Iraq Recession – or Iraq Depression?

Well, I guess that makes it official: Rep. Barbara Lee (D-Calif.) has introduced a resolution in the House of Representatives "expressing the sense of the House of Representatives that the current economic slowdown in the United States is directly related to the enormous costs of the ongoing occupation of Iraq, consigning the United States to what can only be called the Iraq recession."

If passed – and, during an election year in which the war is wildly unpopular, anything is possible – does this mean Congress will vote against funding the conflict?

No way, José!

That’s politics, folks, but what we’re really talking about here is economics – i.e., the bottom line. Which brings up an interesting point: this war has gone on despite rising opposition, despite the marches, the demonstrations, the polls showing that nearly 70 percent of the American people want out. Why, just the other day, Dick Cheney, confronted on ABCs Good Morning America with these poll numbers, replied with a disdainful: "So?"

The Republican base loved it: what Churchillian verve!

The Democrats and the antiwar movement were outraged: what colossal nerve! Politics keeps this war going, but economics may yet end it – perhaps sooner than anyone thinks.

A peace group associated with the left wing of the Democratic Party is currently running a campaign designed to convince the American public that the faltering economy is due to the fiscal folly of the Iraq war – but maybe they’ll have good reason to consider changing their Iraq Recession theme to Iraq Depression. As Bear Stearns goes under and everyone wonders which big investment bank is next, the cracks in the economy widen, and a new fear is instilled in the hearts of Americans – the sense of vertigo that comes with contemplating a real 1930s-style brother-can-you-spare-a-dime economic meltdown.


They told us the cost of the war was going to be – get this – $50 billion. But as Joseph Stiglitz, a Nobel Prize-winning economist, and Linda Bilmes, a professor at Harvard’s Kennedy School of Government, point out in The Three Trillion Dollar War, that’s what we spend in a mere three months. Remember back when Paul Wolfowitz assured us that Iraqi oil profits would pay the entire cost? Oh, those were the good old days! Those days, however, have long since come to an end, and we are faced with the fiscal reality of a $3 trillion war – and that’s a conservative estimate, as Stiglitz and Bilmes constantly remind us. They deliberately low-balled cost estimates in making their calculations; the real cost is probably a lot higher.

The numbers are hard to crunch for two main reasons:

(1) Secrecy. Stiglitz relates how it was next to impossible to gain access to what should be public information: he had to employ the Freedom of Information Act to get a good deal of the numbers.

2) The U.S. government doesn’t keep comprehensible or easily accessible accounts. The Department of Defense flunked its government audit for the tenth year in a row, making it the only agency of the federal government that has so consistently failed to meet its accounting requirements (Homeland Security is in the same shape, but they haven’t been around that long).

In addition, according to Stiglitz and Bilmes, the way the Bushies and their congressional enablers have appropriated funding for this war – a series of "off-budget," "emergency" measures – has made oversight next to impossible. We simply don’t know where all that money is going – and I have no doubt that most of our wise solons would rather not find out.

The key to comprehending the true price of the Iraq war is not to be found in the budget numbers, because, as Stiglitz and Bilmes show, the upfront costs are only a fraction of the actual costs, in economic and human terms. Based on past wars, we can estimate that 40 percent of our soldiers will suffer from disabilities, as in the first Gulf War. This means providing lifelong healthcare for hundreds of thousands at a cost of $600 billion. Again, that’s a conservative estimate – the real number is likely to be much higher. In addition, many of these disabled vets are eligible for, and will apply for, Social Security disability benefits, making impossible demands on an already bankrupt system.

Stiglitz and Bilmes estimate another $125 billion in hidden costs, but that’s not the full price-tag: the economic effects of financing this war ripple outward, with the reverberations echoing down through the generations as the burden of a war funded entirely by debt – to the tune of some $800 billion – is passed down to our children and grandchildren.

Among the more immediately painful macro effects: higher oil prices. During the course of this war, we’ve gone from 25 to 100 dollars per barrel. Cost: $300 billion. Total macro-economic price-tag, including lost opportunity costs: in excess of $1 trillion.

Stiglitz and Bilmes suggest what they call "a new metric" – we ought to ask ourselves what portion of the funds flushed down the Iraq war toilet could have been spent solving this or that problem. Or, in libertarian terms, what portion of these stolen tax dollars could have created jobs and goods in the private sector – and kept the wheels of the economy turning?

In an NPR interview, Stiglitz not only points out that the money we’re spending in Iraq is borrowed, he also names the real culprit: the Federal Reserve Bank, which temporarily masked the real costs of the war with a "happy days are here again" policy of easy money. This created the housing bubble, which led to massive malinvestment, and we are beginning to feel the pain as the narcotic effects of Fed policy wear off. America is living on borrowed money, and on borrowed time, as Stiglitz puts it, but "the day of reckoning" may be right around the corner.

Of course, some sectors are prospering on account of the war: Richard Perle is probably getting richer. Halliburton stock is up. The military-industrial complex is doing quite well, thank you, as is its intellectual Praetorian Guard among the Washington think-tanks. If had a tenth the contributions of, say, the American Enterprise Institute – the War Party’s home base – we wouldn’t have to ask for another penny ever again.

The worst rise, and the rest are cast down: that’s the sociological principle at work in the construction of militarism. As storm clouds darken the economic horizon and we start sinking into the Iraq Depression, a subset of this principle will become apparent: don’t expect to get bailed out if your name isn’t Bear Stearns.

Author: Justin Raimondo

Justin Raimondo is editor-at-large at, and a senior fellow at the Randolph Bourne Institute. He is a contributing editor at The American Conservative, and writes a monthly column for Chronicles. He is the author of Reclaiming the American Right: The Lost Legacy of the Conservative Movement [Center for Libertarian Studies, 1993; Intercollegiate Studies Institute, 2000], and An Enemy of the State: The Life of Murray N. Rothbard [Prometheus Books, 2000].