Wednesday, March 19, 2008

Just swipe that card again, Mr. President

Alternate title: Happy Birthday Blunder!

Today marks the fifth anniversary of the war in Iraq. And we've put the whole damn thing on the credit card. Well, we thought we got good terms! Nothing down with generous repayment terms: the next generation pays. But the pesky bill keeps coming due earlier and earlier.

Nobel Economics Prize winner Joseph Stiglitz and his co-author, Harvard professor Linda Bilmes, have estimated the total cost of the war, just to the United States, to be three to four trillion dollars. The rest of the world will pay similar amount. They wrote a book called The Three Trillion Dollar War, but that estimate is apparently out of date, although the book just came out:

All of the war-price tallies include operations in the war zone, support for troops, repair or replacement of equipment, reservists’ salaries, special combat pay for regular forces and some care for wounded veterans — expenses that typically fall outside the regular Defense Department or Veterans Affairs budgets.

The highest estimates often include projections for future operations, long-term health care and disability costs for veterans, a portion of the regular, annual defense budget, and, in some cases, wider economic effects, including a percentage of higher oil prices and the impact of raising the national debt to cover increased war spending.

The debate raging on Capitol Hill, on the presidential campaign trail, in research institutes and in academia touches on such esoteric factors as the right inflation index for veterans’ health care costs; the monetary value of nearly 4,000 soldiers killed; and what role, if any, the war has had in higher oil prices.

Some economists who track the war expenses say they worry that politicians are making mistakes similar to those made in 2002, by failing to fully come to grips with the short- and long-term financial costs.

“The relevant question now is: what do we do now going forward? Because we can’t do anything about the costs that have already happened,” said Scott Wallsten, an economist and vice president of research with iGrowthGlobal, a Washington research institute. “We still don’t hear people talking about that.”

In discussions about the economy, the elephant - boy, is that an apt metaphor - in the room is the war. The national debt has soared, as has the price of oil, and the dollar has plunged. The Fed keeps throwing "liquidity" on the fire; it seems to help for a little while - at least in terms of buoying the stock market - but only for a little while. As the Fed accepts dodgey-er and dodgey-er debt as collateral, the prospect that the taxpayer is going to foot the bill becomes more and more inevitable.

Privatize the profits and socialize the losses!

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