News The Cost of War: Examining the Economic Impact of Modern Conflicts

[nismaratwork]

Interesting Cyrus, you dropped a word from Desiree's post that makes all the difference: long. The major reason debt/GDP bares watching is because lenders use it as a risk metric in deciding what interest rate they will demand, or whether they will lend at all in the future. The Greek crisis recently emphasized this point. That is, the key is whether or not lenders believe they will continue to be paid back in the long term. Thus war debt, especially for major powers, presents very little risk when it is run up, because wars inevitably come to an end, public sentiment for democracies is overwhelming in agreement to end them as soon as possible. As economists say, war spending, being temporary, is not structural.

Entitlement programs on the other hand such as Greece's early retirement benefits and the US's Medicare tend to have no end, have wide public sentiment to continue them (via robbing Peter to pay Paul as Disiree points out), tend to continually expand, forever as far as I can see, until they either collapse upon themselves or until they cause the state to default on its debt. Entitlement programs are structural. The point of all this is that comparing the US current debt and its trajectory to WWII debt is misleading from the stand point of the lender, the bond holder, the banker. From where they stand, the US has never had this kind of structural debt load in its entire history, not anything close to it.

BTW, updating the chart to this year has the US debt to GDP ratio at 87.5% as of May 2010.

http://zfacts.com/metaPage/lib/National-Debt-GDP.gif

This is also a good reason to get the hell out of Afghanistan, and why the Korean war was and is such a disaster. Long wars are no good at all.

 

[mheslep]

This is also a good reason to get the hell out of Afghanistan, and why the Korean war was and is such a disaster. Long wars are no good at all.

There may be good reasons to get out of Afghanistan, but creating fears that the US will not be able to borrow any more is not one of them. Perhaps I could have been clearer. The war in Afghanistan is not that 'long' or expensive even if continues another five years compared to entitlement programs; Medicare has been around for fifty years and has an entire demographic about to retire into it; that is a long scenario. The war in Afghanistan is going to end, the US already has imposed deadlines on the surge there, maybe in a year or five; it doesn't matter from a debt standpoint. Lenders know this.

 

[Office_Shredder]

This is also a good reason to get the hell out of Afghanistan, and why the Korean war was and is such a disaster. Long wars are no good at all.

The Korean war was a disaster because our debt to GDP ratio dropped dramatically during it?

 

[Cyrus]

Interesting Cyrus, you dropped a word from Desiree's post that makes all the difference: long. The major reason debt/GDP bares watching is because lenders use it as a risk metric in deciding what interest rate they will demand, or whether they will lend at all in the future. The Greek crisis recently emphasized this point. That is, the key is whether or not lenders believe they will continue to be paid back in the long term. Thus war debt, especially for major powers, presents very little risk when it is run up, because wars inevitably come to an end, public sentiment for democracies is overwhelming in agreement to end them as soon as possible. As economists say, war spending, being temporary, is not structural.

Entitlement programs on the other hand such as Greece's early retirement benefits and the US's Medicare tend to have no end, have wide public sentiment to continue them (via robbing Peter to pay Paul as Disiree points out), tend to continually expand, forever as far as I can see, until they either collapse upon themselves or until they cause the state to default on its debt. Entitlement programs are structural. The point of all this is that comparing the US current debt and its trajectory to WWII debt is misleading from the stand point of the lender, the bond holder, the banker. From where they stand, the US has never had this kind of structural debt load in its entire history, not anything close to it.

BTW, updating the chart to this year has the US debt to GDP ratio at 87.5% as of May 2010.

Don't disagree with anything you've said (I'd probably consider myself libertarian fiscally) . I was pointing out that Desiree's said nothing of what you just listed. It's simply a link to a website with a big number.

 

[mheslep]

cyrus's graph depicts national debt as a % of national income becoming lower during the vietnam years. Part of the reason was that the economy was growing, but the other reason is that the government was using newly printed greenbacks to finance the war, instead of explicit debt. That led to the inflationary period during the 70's, which further devalued the "real" value of the debt. It took Volcker's team under Reagan to go cold turkey to stop it, which contributed to the 80's recession.

I agree with all of this except attributing all or even most of the increased spending to the Vietnam war. Johnson's domestic programs increased spending dramatically: Medicare created in '65, Medicaid in '66, War on Poverty in '64 (job corps, welfare, food stamps). Johnson also asked for and got tax cuts. By contrast, US military spending seems to have http://upload.wikimedia.org/wikipedia/commons/8/86/InflationAdjustedDefenseSpending.PNG" . I'm not inclined to run down the absolute figures on this at the moment; maybe the Vietnam war did dominate spending increases in the late 60's, but I doubt it.

 

[nismaratwork]

OK, let me clarify this, I meant that the Korean war never ended, and our commitment there and problems are ongoing. That's all, not that Afghanistan or Korea will bankrupt us, just that such things should be swift and decisive, and for monetary reasons as well. Look at our relationship with Japan and Germany, having crushed each, and then helped rebuild them, versus the Korean peninsula.

 

[EnumaElish]

I agree with all of this except attributing all or even most of the increased spending to the Vietnam war. Johnson's domestic programs increased spending dramatically: Medicare created in '65, Medicaid in '66, War on Poverty in '64 (job corps, welfare, food stamps). Johnson also asked for and got tax cuts. By contrast, US military spending seems to have http://upload.wikimedia.org/wikipedia/commons/8/86/InflationAdjustedDefenseSpending.PNG" , which seems to support your hypothesis.

 

[Office_Shredder]

OK, let me clarify this, I meant that the Korean war never ended, and our commitment there and problems are ongoing. That's all, not that Afghanistan or Korea will bankrupt us, just that such things should be swift and decisive, and for monetary reasons as well. Look at our relationship with Japan and Germany, having crushed each, and then helped rebuild them, versus the Korean peninsula.

We tried crushing North Korea. It didn't work

And we did crush Afghanistan, we're trying to help them rebuild. It's just that our definition of rebuild seems to be at odds with the definition that some Afghans use

 

[Count Iblis]

I think the problem in Afghanistan is that we have modernized our armies to the point that we can't deploy large numbers of soldiers anymore. Afghanistan is a case where you need to deploy a million soldiers who then don't need to do any fighting; the mere presence of soldiers in all of the remote villages will be enough. You can then start to build whatever infrastrucure you need (like the Aghan police and security forces, roads, schools etc. etc.) and leave a few years later.

The lack of forces means that a small group of insurgents can hold the country hostage. If Nato soldiers are in village A, then that means that they are not in village B, so the insurgents can go to that village for their supplies, intimidate the local population and warn them not to cooporate with Nato soldiers and set up their IED factories there.

In each village they have some limited number of supporters, who inform them via radio when the coast is clear, who has been collaborating with Nato etc. etc.

 

[Office_Shredder]

I think the problem is Afghanistan is that we have modernized our armies to the point that we can't deploy large numbers of soldiers anymore. Afghanistan is a case where you need to deploy a million soldiers who then don't need to do any fighting; the mere presence of soldiers in all of the remote villages will be enough. You can then start to build whatever infrastrucure you need (like the Aghan police and security forces, roads, schools etc. etc.) and leave a few years later.

Is there any point in US history where we could deploy a million soldiers without holding a draft?

 

[Count Iblis]

Is there any point in US history where we could deploy a million soldiers without holding a draft?

Why only the US? This is a UN/NATO mission. Why can't the World today with 6.5 billion inhabitants mobilize just one million soldiers to do a simple peacekeeping mission in which hardly any fighting would be involved, while in 1941 Germany was able to launch an http://en.wikipedia.org/wiki/Operation_Barbarossa" with 4.5 million soldiers and 600,000 motor vehicles?

 

[Office_Shredder]

Why only the US? This is a UN/NATO mission. Why can't the World today with 6.5 billion inhabitants mobilize just one million soldiers to do a simple peacekeeping mission in which hardly any fighting would be involved, while in 1941 Germany was able to launch an http://en.wikipedia.org/wiki/Operation_Barbarossa" with 4.5 million soldiers and 600,000 motor vehicles?

Because that was total war for control of the world. This is not. Again, do you think Germany pulled that off without a draft? You seem to think that somehow mobilizing the forces of the world to subdue the Taliban/Al Qaeda over the course of a couple of years would somehow be more expedient and cheaper than the current situation; do you think all those extra tanks and weapons and salaries and the massive supply line necessary to keep it all running is going to come for free?

If China decided to take Hawaii by force, obviously we would not send 100,000 troops to take Shanghai, we would have a draft and force factories in America to start producing weapons of war instead of cars and toys. But that hasn't happened, so we aren't going to halt our economy for the next five years in order to win in Afghanistan, because maybe it isn't worth that. You keep talking about the cost of being mired in such a situation as we are at the moment, but are completely disregarding the cost of implementing total warfare, especially in a region as isolated as Afghanistan.

Also, this might not be a quick occupation either way. Since you love to bring up WWII, we ended up occupying Germany for 11 years

EDIT TO ADD:
Furthermore, the German occupation situation was at least as disastrous and costly as the continuation of the Korean war. The tensions it caused with the USSR and the whole Berlin airlift thing etc. certainly don't qualify as overwhelming success post occupation, and should be taken into account when discussing occupation costs.

"But wait!" you cry. "We aren't going to divvy up Afghanistan because we don't have to!" Well, why would the world commit all its troops to Afghanistan and then let the US make all the decisions? Currently we're the major policy setter because we're the major contributor of troops, if you want Russia to dedicate, say, half a million troops (more than it's current standing land army mind you), then yes, they're going to want to have control over their chunk of the country

 

[nismaratwork]

We tried crushing North Korea. It didn't work

And we did crush Afghanistan, we're trying to help them rebuild. It's just that our definition of rebuild seems to be at odds with the definition that some Afghans use

I believe that we are working from vastly different definitions of "crushed". Mine involves a reckless disregard for human life and infrastructure, and a massive investment in sustained bombing, including the use of radiological weapons, and nerve agents for tunnels.

 

[Office_Shredder]

I believe that we are working from vastly different definitions of "crushed". Mine involves a reckless disregard for human life and infrastructure, and a massive investment in sustained bombing, including the use of radiological weapons, and nerve agents for tunnels.

Wait, so you're just killing for the sake of killing, or are you trying to achieve some legitimate objective here?

Also, what do you think happened in the Korean war? We bombed the hell out of North Korea to cut off supply lines; bridges, railroads, harbors. Are you under the impression that we held back in that war? It was essentially exactly what you're recommending we do in Afghanistan today, and it didn't work because somebody didn't like having a neighbor be conquered in such a manner

 

[taozhen]

The result is quite amazing and I don't like war, and hope the world will be more peaceful.
The second link say some about the debt to the Penny, just compared to the first link. Contract the two links the result I get is the wars were supported by the all of us, this is quite sad to me.

 

[mheslep]

Because that was total war for control of the world. This is not.

The threat may not be as tangible as the armies of the Third Reich, but yes this a struggle for total control of the world.

"It is the nature of Islam to dominate, not to be dominated, to impose its law on all nations and extend its power to the entire planet."
-Hassan al-Banna, founder of the Muslim Brotherhood
http://www.ikhwanweb.com/Home.asp?zPage=Systems&System=PressR&Press=Show&Lang=E&ID=4584 That statement is not atypical.

 

[Office_Shredder]

There is a difference between someone saying they want to control the world and actually fighting a war for control of the world.

The Office_Shredder faith believes that total domination of the world is my right. Are you now going to draft 5 million people and put them on every street corner to stamp out my uprising? Our response should be based on reality, not fiction

 

[mheslep]

There is a difference between someone saying they want to control the world and actually fighting a war for control of the world.

The Office_Shredder faith believes that total domination of the world is my right. Are you now going to draft 5 million people and put them on every street corner to stamp out my uprising? Our response should be based on reality, not fiction

The Muslim Brotherhood is not some nut standing on a corner with a sign, nor is the sentimental expressed above in anyway isolated to them.

Reality:
[PLAIN]http://www.bosasomedia.com/images/somali_news/911%20spetember%2011%20world%20trade%20center%20terrorist%20attack.jpg

 

[edward]

The Muslim Brotherhood is not some nut standing on a corner with a sign, nor is the sentimental expressed above in anyway isolated to them.

Reality:
[PLAIN]http://www.bosasomedia.com/images/somali_news/911%20spetember%2011%20world%20trade%20center%20terrorist%20attack.jpg[/QUOTE]

So we invaded Iraq and when we did we lost Afghanistan.

 

[mheslep]

So we invaded Iraq and when we did we lost Afghanistan.

Afghanistan is "lost"? Since 2003 and the Iraq invasion? Apparently that kind of insight is qualification for the US Senate.
http://www.foxnews.com/story/0,2933,267181,00.html"

 

[nismaratwork]

So we invaded Iraq and when we did we lost Afghanistan.

We were never going to win either scenario. The point however, is that there is a measurable dilution of terrorist capacity to plan and execute mass casualty events. I believe that could have been achieved with means that fall short of invasion, and of course Iraq was simply insane and tangential.

 

[nismaratwork]

Afghanistan is "lost"? Since 2003 and the Iraq invasion? Apparently that kind of insight is qualification for the US Senate.
http://www.foxnews.com/story/0,2933,267181,00.html"

Iraq was and could have continued to be an effective foil to Iran, and insulation between Iran and Israel, which is why we armed and supported them in the first place. Bush Sr. realized the strategic importance of this, and far from lacking conviction in leaving short of Bagdhad, he made a wise choice for the future. Bush W. and his advisers obviously lacked that vision, and were deluded in the believe that they could improve this situation. Time has shown they were wrong.

 

[Office_Shredder]

I guess I missed the part where after the WTC towers fell the American government folded like a cheap suit and the Taliban moved into take over.

Was it a horrible tragedy? Yes. Should we work to stop it from ever occurring again? Yes. Are the stakes involved anything remotely resembling "controlling the world"? No. That's simply not true, and to suggest otherwise is nonsense.

Please give a demonstration on Islamic terrorists ability to dominate economic, political and military spheres of influence across the globe. Not influence via attacks, but to actually control. Otherwise, cut the nonsense out and let's move on to something productive

 

[nismaratwork]

I guess I missed the part where after the WTC towers fell the American government folded like a cheap suit and the Taliban moved into take over.

Was it a horrible tragedy? Yes. Should we work to stop it from ever occurring again? Yes. Are the stakes involved anything remotely resembling "controlling the world"? No. That's simply not true, and to suggest otherwise is nonsense.

Please give a demonstration on Islamic terrorists ability to dominate economic, political and military spheres of influence across the globe. Not influence via attacks, but to actually control. Otherwise, cut the nonsense out and let's move on to something productive

Indonesia, The Philippines, Iran, problems emerging in Iraq, Israel's issues with the "right of return", The House of Saud's control through (among other mechanisms) Wahhabi Islam, Northern Africa such as the Sudan, and to some extent Egypt. There is a competing culture, and one that seeks a world of Muslims, connected in fellowship. Given the sheer numbers, that implies a measure of control, much as Catholicism enjoys in Italy and elsewhere.

 

[nismaratwork]

That's counter-factual and incoherent.

That is a meaningless statement without support, reflecting only your personal opinion.

 

[CAC1001]

Interesting Cyrus, you dropped a word from Desiree's post that makes all the difference: long. The major reason debt/GDP bares watching is because lenders use it as a risk metric in deciding what interest rate they will demand, or whether they will lend at all in the future. The Greek crisis recently emphasized this point. That is, the key is whether or not lenders believe they will continue to be paid back in the long term. Thus war debt, especially for major powers, presents very little risk when it is run up, because wars inevitably come to an end, public sentiment for democracies is overwhelming in agreement to end them as soon as possible. As economists say, war spending, being temporary, is not structural.

Entitlement programs on the other hand such as Greece's early retirement benefits and the US's Medicare tend to have no end, have wide public sentiment to continue them (via robbing Peter to pay Paul as Disiree points out), tend to continually expand, forever as far as I can see, until they either collapse upon themselves or until they cause the state to default on its debt. Entitlement programs are structural. The point of all this is that comparing the US current debt and its trajectory to WWII debt is misleading from the stand point of the lender, the bond holder, the banker. From where they stand, the US has never had this kind of structural debt load in its entire history, not anything close to it.

BTW, updating the chart to this year has the US debt to GDP ratio at 87.5% as of May 2010.

http://zfacts.com/metaPage/lib/National-Debt-GDP.gif

One thing on this, I agree with you on most of it, however, cannot war debts still present a major risk to a nation? I had been reading how while it can be "obvious" from a historical standpoint that a major war is likely to occur, often at the time right prior to the war, the people are unaware.

One way to test this I had read is to look at the prices of bonds of nations right before the war. Bond prices will plummet if the general population knows a war is coming because they know that the countries will have to run up massive debts and deficits to finance the war, and will thus dump the bonds.

So wouldn't war debts still be risky? Yes wars are temporary, but they can still last a long time...?

 

[mheslep]

One thing on this, I agree with you on most of it, however, cannot war debts still present a major risk to a nation? I had been reading how while it can be "obvious" from a historical standpoint that a major war is likely to occur, often at the time right prior to the war, the people are unaware.

One way to test this I had read is to look at the prices of bonds of nations right before the war. Bond prices will plummet if the general population knows a war is coming because they know that the countries will have to run up massive debts and deficits to finance the war, and will thus dump the bonds.

So wouldn't war debts still be risky? Yes wars are temporary, but they can still last a long time...?

It sounds like the risk you refer to above would be inflation risk, in that lenders may expect the government to inflate the money supply (print money) which makes it easier for the government to pay off the war debt but devalues the bonds. However, I don't see much risk of default caused by war debt, causing a wide spread collapse. The Afghanistan war is the longest (hot) war in US history and it has nothing the like the lifespan of US federal entitlement programs, nor the growth potential, nor the public support to continue out over the horizon.

 

[CAC1001]

The Afghanistan war is the longest (hot) war in US history and it has nothing the like the lifespan of US federal entitlement programs, nor the growth potential, nor the public support to continue out over the horizon.

Well, some wars have been longer: Vietnam was 1962-73, the Philippine Insurrection was 1899-1913, and the Indian Wars 1790-1891.

 

[russ_watters]

One thing on this, I agree with you on most of it, however, cannot war debts still present a major risk to a nation?
...
So wouldn't war debts still be risky? Yes wars are temporary, but they can still last a long time...?

Certainly, but you have to weigh risks against each other. In WWII, the risk of debt is weighed against the risk (fallout) of Nazi Germany taking over all of Western Europe.

 

[nismaratwork]

Certainly, but you have to weigh risks against each other. In WWII, the risk of debt is weighed against the risk (fallout) of Nazi Germany taking over all of Western Europe.

There was also the patriotic sale and purchase of War Bonds, and then Victory Bonds, which I think reflects your calculation of relative risk.

 

[russ_watters]

There was also the patriotic sale and purchase of War Bonds, and then Victory Bonds, which I think reflects your calculation of relative risk.

I'm not quite following. Those were the debt.

 

[mheslep]

Well, some wars have been longer: Vietnam was 1962-73, the Philippine Insurrection was 1899-1913, and the Indian Wars 1790-1891.

In terms of war debt, the topic of the moment, the US didn't have any ground troop levels of consequence in Vietnam until '65. Likewise the scale of those other conflicts would have no need for the issuance of any debt to pay for them.

 

[nismaratwork]

I'm not quite following. Those were the debt.

The argument was made earlier that people would dump bonds and avoid their purchase in times of war. I am making the point that while that can be the case, it is not always the case. Maybe it would be better to say that WWI, WWII, the most active phase of the Korean War, conform to the notion that war-debt is fleeting. We are yet to see how modern wars will play out, when there is great waste for little gain, including an imperative for self-defense.

There is the fallout from war; Vietnam vets with broken families and minds, and the TBIs being racked up in these current conflicts. We did little for the veterans of Vietnam, so maybe that cost was minimal, but there is impetus to care for those injured, and a wider view of what constitutes injury, in modern wars. What happens when wars spawn their own entitlement programs, out of the necessity of treating PTSD, TBI's, amputation and burns, and the public is unwilling to ignore this? Wars, and the weapons of war are evolving, and as both do, how they impact our economy may not be as easy as a chart of past GDP %'s.