NYT: Counting the Hidden Costs of War ($270B and still counting?)

ECONOMIC VIEW
Counting the Hidden Costs of War
By ANNA BERNASEK

Published: October 24, 2004


....Two economists, Warwick J. McKibbin of the Brookings Institution and Andrew Stoeckel of the Center for International Economics in Australia, have calculated that the war may have already cost the United States $150 billion in lost gross domestic product since fighting began in March 2003. That is close to one percentage point of growth lost over the past year and a half. If that figure is correct, the nation's annual economic growth rate, which has been 3.7 percent during this period, could have been nearly 4.7 percent without the war.

Where does that $150 billion figure come from? The study took into account factors like higher oil prices, increased budget deficits and greater uncertainty. When analyzing the effects of uncertainty, the authors estimated the impact of the war on financial markets, business investment and consumer spending....

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.... if Mr. McKibbin and Mr. Stoeckel are correct in their estimate, the real cost of the war to date, including direct spending and lost economic growth, is in the neighborhood of $270 billion....

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What really worries economists, though, is the future economic impact. "The longer this war runs, the weaker our long-run growth will be," (Mark Zandi of Economy.com) said. That is because spending on things like the occupation and peacekeeping in Iraq does not do anything to bolster the American economy's productive capacity.

And it adds to the growing budget shortfall. "With a budget deficit already at 3.5 percent of G.D.P.," (Stephen S. Roach, Morgan Stanley's chief global economist) said, "that's a really big deal."...


http://www.nytimes.com/2004/10/24/business/yourmoney/24view.html

whoop-dee-doo. GO KERRY!

That businesses shut their wallets. The waste of collosal resources on methods of destruction overseas adds to the already huge balance of payments deficit, the government deficit, and adds nothing to productivity. The opportunity cost is huge. The fact that it provided windfall profits for energy companies at the expense of the public is no help either.

Mr. Zandi says the war has clearly "had a very large impact on our economy and on the psyches of business and consumers." He explained it this way: First, in the period before the war, fear and uncertainty held back the economic recovery. Then, as the initial invasion succeeded, the economy recovered strongly and found its footing again. Now, as the war drags on, higher oil prices and shaky confidence are dampening the pace of growth and job creation.

:kick: