How we paid for the War on Terror

Yes, the fed issues currency by fiat, but the actual resources consumed by this war probably account for the monetary price tag. Additionally, the money spent did not vanish in a puff of smoke at the end of a gun: it lined the war chests of the military industrial complex. This gives these people and organizations outsized influence to manipulate our government into staying in wars in order to justify buying expensive munitions. This destructive feedback loop is the true cost of war.

Yes. When we started the "War on Terror", there should have been a "War Tax". As there was in WWI and WWII. "During the Second World War, the top individual tax rate rose to 94 percent and remained at 91 percent for nearly two decades—until 1964."

Why is American warfare so expensive?<p>Russian, French and Turkish interventionism in the Middle East and Africa are an order of magnitude smaller but they seem to have accomplished more than the US&#x2F;NATO did in Afghanistan.<p>The Iraq war is a complicated beast. The Iraqis I know feel the country improved for the better but US foreign policy on Israel-Palestine and warmongering against Iran (most Iraqis are Shia) has eroded whatever goodwill they had after the fall of Saddam.

&gt; There is no pot of money in between that defines limits or possibilities. We should by all means spend time thinking about what it would be good to spend $ 5 trillion on, but given the available resources and the amount of slack at our disposal that is a case to be made independent of the spending on the war.<p>Bollocks. The amount of productivity of each worker and the primary productivity of the land is finite.<p>That is The Pot.<p>Anything that drains that pot results in a poorer country.

This is true but understated. A third of humanity is subject to some sort of economic sanctions or embargo, which invariably are instituted as some sort of pretext for future war. This costs the global economy some huge amount, but for the specific nations targeted most brutally (Venezuela, Iran, etc.) it leads to many more deaths because medicines and other healthcare supplies cannot be imported.

The simple explanation here is that 200 billion per year over 20 years is unquestionably a lot of money, but not large enough relative to overall US government spending ($7T per year) to perturb anything all that much.

The article says spending borrowed money on war doesn’t crowd out other economic goods.<p>But of course it does. How money is raised and how it is spent are separate issues.<p>You can say borrowing is ok, or not, for any given level.<p>But what you can’t do is spend the same money on massive military activity, with little hold over value, and that same money on investments that increase productivity for a generation, like targeted education, research and infrastructure.<p>Whatever you spend a dollar on, you have “crowded out” the alternative.<p>And saying well you can borrow more isn’t a valid point. You just have more money, but you are still choosing one thing or another with every dollar.<p>(In characterizing military activity as not an investment I am not addressing the case of wars that preserved our and our allies freedom, but the disastrous discretionary ones of the new century.)<p>HOW you spend money is always a trade off, no matter where the money came from.

&gt; There is a productive apparatus and resources that feed it - what we are gesturing towards when we talk about “the economy”. They can be mobilized using flows of spending generated by public or private credit, to move in one direction or another.<p>&gt; It wasn’t pouring money into the sand. Most of the dollars flowed back to America.<p>Fiat based money (in which currency -- circulating money, is actually debt) works fine when this money is used to build (and maintain?) infrasctucture, markets, industries, which can then &quot;pay back&quot; this debt; which can sustain a society.<p>The truly sad part, most would agree, is that they&#x27;d use this for destructive purposes.<p>First use fiat-credit to fund a war to break a foreign country and then loan out more credit to pay for rebuilding it. The end result is a transfer of (at least) ownership back to America.

Hard to take anyone seriously who repeats the cartoonish idea that claiming budgets matter for governments is a fallacious attempt to conflate a government with a household. It is ironically an absolutely fundamental failure to understand the basics of public finance.<p>If only someone had informed Zimbabwe that they could have kept on printing because government debts don&#x27;t matter when you print your own currency.<p>Anyway, believe whatever you want to believe. Americans who run their personal finances like dollar hegemony will keep them wealthy forever will pay the price in the end.

If you want to wage expensive wars and need to pay for it, you have two basic options: squeeze your people, or squeeze somebody else&#x27;s people.<p>It doesn&#x27;t matter what your political slant is or even your economic philosophy. You don&#x27;t even have to be constrained by your own economy. And even if you were, &quot;your economy&quot; might be so wound-up in the economies of other nations that those other nations end up supplementing your economy enough to pay for the war. Or you can just pillage. In any case, the money always comes from the people; you just have to figure out which people that ended up being.<p>There is of course the third option: &quot;don&#x27;t pay for it&quot;. In that case, your government (or rulers) are generally doomed, because there is always somebody <i>with</i> money who will see your faltering state as a juicy investment or acquisition. We seem to be in a &quot;peaceful period&quot;, as countries like Venezuela still haven&#x27;t been snapped up; but rest assured that somebody (<i>cough</i> China <i>cough</i>) will be by eventually to pick it up and give it a new coat of paint.

Michael Hudson&#x27;s &quot;Super Imperialism: The Economic Strategy Of Imperial America&quot; explains:<p>&quot;When the US payment deficit pumps dollars into foreign economies, these banks (have) little option except to buy US Treasury bills and bonds which the Treasury spends on financing an enormous, hostile military build-up to encircle (today&#x27;s) major dollar-recyclers China, Japan and Arab OPEC oil producers&quot; - essentially a process by which they finance their own endangerment.<p>From <a href="https:&#x2F;&#x2F;www.countercurrents.org&#x2F;lendman010709.htm" rel="nofollow">https:&#x2F;&#x2F;www.countercurrents.org&#x2F;lendman010709.htm</a><p>Additional links:<p><a href="https:&#x2F;&#x2F;mronline.org&#x2F;2021&#x2F;02&#x2F;09&#x2F;michael-hudson-changes-in-super-imperialism&#x2F;" rel="nofollow">https:&#x2F;&#x2F;mronline.org&#x2F;2021&#x2F;02&#x2F;09&#x2F;michael-hudson-changes-in-su...</a><p><a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=PtHX23Trvy4" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=PtHX23Trvy4</a>

OK so this is kind of wordy... Let me try to point out the guts...<p><i>no one would deny that in an economy operating at 100 percent full capacity - as in the kind of European war economy that Keynes analyzed in the 1940s - crowding out may occur. But that is a highly unusual state of affairs and is precisely not what a progressive analysis of capitalism should take for granted. There is no reason to believe that the US economy at any point in the last 20 years has operated close to that absolute limit, at which trade offs are zero sum.</i><p>Keyne&#x27;s &quot;how to pay for the war&quot; booklet is all about how to suppress consumption through saving, rationing and such. Actual consumption needed to be suppressed, because factories needed to make tanks instead of cars. The book is <i>not</i> about how to print money, deal with finance markets, etc. We&#x27;d call that &quot;fiscal policy.&quot;<p>Fighting WW2 genuinely pushed the UK&#x27;s financial limits. The problem wasn&#x27;t ability to borrow, inflation, money markets &amp; such. The problem was the ability of its economy to support such a big military effort.<p>The point of this blog, I think, is that there was never a &quot;how to pay for the war&quot; pamphlet for afghanistan. US &amp; NATO industries and economies were capable of supporting the war, accounted for as a deficit, without austerity like Keyne&#x27;s prescribed for the UK. Hence capacity.

I&#x27;m confused.<p>&gt; If we want to criticize the War on Terror from a perspective that does not betray sensible macroeconomics, we should not rely on calculations of cost, or suggestions of crowding out to do the work for us. America could easily afford the War on Terror.<p>How is &quot;crowding out&quot; still not a reasonable argument? Sure, he says you can print more money, but then you run against the constraints (like inflation) that he talks about earlier in the article. So there&#x27;s a limit to how much can be printed, and does that not &quot;crowd out&quot; other potential spending targets?

This is a genuinely fascinating and eye-opening way to look at it. I had never considered it from the perspective of the Keynesian economic machine.

A major problem with hyper-Keynesian MMT advocates is that it relies on:<p>- Having the global reserve currency<p>- Being able to raise taxes at will to fight inflation<p>It may be possible that with a one-world government and global agreement on central currency that we could get to this. But instead the US only has the global reserve currency, and the political will to print it seemingly infinitely, but not the ability to raise taxes dynamically.<p>We are already seeing high inflation (by recent US standards) that is beginning to become politically untenable. A full-throated MMT policy would be impossible in the current environment.<p>Even worse there are major threats to USD as the global reserve currency, from Bitcoin to China RMB. I fear the politicians are playing with fire and the lack of fiscal discipline will lead to serious backlash and the reduction in global financial power for the US.

Military, Finance and Health spending by govts in turn fill the pockets of Enterprises, hand in glove with central govts, I am unable to even think of a remote possibility on how to break this nexus.

I&#x27;m always amazed at the people that think that somehow if the government had not misspent these trillions of dollars on war that it could have somehow effectively spent it on massive health and education projects. The choice here was for a corrupt congress to dole out trillions in directionless war or dole out trillions in directionless health and education boondoggles. Also these same people seem to be against tax cuts.<p>I think the federal government needs to cut about 700,000 federal jobs and we need to shrink the discretionary federal budget by at least 500 billion. If we don&#x27;t, you will keep getting iraqs and afghanistans until we collapse.

&gt;Why do progressive critiques of the war fall back on conservative versions of economics to underpin an anti-war position?<p>Spending money keeping people alive is a more productive use of that money than spending money to make people dead.<p>MMT doesn&#x27;t change this equation. In fact, it points out explicitly that increased money supply MUST be used to increase productivity. The exact opposite of what happens when you spend money to bomb people.

Its forgotten how many benefits warfare can bring to humanity. WW2 transformed the US into a global superpower and an industrial powerhouse of unprecedented scale. Technologies invented to aid warfare are improving the quality of life (e.g. aircraft, radar, computers, internet etc etc.) I think that the war industry actually brings us tremendous benefits with a good ROI.

The war is a failure of imagination. You are paying millions of people to work on the War on Terror. It&#x27;s nice that they&#x27;re all employed, that the rich get richer etc., but can we not think of anything better to do with our time?

Any proper left wing position is against war between nations but in support of war between <i>classes</i>.

Reducing his analysis to MMT, as some here are doing, suggests that you don&#x27;t know about Tooze&#x27;s area of study. His magnum opus, probably one of the greatest books in modern economic history, looked at precisely these questions of govt spending being taken to the limit (in Nazi Germany).<p>But, a bit like those who specialise in Japanese economic history, I feel like it is pretty misleading to base your argument for MMT on purely wartime measures: not only is the level of govt spending changing but the allocation of resources is changing...that is very different to a non-wartime economy where there aren&#x27;t huge supply changes.<p>After WW2, there was huge economic dislocation and inflation. But it seems very churlish to look at WW2 and say: there are no limits to spending. When: most economies in the world effectively shut down, trade shut down, there was massive destruction of supply, massive financial repression...financial repression in the US, by far the economy that was least negatively impacted, didn&#x27;t end in truth until the mid-60s. The UK economy didn&#x27;t recover in full until the 90s.<p>Crowding out does occur. It isn&#x27;t unusual. There is ample evidence of it occurring. It is dangerous to point out too that &quot;there is no limit&quot; and then fail to mention that your only sources for this claim are dictatorships or countries at war...there is a reason for this (it is often politically unpalatable to take control over production such that crowding out is prevented).<p>The reason why there was no crowding out, to be blunt, is that these wars weren&#x27;t very expensive. They provide no evidence to support the claim that: that we are nowhere close to the real limit on spending. Almost every industry right now has shortages, and the economy isn&#x27;t close to full capacity because the labour participation rate is low? Rakakakakaka.<p>I like Tooze but this is very weak stuff (it is worth pointing out though, that the last part of the previous paragraph is essentially the Fed&#x27;s position...so we will likely find out who is right).<p>It is also interesting that he didn&#x27;t mention the 1920s more either...this is the ultimate &quot;proof&quot; that austerity makes no sense. But it is also worth pointing out that after WW1, lots of countries had the same issues after WW2. There were huge price changes in 1920 that basically felled the UK economy until the 90s (WW2 and US actions after were just the final nail in the coffin), it is quite foolish to suppose that the UK economy would have just magically recovered if the govt started spending...it was a supply-side issue, not a problem with demand (the US was the counter-point to this, the US started the decade with a relatively blank slate and this decade turned the US into a financial power competing with the UK...the UK was legacy, stuck with all the old industries that were shrinking, and struggled to retool after the war ended)...but yeah, usually every economic narrative that takes the Keynesian approach will mention 1920s UK...it is a classic (although misleading) example.

&gt;The tragedy is that the better projects were never on the agenda of power at all. The tragedy is that the one thing that those with power and influence could agree on was war-fighting.<p>There&#x27;s not much more I can add to this. Society is made up of choices and we chose to slaughter people around the world instead of choosing to provide healthcare, education, or any other constructive benefit.