In 2004, when his words still made people tremble, Osama bin Laden threatened to “make America bleed to bankruptcy”, wrote The New York Times. Although no one took the threat literally, time has shown that the words of former U.S. enemy number one was not just simple words. A survey of U.S. newspaper put a price on the war on terror at the huge value of 3,300 billion dollars. In other words, for every dollar spent by al Qaeda to set up the attacks of September 11, 2001, the U.S. spent the fabulous amount of 6.6 million dollars.
Of this money, more than 1,000 billion dollars were direct costs involved in war, such as removing the Taliban from power in Afghanistan. But what if the remaining 2.000 billion dollars had been spent in other directions? For example, rebuilding an education system? Or finding better alternatives to compete with China? Or reduce the national debt?
In the U.S. there were never discussed priorities. “What justifies these expenses?” Asks Dennis Blair, briefly a member of the Obama administration on security issues. “Looking back, we suffered a trauma and the posttraumatic stress made us throw out a lot of money to solve the problem”, said David Rothkopf, author of a history of the U.S. National Defense Council. “There are expenses that we can’t avoid and expenses that we choose to make and we needed a decade to realize that some choices were wrong”.
The war against terror was far beyond the estimated costs in the early 2000s. Lawrence Lindsey, director of the National Economic Council, was forced to resign in 2002 when he suggested that the costs involved in the war in Iraq would amount to 100-200 billion dollars. In response, Mitch Daniels, then head of the Office of Budget came up with an estimate of 50-60 billion dollars. According to the latest data, the Iraq war has cost far more than 800 billion dollars. The Afghanistan war cost over 440 billion dollars.
Thus, the biggest impact of the two wars was economic. These costs were a source, largely overshadowed by the recession of 2007-2009 and the fall of the housing market, of the precarious situation in which the United States is today: a public debt almost equal to GDP and an estimated deficit of nearly 10% of GDP.
Normally the wars are financed by tax increases. But George W. Bush, the president responsible for both wars reduced taxes. Meanwhile, the real estate bubble has caused Americans to borrow irresponsibly, and household savings dropped from 8% of GDP to almost 0%. Bush created the Medicare benefit program, which loaded even more the budget, and Obama continued this program.
Then the recession has come, which demonstrated that the United States can’t afford the combination of low taxes, low savings, a bloated welfare system and wars abroad. Perhaps if the money spent in two armed conflicts were oriented to the economy, the recession would have been easier, but the war on terror leaves the U.S. with a huge financial burden.
U.S. debt rose from 40% of GDP to 67% of GDP and even 98% of GDP if taken into account holdings of securities of government agencies and pension funds. Economist Michael Boskin writes in The Wall Street Journal that federal spending (25% of GDP), deficit (10% of GDP) and the federal debt (67% of GDP) are at the highest values after the Second World War . Unemployment also remains at record levels.
This is the portrait of an economy that could have looked quite different if the money spent on war would have been oriented to support the economy. But the Libyan conflict erupted this spring revealed an America less willing to engage in another conflict. Because of the aversion that Americans have against involvement in armed conflicts and the weak financial power that no longer allow an involvement in another international conflict, Obama preferred to keep the U.S. military in the second line of offensive that is trying to remove dictator Muammar Gadhafi from power.