The cost of war

Chris Farrell From chief economics correspondent Chris Farrell

As the summer of 2010 winds down the wars in Iraq and Afghanistan are in their eighth and tenth years. The Minnesota National Guard has actively served in both conflicts and elsewhere throughout the world. Sad to say, we’ve had all too many reminders of the human cost of war over the years.

But the financial cost of war is also getting increased attention as Americans worry more about the nation’s persistent federal deficits and ballooning national debt. The numbers are big with the cumulative total in direct military costs associated with these conflicts closing in on a trillion dollars.

There are other expenses associated with war that aren’t included in the direct military expenditure category. Take the life-cycle spending on veterans. Spending on the World War 1 cohort of veterans peaked in 1965, nearly half a century after the end of the conflict. The money that went toward the World War 11 generation of veterans first peaked in 1972 and again in 1980, or roughly 30 years after the end of hostilities. Of course, the life cycle costs of veterans eventually run out as the soldiers die off.

These examples come from two recent papers by economist Ryan D, Edwards, economist at Queens College-CUNY. In A Review of War Costs in Iraq and Afghanistan and U.S. War Costs: Two Parts Temporary, One Part Permanent Ryan attempts to come up with a comprehensive calculation on the overt costs of war, such as military spending, fatalities, and destruction of capital and the long-term, more hidden expenses, which include the costs of war borne by combatants and their caretakers. A number of other factors come into play, too. The macroeconomic price can include the diversion of savings toward war industries and away from private productive investment. Interest charges that are incurred by postponing the payment of the military bill off into the future are another potential cost.

Of course, as Edwards notes, it isn’t possible to come up with definitive figures. Many of the calculations he attempts are controversial within the profession. For instance, the most striking figure he comes up with is that the pain and suffering per veteran may be as high as 10 percent to 25 percent of lifetime wealth.

He also reviews the track record of other studies that attempted to quantify the price of war in Iraq and Afghanistan.

It’s an important investigation. Since the Civil War, while direct military spending still accounts for a majority of war-related spending at least a third of the federal budgetary costs of warfare have been long-lived. “Depending on the scope of the conflict, the unfunded obligation to pay future veterans’ benefits starting from the end of the conflict can range from 5 to 50 percent of GDP,” he writes. “This is a very large commitment.”

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