October 11, 2003


If Bush won't ask for sacrifices to pay for war, Congress should (Jonathan Coopersmith, October 7, 2003, Dallas Morning News)

I confess I have a dog in this fight. I have two small children, and I am worried about the world we are creating for them. Perhaps my biggest concern is the mismanaged postwar occupation of Iraq.

My usual reaction when someone mentions national prestige is to guard my wallet. But regardless of what we think about the decision to invade Iraq, our country now is waist deep in that briar patch and can't leave until some serious semblance of order and sovereignty are restored.

The military occupation is costing about $1 billion a week – or roughly $50 billion for the year. That's a lot of money – nearly as much as all veterans' benefits ($58 billion), not quite twice the federal budget for public education ($34 billion), more than three times the National Aeronautics and Space Administration's budget ($15 billion) and 10 times the FBI's budget ($5 billion). That's how much the Iraq war is costing – on top of the nearly $400 billion defense budget.

How much money is $50 billion? Let's be cynical and assume the war was about oil. Since gasoline is our nation's main use of oil, let's put the burden of paying for the war on drivers. Americans consume 372 million gallons of gas daily. To pay that $1 billion a week would require a gas tax of 43 cents a gallon. To pay the entire $87 billion the president requested would demand a gas tax of 64 cents a gallon.

Historically, wars have been very expensive and usually force the imposition of new taxes to pay for them, such as the income tax, first used in the Civil War. Not paying for wars can have devastating financial consequences.

One of the more risible themes of recent years is that of the Greatest Generation and the unique sacrifices they supposedly made. It's worth noting that in 1946 the federal debt hit its all-time peak of 127.5% of GDP. For some sense of comparison, consider that the current debt is $6.8 trillion on a GDP of $11 trillion. My math's not good, but, what's that? About half of the Greatest Generation's debt?

There are perfectly good reasons to try and trim the deficit and the debt -- and there are decent reasons to put higher taxes on gasonline -- but matching the fiscal responsibility of our elders isn't one of them. And it makes no sense to trash the economy in the middle of a war by cranking up taxes.

The Deficit Chicken Hawks (Robert J. Samuelson, October 10, 2003, Washington Post)

Almost everything you think you know about budget deficits is probably wrong or misleading. For starters, they don't automatically cripple the economy. If they did, America would be a much poorer country. Since 1961 the federal government has run deficits in all but five years (1969, 1998-2001). Over the same period, the economy's output (gross domestic product) has expanded by almost a factor of four, the number of jobs has grown by 72 million and per-capita incomes have increased about 150 percent.

Indeed, rising deficits are sometimes helpful. They are now. It is possible to dislike parts of President Bush's tax cuts -- and to see the White House's budget rhetoric as hypocritical -- but it is not possible to think that on balance these policies have hurt the economy. From fiscal 2000 to 2003, the budget has moved from a surplus of 2.4 percent of GDP to a deficit of 3.7 percent of GDP; the shift is worth about $650 billion annually. Tax cuts didn't cause all of this swing. Still, the massive stimulus helped offset the depressing effects of the stock market, Internet and telecom bubbles. Higher deficits didn't raise interest rates. In 2000, rates on 30-year mortgages averaged 7.5 percent; this year, they've been under 6 percent.

But the biggest misconception about deficits is that, by themselves, they threaten the economy's long-term vitality. Not true. The real threat is rising government spending. The reason is simple. Government spending must be paid for by either taxes or borrowing (a deficit). If spending rises too high, economic growth may suffer from either steeper taxes or heftier deficits. Spending is the real culprit.

Consider the long-term budget outlook. Federal spending is now about 20 percent of GDP, which is roughly the average since 1960. Homeland security and higher defense spending have undone much of the post-Cold War "peace dividend." [...]

As a nation, we need to change the conversation. It has to become respectable to talk about limits, not just wants and needs. In the next few years, large deficits are tolerable; indeed, trying to reduce them too quickly might ruin the fragile recovery. But Republicans need to admit that, once the economy strengthens, large deficits falsely promise something for nothing.

Posted by Orrin Judd at October 11, 2003 6:18 AM

Your last statement is totally accurate. However your rought attempt to compare WWII debt with our present state of affairs falls flat. On a scale of 1 (small war) to 10 (big war), WWII was at least a nine, the war on Iraq is maybe at best a one.

I am not going solve any economic problems with this post, but I think I would appreciate REPUBLICANS (forget democrats) occasionally recomending SPENDING CUTS, but hey your the pro.

Posted by: h-man at October 11, 2003 7:49 AM

Given that neither was necessary, they're both 1's.

We can recommend spending cuts til we're blue in the face, but the state of our democracy seems to preclude them.

Posted by: oj at October 11, 2003 8:01 AM


I won't argue the merits of WWII, but I now see your Samuelson update and so my original post is now mute.

Posted by: h-man at October 11, 2003 8:17 AM


I agree with you that we should cut spending. We aren't going to.

Posted by: oj at October 11, 2003 8:27 AM

Those who are complaining about the deficit should support a constitutional amendment to hold government revenues (and thus spending) to a certain amount (much as several states do, including next week's backpacking destination, Missouri). They won't, because their real goal is more revenue for more spending.

Posted by: kevin whited at October 11, 2003 11:15 AM

Instead of a constitutional amendment that ties our hands during recessions, what we really need are fiscally responsible politicians who don't spend the entire surplus during times of prosperity. But the chance of that, I admit, seems small.

Posted by: jd watson at October 11, 2003 8:58 PM

How about a consitutional amendment demanding counter-cyclical government spending?

Who would be against that?

Posted by: Jeff Guinn at October 12, 2003 7:46 AM

How 'bout a constitutional amendment striking the provisions for amending the constitution?

Posted by: David Cohen at October 12, 2003 7:38 PM