The Iraq War, Research Paper Example

This paper explores the economic costs of the Iraq war on the US Economy. It puts forward an argumentative approach looking at the advantages and disadvantages of the US war in Iraq. This is contrasted to the war in Vietnam and the costs vs. benefits of prosecuting that war.  The arguments are put into context by examination of the political viewpoints, international viewpoints and those of the United Nations.  The results are essentially informative based upon research conducted over a number of reliable sources.

Introduction

The prelude to war in Iraq started when the tyrannical regime of Saddam Hussein invaded its neighbour of Kuwait.  Hussein claimed that Kuwait belonged to the people of Iraq and was being exploited by the West for its oil.  As such the oil belonged to Iraq and he invaded the country in 1990.  The Iraqi invasion force occupied the country for 6 months before they were expelled by an international coalition force. When leaving Kuwait the Iraqi troops tried to destroy all of the oil wells in Kuwait and later they spent the next several years abusing no fly zone restrictions that had been placed upon them.   The real turning point came after the terrorist attack on New York City (9/11) and President Bush citing evidence that terrorist links could be traced back to Saddam Hussein in Iraq and state sponsored terrorism saw Iraq developing a program of weapons of mass destruction. These including chemical and biological warfare agents.  “The U.S. claimed to have intelligence which proved the existence of the WMD and asked the U.N. Security Council to authorize an attack. The council did not. Instead, the U.S. and the United Kingdom enlisted 29 other countries in a “coalition of the willing” to support and carry out the invasion launched in March 2003.” (Porter).

The US approached the United Nations Security Council to sanction the attack but they did not approve this.  The results of the UN Weapons Inspectorate in Iraq were inconclusive and they found no firm evidence of weapons of mass destruction.  Certain countries in Europe like France and Germany were also opposed to the invasion and preferred a diplomatic solution.  The coalition ignored this and went ahead regardless.

Objectives of the war

The main objective of the war was that of regime change and deposing the tyrannical reign of Saddam Hussein and his administration that were committing acts of genocide against the people, particularly the Kurds in the North of Iraq. He also suppressed the people of Iraq and posed a continued threat to Kuwait and stability in the Middle East.  This combined with him stockpiling weapons of mass destruction and his belligerent attitude to the west, particularly sponsoring acts of terrorism, sealed his fate.  The acts that were to follow astounded the world as they witnessed a country torn apart and the brutal acts of revenge that resulted in the public executions of Saddam Hussein and many of his senior followers.

Main issues from us military perspective

The US Military essentially had the following objectives in the prosecution of the war against Iraq:

• Regime Change – Depose the Hussein Government and make the protagonists stand trial for war crimes
• Re-establish a form of democratic government- in Iraq and liberating the people in order that they may run their own country free from persecution from a brutal dictatorship
• Help in the reconstruction of Iraq after the prime objectives had been completed
• Neutralise weapons of mass destruction – Eliminate any stockpiles of discovered weapons of mass destruction
• Collect Evidence – Collection of evidence of genocide and other killings that may subsequently be used in the trials of those arrested in Saddam Hussein’s regime.

Economic factors of the war

There is no doubt that the costs of the Iraq war have held a tremendous burden on the US economy “the full economic costs of the war to the American taxpayers and the overall U.S. economy go well beyond even the immense federal budget costs already reported. These “hidden costs” of the Iraq war” (Schumer and Maloney). Since the start of the war in 2003 the costs of the way have continued to escalate on an annual basis. This has far exceeded the budget of the US Administration.  The burden to the American taxpayer has also increased dramatically. Perhaps the most troublesome aspect of this is the amount of monies that get divested in both Afghanistan and Iraq instead of being diverted into the US domestic economy in terms of improving industrial development and the health system. “The President has requested a total of $607 billion for the Iraq war alone since 2003. This is over ten times higher than the $50 to $60 billion cost estimated by the Administration prior to the start of the war” (Schumer and Maloney). The war between 2002-2008showed  alarming cost of some $1.3 trillion, rising to $1.6 trillion if you factor in the contribution to the Afghanistan conflict.  The Joint Economic Committee has also produced a chart which illustrates the burden of these costs on the American taxpayer and family. In addition, .  You also need to factor in the cost of 4,000 US fatalities as a result of the war and the costs dealing with the rehabilitation of the many wounded soldiers.

The Washington post reported in September 2010 that in 2008 the total cost to to the USA for the war in Iraq amounted to $3 trillion. However, in 2010 the $3 trillion estimate is too low and the end resulting figure is likely to be much higher. The original estimate failed to include the cost for dealing with the wounded soldiers, compensation of disabled veterans and all of the opportunity costs associated with the war. The original calculation was pinned on the war for a $5 on the barrel increase of oil, however the conservative estimate is that it was at least $10/barrel which adds a further$250 billion to the original  price estimate. This in turn had a decestating detrimental effect on the US economy. This was a war that was almost entirely funded on borrowing which caused the US debt to rise from $6.4 trillion in March 2007 to that of $10 trillion in 2008, with the war being 25% of the increase in costs. In addition, this excludes any estimate for the post war costs which are estimated to add a further $0.5 trillion to the national debt. (Bilmes)

The global financial crisis contributed to the problem as the higher oil prices meant that the money spent on oil abroad was not diverted into domestic projects at home. This in turn failed to provide the economic stimulus on the domestic front. Hence the paying of foreign contractors in Iraq was only a short term stimulus and not the long term injection of capital required in order to stimulate the home economy. “With the unemployment rate remaining stubbornly high, the country needs a second stimulus. But mounting government debt means support for this is low. The result is that the recession will be longer, output lower, unemployment higher and deficits larger than they would have been absent the war.” (Bilmes).

Joseph Stiglitz an economist at Columbia University has reported that the health costs alone could exceed $600 billion against the earlier budget of $50-60 billion “Disability and health care payments for veterans alone could amount to $600 billion. “This (war) is an unfunded entitlement (program) we have created in the past five years,” Stiglitz this week told a forum at the Carnegie Endowment for International Peace, a Washington, D.C.-based non-profit. “ (Kirchoff). The war is bound to have an impact on GDP but it does include the inability of previous administration to have invested sufficient funds in building up the defence budget in order to deal with such emergencies. “Allen Sinai, president of consulting and analysis firm Decision Economics, says defense spending does add to gross domestic product, the broadest measure of the value of goods and services in the country. But at the same time, he says, the net impact of the Iraq conflict has been to reduce GDP by as much as a full percentage point annually” (Bilmes).

Economist warn against pegging the costs of the war in Iraq purely against the conflict. It is understood that the war contributed to this but there were other major factors in play, for example at the start of the war it coincided with a deep cut in production of oil fromVenezuala, a major world exporter. This caused a deep surge in the global demand for oil. Despite this Iraq is today producing around 2.2 million barrels of oil per day which is almost equivalent to the rate of production at the start of the war.

Stiglitz stated that the Feds have flooded the economy with liquidity and that we are now paying the price for those troubled years” To offset that depressing effect, the Fed has flooded the economy with liquidity and the regulators looked the other way when very imprudent lending was going up,” Stiglitz said. “We were living on borrowed money and borrowed time and eventually a day of reckoning had to come, and it has now come” (Trotta).

The Iraq war budget of 2007 was $138 billion or placed into better perspective this amount could have funded 45 million Americans with Medicaid, built 400 new schools and paid for 30,000 teachers, facilitated the construction of 1.6 million new homes. All of the costs for the ongoing Afghanistan war have yet to be factored into this huge equation but as that war rages on so does the bill and debt to the USA.  It is the combined legacy of these two wars that might ultimately see the demise of one of the world’s great super powers and economies “Add them all up together, factor in the structural mega-deficits and costly financial bailouts engineered by the politicians in Washington, and one cannot escape the conclusion that it will be bankruptcy, not victory, which will be the final outcome and legacy of America‘s war on Iraq.” (Global economic crisis)

Comparative analysis vietnam

In contrast to the Iraq war, the US can do comparisons to that of the Vietnam War “The Vietnam War cost the United States 58,000 lives and 350,000 casualties. It also resulted in between one and two million Vietnamese deaths.” (Digital History). Statistics illustrated the cost of the human tragedy:

• An estimated total of 2,122,244 were killed and 3,650,946 wounded.
• 58,169 Americans were killed (11,465 of them were teenagers) and 304,000 wounded.
• 444,000 North Vietnamese and 220,557 South Vietnamese military personnel and 587,000 civilians were killed.
• 2,590,000 Americans and 59,520 Australians served in Vietnam
• 6,727,084 tons of bombs were dropped (compared with 2,700,000 tons dropped on Germany during World War 11.) (Thorogood).

Economic models

Whilst Governments prosecute Wars it is the public that funds them and pays for it by increased taxation “War funding has been borrowed from the public. Since 2001, Federal government revenues as a share of  Gross Domestic Product have decreased by one percent, while outlays have grown significantly and debt held by the public has increased by approximately $1.5 trillion” (Schumer and Maloney).  The chart below illustrates the apportionment of the costs in the Iraq war.

The costs measured in billions of $.

Of particular interest is the disruption to the world’s oil supplies amounting to some $270 billion and the increase in the cost of oil to the consumer from the start of the war “Since the start of the Iraq war in 2003, the price of oil has increased, from $37 per barrel (in the week prior to the war) to a recent peak of well over $90 per barrel in November 2007” (Schumer and Maloney).

Admiral Mike Mullen stated that the national debt is one of the most significant threats to national security “The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff. Tax payers will be paying around $600 billion in interest on the national debt by 2012. “ (Mullen).

Increase in military spending

Most people believe that wars create wealth and increase the number of jobs.  In actual fact the increase in military spending tends to create the reverse trend.  The chart below illustrates the steady decline in jobs, particularly in the construction and manufacturing sectors. The impact is not really in the first 5 years but more the consequences over a much longer 20 year period. “The cumulative current account deficit over the twenty year period in the high military spending scenario is approximately $1.8 trillion higher than the baseline scenario” (Baker).  Increased military spending is also cited as one of the reasons for lost opportunities in the USA “As far as providing jobs, military spending is a much worse investment than other federally funded programs. For example, $1 billion spent by the Pentagon on weapons, supplies and services generates 25,000 jobs. However, the same $1 billion would also create 30,000 mass transit jobs, 36,000 housing jobs, 41,000 education jobs, or 47,000 health care jobs.” (Finley).

The international perspective

There is a considerable argument that you pay for super power status.  The chart illustrates how far removed the US is from other countries relative to military spending.

The arguments – Iraq war

“In the current economic purgatory that America finds itself in, it is astonishing that no policymaker has been held accountable for this $3 trillion “mistake” (mistake, that is, for those who believe the invasion was really based on the claim that Iraq possessed weapons of mass destruction-as opposed to reengineering the Middle East and securing oil resources).” (Global economic crisis).

Conclusion

It is questionable whether this was the right course of action for the US at that point in time. The UN Weapons inspectorate had not discovered any weapons of mass destruction and they had not completed the job. Despite Saddam Hussein being somewhat of a despicable character he had managed to retain relative stability in the area. Creating regime change is always dangerous unless you have a robust plan for recovery after the war. Essentially you are left holding the empty money purse and will be expected to replenish it and help in the rebuild of the country in the aftermath of destruction.  The US had already taken a huge responsibility in helping to rebuild Europe after World War 2 ( The Marshall plan). They may have learnt from this and considered the financial burden resulting in the reconstruction of Iraq. To make matters worse there remains the ongoing problems with Afghanistan and the potential for conflict with North and South Korea.  “The USA led the rise [in military spending], but it was not alone. Of those countries for which data was available, 65% increased their military spending in real terms in 2009. The increase was particularly pronounced among larger economies, both developing and developed: 16 of the 19 states in the G20 saw real-terms increases in military spending in 2009.” (Shah)

“Military spending slows economic growth, increases the budget deficit, increases the trade deficit as can be seen, in fact, in US’s negative Current Account Balance, formerly called the ‘balance of trade deficit’” (Hart)

Works Cited

Baker, Dean. The Economic Impact of the Iraq War and Higher Military Spending. Government Paper. Washington DC: Center for Economic and Policy Research, 2007.

Bilmes, Joseph E. Stiglitz and Linda J. The true cost of the Iraq war: $3 trillion and beyond. 5 9 2010. 30 11 2010 <http://www.washingtonpost.com/wp-dyn/content/article/2010/09/03/AR2010090302200.html>.

Digital History. Learn About the Vietnam War. 2010. 21 11 2010 <http://www.digitalhistory.uh.edu/modules/vietnam/index.cfm>.

Finley, David S. How Much Military Spending is Enough? . 28 3 2003. 21 11 2010 <http://home.pacbell.net/dsfinley/military/military_spending.html>.

Global economic crisis. Iraq War Will Cost the American Economy $3 Trillion. 1 9 2010. 30 11 2010 <http://www.globaleconomiccrisis.com/blog/archives/1168>.

Hart, Len. How the Iraq War Destroyed the US Economy. 11 11 2009. 21 11 2010 <http://www.thepeoplesvoice.org/TPV3/Voices.php/2009/11/11/how-the-iraq-war-destroyed-the-us-econom-1>.

Kirchoff, Sue. Debate rages about impact of Iraq war on U.S. economy. 10 4 2008. 30 11 2010 <http://www.usatoday.com/money/economy/2008-04-09-iraq-war-economy-cost-obama_N.htm>.

Mullen, Admiral Mike. War and The Economic Crisis: Mullen: “Debt is Main Threat to U.S. National Security … Pentagon Must Cut Spending”. 29 8 2010. 22 11 2010 <http://www.globalresearch.ca/index.php?context=va&aid=20810>.

Porter, Kieth. Profile: The Iraq War. 2010. 22 11 2010 <http://usforeignpolicy.about.com/od/newsiss3/p/iraqwarprofile.htm>.

Schumer, Charles E. and Carolyn B. Maloney. War at any Price? Economic Report. Washington DC: Joint Economic Committee, 2007.

Shah, Anup. Global Military Spending. 27 7 2010. 21 11 2010 <http://www.globalissues.org/article/75/world-military-spending>.

Thorogood, Peter. A vietnam war diary . 2010. 22 11 2010 <http://www.menziesera.com/vietnam/diary_cost.htm>.

Trotta, Daniel. Iraq war hits U.S. economy: Nobel winner. 22 3 2008. 30 11 2010 <http://www.reuters.com/article/idUSN2921527420080302>.