Inflation and War
January 29, 2007
The Pentagon recently reported that it now spends roughly $8.4 billion per month waging the war in Iraq, while the additional cost of our engagement in Afghanistan brings the monthly total to a staggering $10 billion. Since 2001, Congress has spent more than $500 billion on specific appropriations for Iraq. This sum is not reflected in official budget and deficit projections. Congress has funded the war by passing a series of so-called “supplemental” spending bills, which are passed outside of the normal appropriations process and thus deemed off-budget.
is fundamentally dishonest: if we’re going to have a war, let’s face the
costs-- both human and economic-- squarely.
Congress has no business hiding the costs of war through accounting
the war in Iraq surges forward, and the administration ponders military action
against Iran, it’s important to ask ourselves an overlooked question:
Can we really afford it? If
every American taxpayer had to submit an extra five or ten thousand dollars to
the IRS this April to pay for the war, I’m quite certain it would end very
quickly. The problem is that
government finances war by borrowing and printing money, rather than presenting
a bill directly in the form of higher taxes.
When the costs are obscured, the question of whether any war is worth it
and the Federal Reserve Bank have a cozy, unspoken arrangement that makes war
easier to finance. Congress has an
insatiable appetite for new spending, but raising taxes is politically
unpopular. The Federal Reserve,
however, is happy to accommodate deficit spending by creating new money through
the Treasury Department. In
exchange, Congress leaves the Fed alone to operate free of pesky oversight and
free of political scrutiny. Monetary
policy is utterly ignored in Washington, even though the Federal Reserve system
is a creation of Congress.
result of this arrangement is inflation. And
inflation finances war.
Lawrence Parks has explained how the creation of the Federal Reserve Bank in
1913 made possible our involvement in World War I. Without the ability to create new money, the federal
government never could have afforded the enormous mobilization of men and
material. Prior to that, American
wars were financed through taxes and borrowing, both of which have limits.
But government printing presses, at least in theory, have no limits.
That’s why the money supply has nearly tripled just since 1990.
perspective, consider our ongoing military commitment in Korea. In Korea alone,
U.S. taxpayers have spent $1 trillion in today’s dollars over 55 years.
What do we have to show
for it? North Korea is a
belligerent adversary armed with nuclear weapons, while South Korea is at best
ambivalent about our role as their protector.
The stalemate stretches on with no end in sight, as the grandchildren and
great-grandchildren of the men who fought in Korea give little thought to what
was gained or lost. The Korean
conflict should serve as a cautionary tale against the open-ended military
occupation of any region.
$500 billion we’ve officially spent in Iraq is an enormous sum, but the real
total is much higher, hidden within the Defense Department and foreign aid
budgets. As we build permanent
military bases and a $1 billion embassy in Iraq, we need to keep asking whether
it’s really worth it. Congress
should at least fund the war in an honest way so the American people can judge