It's the War Economy, Stupid!

This article appeared in the March 31, 2008 edition of The Nation.

March 13, 2008

With the country poised on the precipice of a recession, if not already in one, the economy has eclipsed Iraq as the most pressing issue of the moment. But rather than being treated as discrete items on a laundry list of issues, the war and the economy should be linked. While the current economic meltdown has other causes, one of the biggest obstacles we face in pulling out of this crisis is the staggering cost of the war in Iraq.

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In the five years since the war began, the United States has spent more than $522 billion in Iraq. This year spending will easily top $160 billion. Yet, as Joseph Stiglitz and Linda Bilmes point out in their new book, The Three Trillion Dollar War, the short-term costs pale in comparison with the sum our nation will spend over the long term. Ongoing veterans' health costs, debt payments and the cost of re-equipping the military are some of the reasons for this outrageous $3 trillion bill. At the same time that the war has imposed a huge burden on taxpayers, it has precipitated one of the largest transfers of wealth and power in modern history. By helping to drive up world oil prices, it has produced a massive redistribution of wealth from working Americans and other oil and gas consumers to a handful of oil producers.

Given the logic of military Keynesianism, one might think that spending on the war would keep the economy humming. With soldiers receiving signing bonuses of $10,000 or more, defense industry stocks rising nearly 20 percent last year and military contractor CEOs bagging tens of millions (see centerfold), some pockets are flush with cash. But, as Robert Pollin and Heidi Garrett-Peltier explain on page 15, military spending is one of the least effective tools for stimulating the economy. Redirecting Iraq War funds to education, healthcare, renewable energy and infrastructure would create up to twice as many jobs.

In the heat of their battle for the Democratic nomination, Hillary Clinton and Barack Obama have neglected to emphasize the relationship between war spending and our economic woes. And the fact is, their Iraq plans--both of which allow for a residual force to remain after combat troops are withdrawn--do not do enough to rein in the costs. As for GOP nominee John McCain, his announcement that it wouldn't trouble him if US troops stay in Iraq for "a hundred years" suggests that the long-term costs will exceed $3 trillion if he is elected President. All the candidates, meanwhile, want to increase the already enormous military budget.

Former candidate John Edwards is lending his voice to the Iraq/Recession campaign led by MoveOn.org, which aims to emphasize the connection between the billions spent in Iraq and our crumbling economy. As MoveOn frames it, "the tradeoffs are stark: Bombs or unemployment insurance for people laid off as the economy slows? Billions for Halliburton and Blackwater, or help for people on the verge of losing their homes because of the subprime meltdown?"

Withdrawing from Iraq would also free up resources for the government to spend on targeted humanitarian relief for Iraqis, ideally through an independent relief organization. If the United States provides war reparations, it should put the money in a UN-administered trust for the Iraqi people, to be used for reconstruction or to help fund a multinational peace force. The United States must not compound one strategic mistake--invading Iraq and breaking the Iraqi state--with another, funding an intensified civil war and a corrupt Iraqi government.

For both America and Iraq, peace is the path to prosperity.

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