Wednesday, April 16, 2008

Iraq War: Is It The Cause Of The U.S. Economic Recession?

The Iraq war is being debated on many different levels. One is the idea that it could be the cause of the U.S. economic recession. Politicians and economists are divided on the subject. Most Democrats, including presidential candidate Barack Obama, claim that the Iraq war has had a substantial effect on the U.S. economy and should be examined as one of the primary reasons for the U.S. recession. Most Republicans quickly dismiss the claim as being without merit, but a growing number of Republican s, including Republican Presidential candidate Ron Paul, strongly oppose the war based on its economic fallout. But is the Iraq war to blame for our economy’s problems? Let’s look at arguments from both sides of the debate:

The Iraq War caused the U.S. economic recession

In a Washington Post article, Nobel Prize-winning economist Joseph Stiglitz argues that the Iraq war is to blame for the economic recession for the following reasons:

  • The oil-producing countries have so much money that they don’t need to produce much oil. Because they don’t have the immediate need for cash, they are able to plan better for the future by pumping less oil and charging more for what they do produce. By doing this they are able to keep more oil for future use.
  • The government has spent so much on the Iraq war and gone so far into debt that it has been unable to keep the domestic economy in check through tax cuts and other internal investments.

Senator Barack Obama had the following to say at a recent forum, according to the same Washington Post article: "If we can spend $10 billion a month rebuilding Iraq...we can spend $15 billion a year in our own country to put Americans back to work and strengthen the long-term competitiveness of our economy."

Senator Obama has a valid point to his argument. This war was entirely financed with debt, which in itself is bad, but ultimately what has our country received in return for that investment? At least if we are going to go deeper in debt, we should probably be using those funds for something that might actually help our economy, and our country.

According to a CNN poll, 71 percent of Americans believe that the Iraq war is at least partially responsible for the economic downturn.

The Iraq War Is NOT responsible for the U.S. economic recession

While it is easy for politicians to say the Iraq war has caused many of the world's problems, there is little evidence that the war is directly responsible for the economic recession. In response to the arguments made by Stiglitz, according to the Washington Post most economists believe that the price of oil is rising because of increased demand rather than a shortage of supply. Furthermore, Martin Baily, former chairman of Bill Clinton’s council of economic advisors, had this to say: “The credit crisis we got into is because of the housing boom, the relaxation of lending standards and certainly a lack of adequate supervision," Baily said. "I don't see a connection with government borrowing."


I can see validity in the arguments from both sides. Considering all the other problems that the U.S. is facing—in particular, the housing bubble—while I think it is a little farfetched to say that the Iraq war was the sole cause of the economic recession, it is equally foolish to say that the costs of the Iraq war have had little if any impact on the U.S. economy. Wars are not free, and the U.S. has spent billions of dollars on this war, financing it entirely with debt, which will have to be repaid one way or another.


Anonymous said...

I understand that you are analyzing this on a very broad level, but in doing this you are only doing a disservice to any understanding that might be gained from asking such an important question. The American people deserve full disclosure and a lot more perspective than this if they are to understand the true meaning of what it means to abandon the constitution and conduct ourselves as modern day imperialists. Dig a little deeper and look at the comments made by Dr. Ron Paul over the last 20 years and you'll have your answer as to why our leadership (past/present) has cut the legs out from underneath our economy. At least you asked the question, I'll give you credit for that.

Anonymous said...

Yes, a agree with the position that the economic drag, and eventual Recession, has been, in large part, caused by the Iraq War.

Please keep in mind that the war started in 1991, not 2003. A two phase, fifteen year was is an extremely expensive endeavor.

Some have put estimates at $15,000,000,000 a month to keep the war effort going.

This money should be reallocated to R&D, job creation, and items that build and maintain a healthy economy.

Anonymous said...

There are solutions to the mess called the Bush legacy and you touch on them:
It is time to get on with turning the ship around. It's time to plug the drain on the $45 trillion + combined national debt sinking the morale and determination of middle America.
 The tax paying middle class will have to do it itself and it's going to be a long hard road. It needs to start ASAP and as much pressure should be placed on Congress by the media as it can possibly muster. It is also evident that America has the tenacity and capacity to rebuild confidence.
It is also time to give Iraqis their nation back before too few are left to remember that most Shiite, Sunni or Kurd Iraqis described themselves as Iraqis above all else and religious or sectarian group members second…..

Anonymous said...

the recession is a direct result of the falling dolar which is happening because the fed keeps printing it, which happens because of the bailouts, which happened because the billionaire bankers don't want to pay-hello!! in return, other countries are recognizing this and shunning the dollar,and in turn it is plummetting even further as these countries demand other forms of payment and so the america keeps on top of these other countries with the threat of nuclear weapons which america does not want to allow other countries to have all the while borrowing monies from the other countries to finance this inescuseable war. nough said.

Anonymous said...

The thesis not explored regarding the present economic problems and the Iraq War is the political need for a prosperous economy providing the popular support for the Bush administration's Middle East policy. The United States was faced with very few tools to stimulate the economy prior to our attack on Iraq. Excluding health care, the only segment left was the construction industry and home building. Our government is and was deeply involved in financing the building industry. Mortgage interest rates were kept low and borrowing standards were ignored. Mortgages were packaged into securities with little or no intrinsic value, without regulation, in order to provide funding for the booming housing market. Thus the housing industry exploded. Temporary prosperity ensued generating the popular support President Bush needed for his Middle East policy.