Posted on 03/26/2003 5:56:40 PM PST by Willie Green
For education and discussion only. Not for commercial use.
WASHINGTON (Reuters) - The price of a post-war U.S. occupation of Iraq could be so big that some experts fear it would make the cost of combat alone pale in significance.
This is especially true because consideration of the war's ultimate price tag, and how to pay it, comes at a time the U.S. government is already awash in red ink.
This week, the White House asked Congress for almost $75 billion in extra money to pay for a relatively short war in Iraq.
While Congress has yet to set aside funding for rebuilding in the current budget debate, worries over the war's eventual costs were cited in the Senate's Tuesday vote to whack President Bush's proposed 10-year tax cut of $726 billion in half.
For a government that spends more than $2 trillion a year, a one-time expense of $75 billion is relatively small. It will, however, add to what the Bush administration has already estimated will be a record budget shortfall of $304 billion in 2003 and it will mean additional debt will be added to the government's current outstanding debt of $6.400 trillion.
The Council on Foreign Relations, in a recent report, estimated that the United States may need to station 75,000 troops in Iraq, which, with aid efforts, could cost $20 billion a year "for several years."
Bob Bixby, executive director of the Concord Coalition, a balanced budget advocacy group, said the annual costs could run between $10 billion and $30 billion.
"No one really has any idea about how much this might cost," said Lyle Gramley, a former Federal Reserve governor and a senior economic consultant with Schwab Washington Research Group. "It could be very, very big bucks."
DIFFERENT WARS, DIFFERENT COSTS
In World War II, the United States ran up huge amounts of debt to finance a global war fought on two fronts. While it left the war with a big debt burden, it quickly worked it off. Publicly held debt as a percentage of U.S. gross domestic product fell to 57.3 percent by 1955, after peaking at 108.6 percent in 1946.
In Vietnam, the increasing U.S. involvement throughout the decade of the '60s was also financed by government borrowing, though to a much smaller extent. The decision to finance the war at the same time as then-President Lyndon Johnson's Great Society social programs led critics to say the administration was buying both "guns and butter."
The last major U.S. war, the original Persian Gulf War in 1991, was a different matter. As part of a much larger international coalition, the United States successfully raised almost all of the approximately $61 billion cost through international contributions.
A Treasury spokesman on Tuesday declined to comment on whether Iraq occupation costs could affect Treasury's long-term borrowing patterns.
There is, however, a very small cash cushion left over from the 1991 Gulf War. The Defense Cooperation Account, where money from U.S. allies was deposited to help pay for the first Gulf War, still had about $657 in cash and another $13.1 million in holdings of U.S. government securities on hand at February's end, according to the Treasury Department.
CREEPING GROWTH?
The cost of keeping troops in Iraq after the war depends on several variables, experts say. The size and duration of a post-war U.S. operation is a major question and likely would depend on how well a post-Saddam Hussein regime is accepted. Another variable is whether the costs could be shared with other nations or defrayed through oil sales.
But if the United States is faced with a long, solitary commitment, it could have consequences for the economy.
One problem could be a creeping growth in expenses reminiscent of the Vietnam era. The costs of the continued escalation of U.S. efforts in Vietnam were not foreseen and, some argue, played a part in the rise of inflation in the late 1960s and early 1970s.
"Vietnam snuck up on budgeters," said Lou Crandall, chief economist with Wrightson ICAP.
Another possibility is a return of the early '80s economy, according to Schwab's Gramley. Seeing an expensive military buildup leading to massive deficits under the Reagan administration, the Federal Reserve was compelled to keep inflation-adjusted interest rates high in order to hold inflation in check, he said.
Those rates, he said, kept productivity growth low and economic growth muted.
"That, I think, is the risk we run," he said.
Others think those worries are overblown. Stephen Stanley, senior market economist with RBS Greenwich Capital, said it's unlikely other nations would refuse to underwrite or take some part in post-war Iraq operations.
Stanley also said capital markets would not necessarily hear alarm bells from a somewhat higher budget deficit.
"Ultimately," he said, "it's a question of what is its relation to the size of the economy and where do we think it is headed."
9-It will cost the U.S. billions of dollars to rebuild Iraq. Last time anyone looked, Iraq was sitting on several trillion dollars worth of oil and, as such, can easily obtain loans to pay for its own reconstruction.
Tonight we welcomew new show host TOM ATKINS! *GARY ALDRICH Former FBI agent, Author of Unlimited Access Gary will discuss his new book, and America's current political situation.
*PIERRE DE HAIL Former French Special Ops fighter, president of Risk Management International Pierre will offer exceptional insight in the Iraq war, and controversial opinions on France, Europe
It's ok for dictators to steal the nations wealth but not ok for a conqueror to distribute it to the Iraqui people with a little cut off the top for overhead.
It is a waste of time to play the "your a hypocrite too!" game and a lot more productive to analyze the costs and benefits of undertaking a long-term occupation in the here and now. Back in the ancient times, conservatives used to care about such things.
Surely you wouldn't hide behind your words, surely you are a man of action and can do this thing. Rise to occasion, Jonathan, do this thing, be the brave man that you write your self up as.
This cheesebag is hiding behind his filing cabinet as we type. Your opinion, Mr. Nicholson join the opinion pool. Opinions are like a$$holes, everybody has one. Yours is paid for and published, mine is voluntary.
We are prohibited from pumping and selling our own oil by the very same Democrats who now are screaming about the costs and wondering where the money is coming from (hint: it's not coming from their decades-long bloated useless Federal programs).
Iraq has huge amounts of oil. Let's start pumping it. Why should the American taxpayer pay all the bills when this war is the fault of the Iraqi government?
Enough is enough!
--Boris
We can not bring utopia to that Bosnia writ large called Iraq and to try to do so through a MacArthur regency would be the height of folly....thus issues of the costs of a long-term occupation (which is now being planned) should be on the table.
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