Pros And Cons Of Military Spending During Iraq And Afghanistan War

Economics Honors
1 November 2013

Economics of Military Spending during Iraq/Afghanistan war People are under the impression that wars are beneficial to an economy. They seem to create jobs and give a variety of businesses work. But do they really turn a profit or is there more spending being done than profit being turned in. The Iraq and Afghanistan war has been very controversial. Part of that controversy comes from the economic perspective of the war. One of the many sub-topics to the war is job creation or job loss. For every one million dollars spent towards the war since 2001-2011, has created 8.3 jobs. On the other hand, with one million dollars spent else where, it could have created many more jobs. 15.5 jobs could have been created
With an average of $130 Billion dollars spent a year over 10 years, you are looking at almost 2 million more jobs created if that money is spent in alternate sectors. The war in Iraq did create a lot of jobs but the issue there is that, the money that is made by the employees are generally spent abroad and spent on materials made outside of the US. So the jobs that would have been generated state side, also would’ve generated a lot of capital for the US economy. So overall, the war generated a lot of jobs but the money spent on the war could’ve generated more jobs domestically. Military spending isn’t just spending the money but it is also keeping money from being spent in other areas. As you saw with jobs, more money spent domestically would’ve been a more efficient use of the money. The same goes for public investments such as US infrastructure. In 2001, military assets were valued at roughly $904 Billion. The total increase $341 Billion over the next 10 years. That puts the value at $1.2 Trillion at 2011. Now, with that $341 Billion dollars, the US
An important impact of war spending has been to raise the nation’s indebtedness. Borrowing financed the increased military spending following 9/11 almost entirely. According to standard macroeconomic models and evidence, rising deficits have resulted in higher debt, a higher debt to GDP ratio because debt has risen faster than income, and higher interest rates. The ratio of federal debt held by the public to national income (gross domestic product, or GDP), a good indicator of the sustainability of government spending was 32.5% at the end of fiscal year 2001. It rose to 36.2% after 2007 and to 69.4% at the end of 2011, an increase of almost 37 percentage points since 2001. The nonpartisan Congressional Budget Office (CBO) projects that under current law, debt held by the public will rise to more than 75% by 2020, an increase of greater than 40 percentage points since 2001. All of this spending is completely borrowed money as well, forcing the government to have to pay interest on the borrowed money. Some estimate that by 2020, the government will have paid $1 Trillion dollars in interest. These spiking interest rates have an effect on non-direct areas as well. For a 30-year fixed rate mortgage on a home priced at the median of $250,000 with 90% borrowed funds, an increase of 35 basis points would