The U.S. has created a Warfare State

Estimates of the cost of the Iraq war continue to escalate to levels well beyond what its optimistic architects once promised. Most notable, perhaps, has been the estimate of Columbia University’s Joseph Stiglitz, who, in a January 2006 paper with Harvard’s Linda Bilmes, put the full cost at around $2 trillion.

The $2 trillion number – the sum of the current and future budgetary costs along with the economic impact of lives lost, jobs interrupted and oil prices driven higher by political uncertainty in the Middle East – now seems low.

Additionally, expenditures for “homeland security” surely belong in any reckoning of defense spending. Plus, additional programs involved in defense are spread throughout the budgets of various other Cabinet departments. Then there is the supplemental spending earmarked for present military adventures (not part of the defense budget, contrary to popular impression), in this case Afghanistan and Iraq, as well as the portion of the federal government’s net interest payments that is attributable to deficit-financed defense spending in the past.

Robert Higgs estimates that the real defense budget is probably about twice as large as the sum officially allocated to the Department of Defense.

However, the real cost of military activities should also be measured in human and natural resources and in the stocks of productive capital absorbed in producing, transporting, and maintaining weapons and other military equipment. It is in the sense of alternative opportunities lost that military spending should be considered – the numbers of people employed by the military, the goods and services it purchases from the private sector, the real estate it ties up, and the technology devoted to it. Not only do we lose the opportunity for civilian use of goods and services, but we also lose the potential economic growth that these resources might have brought about.

[Excerpt of an article by Thomas E. Woods, Jr, senior fellow in American history at the Ludwig von Mises Institute]