Is the Iraq War Hurting the U.S. Economy?
has been skirted by the government and, instead, blame has fallen solely on the sub-prime fallout. Can we trust this assessment? It is commonly thought that increased military spending does not hurt the economy. However, economic models have been shown to contradict that. Last year, the Center for Economic and Policy Research (CEPR) commissioned a group called Global Insight to run a model simulation to determine the impact of higher military spending on an economy. They figured an increase of 1% of GDP, which is roughly what military spending has increased in the U.S. since 2001 with the wars in Afghanistan and Iraq. What the simulation found was that, while there is an initial stimulus from the increase in spending, over time (typically around the 5 year mark) the increased spending starts to show decreases in nearly all sectors. After the 5 year mark, We see a drop in payroll employment, housing starts, and jobs and we see increases in interest rates, inflation, and imports.
