treated so far in veterans' medical facilities, we now estimate that future disability payments and health care costs will total $600 billion to $900 billion," Stiglitz wrote in a book, "The Three Trillion Dollar War," co-authored with Linda Bilmes.

"The social costs, reflected in veteran suicides (which have topped 18 per day in recent years) and family breakups, are incalculable," Stiglitz said.

Stiglitz argues that the post-9/11 military operations have contributed to America's "macro-economic weaknesses, which exacerbated its deficits and debt burden."

Among the ill-effects cited by the Nobel Prize-winning economist:

  • Disruption in the Middle East led to higher oil prices, forcing Americans to spend money on oil imports that they otherwise could have spent buying goods produced in the U.S.
  • The Federal Reserve hid these weaknesses by engineering a housing bubble that led to a consumption boom.
  • The deficits to which America's debt-funded wars contributed so mightily are now forcing the United States to face the reality of budget constraints.


While defense contractors have profited -- for example, Sikorsky Aircraft Corp., the maker of Black Hawk helicopters, saw its global sales more than double in

five years to $6.7 billion in 2010 the benefits have not trickled down.

"There's a lot of money to be made by war contractors and rent-seeking special interests. But for the economy as a whole there's a less efficient use of resources," says Adam Summers, a policy analyst with the libertarian-leaning Reason Foundation in Los Angeles.

Summers disputes the widely held notion that U.S. involvement in World War II revived the nation's depressed economy.

"Yes, it brought down unemployment by conscripting 30 percent of workers. But productivity went down with the use of elderly workers, women and teenagers. Building tanks didn't raise the quality of life," he observed.

"It's like the [federal] stimulus: Government can't create wealth."

Security-minded critics, including Republicans, have bemoaned Washington's mounting indebtedness to China, and Beijing's own military expansionism by air and by sea.

Since the war on terror has been financed largely through borrowed money, even patriotically oriented tea party groups have begun to question the ongoing cost of the global mission. They vividly recall the warning President Dwight Eisenhower (who commanded the Allies in Europe during World War II) sounded about the excesses of what he branded the "military industrial complex."

"Perhaps the most remarkable feature of post-9/11 neoconservative foreign policy was its virtual disregard for economics," Peter Beinart wrote recently at the Daily Beast website.

"Undergirding post-9/11 neoconservatism was the assumption that the money for a quasi-imperial foreign policy would always be there; and that, if necessary, domestic spending could always be slashed -- and perhaps even taxes raised -- to make sure the Pentagon was spared the ax. But that assumption no longer holds.

"Forced to choose between health-care spending and military spending, as they increasingly must do, most Democrats will choose the former. And forced to choose between military spending and tax hikes, Republicans in this tea party era will throw the Pentagon under the bus as well."


Indeed, none of the major GOP candidates is attacking President Obama's gradual policies to ratchet down military activities in Afghanistan and other Mideast hotspots. The administration, by the way, has softly renamed these types of actions "overseas contingency operations."

"Republican voters have little appetite for the neoconservative agenda of continued war in the Middle East," Beinart wrote.

After almost 10 years of military campaigns, the chief accomplishment was the killing of al-Qaida kingpin Osama bin Laden. Meantime, Iraq remains chaotic and Afghanistan increasingly resembles the kind of advance-and-withdraw exercise that bogged down the Soviet Union's Red Army.

Still, no one is talking about downsizing the U.S. armed services.

Stiglitz notes that America's military spending remains nearly equal to that of the rest of the world combined, two decades after the end of the Cold War.

"Some of the increased expenditures went to the costly wars in Iraq and Afghanistan and the broader global war on terror, but much of it was wasted on weapons that don't work against enemies that don't exist," the Stiglitz says.

Summers asserts that a surge in security-related spending at home hasn't helped the country economically.

Likening war-on-terror "stimulus" to French theorist Frederic Bastiat's "broken window" rationale, that a shopkeeper replacing a busted-out pane of glass generates "economic activity," Summers asks what the shopkeeper would have done with money otherwise.

"Bureaucracy is as inefficient in Homeland Security as it is in every other area of government," he posits. "Money is being diverted from more productive uses in the private sector. It's money down the drain."

Citing the much-criticized Transportation Security Administration, Summers believes, like U.S. Rep. Ron Paul, that airlines should be responsible for their own "defense costs."

"Right now, we have a one-size-fits-all, top-down mandate from the government. Put the focus on safety of consumer," he suggests.


No fan of big government, U.S. Rep. Tom Rooney, R-Tequesta, rejects the suggestions of "waste" in intelligence funding as a dangerous exercise in second-guessing.

That's the stupidest thing I've ever heard. If their towns get attacked and we shouldve known about it, they'd be the first to say they shouldve been warned, said Rooney, who sits on the House Intelligence Committee.

The second-term congressman who also serves on the House Armed Services Committee said, Significant cuts to defense and intelligence in the 1990s seriously weakened our military readiness and intelligence-gathering ability, and ultimately put our national security at risk.

"The 10-year anniversary of 9/11 is a reminder of the need for a strong, effective military and intelligence community to keep our citizens safe and ensure that such a tragedy never happens again.

Rooney, an attorney who formerly served in the Judge Advocate General Corps, added that the current Intelligence Authorization Act includes "significant savings that will not impact the mission or compromise safety."

It is "significantly below" the presidents budget request for fiscal 2012, and below the levels authorized and appropriated for fiscal 2011, the congressman noted.

With hindsight, war-on-terror skeptics say they have been vindicated on the point that Iraq was not involved in the 9/11 attacks and did not represent a threat to the United States.

"We should have followed the wisdom of Washington and Jefferson to seek peace and trade while avoiding entangling alliances that lead to war," Summers says.

As for the price of security?

"Trying to be policeman of the world and putting ourselves in the middle of every conflict makes us less safe," he says.

Contact Kenric Ward at or at (772) 801-5341.

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