The cost of ongoing U.S. wars in Afghanistan, Iraq and Libya is up to at least $1.2 trillion. What would the economic recovery look like if that money hadn’t been spent?
The GDP was about $10.1 trillion when U.S. forces invaded Afghanistan, and is $14.7 trillion now, an annualized growth rate at around 2 percent. That the U.S. economy still was able to grow despite war cost — every penny of it borrowed — other runaway borrowing, and the 2008 revelation of systemic perfidy on Wall Street, at the big banks and at Fannie Mae is testimony to America’s vibrancy.
But imagine if $1.2 trillion had been added to the economy, rather than spent on war. Of course lower military spending does not translate one-for-one into increased economic growth — the two aren’t directly correlated. But they are related, and as Harvard economist Martin Feldstein said last week, “each dollar of extra deficit adds much less than a dollar to GDP.”
So imagine that $1.2 trillion had not been spent smashing things, including America’s own military hardware, in Iraq. Afghanistan and now Libya. War, after all, is about killing people and destroying resources. Economic growth is about empowering people and creating value.
Add war costs back into the economy and the U.S. GDP would be around $16 trillion today, an annualized growth rate of roughly 3 percent for the last decade. At that level of growth, unemployment would be lower, deficits would be lower and the national mood brighter.