Saturday, March 18, 2006

The Trillian Dollar Sky is Falling

So MSNBC is preorting "Cost of Iraq War could Exceed $1 Trillion"; and they say the costs are growing at 200 million per day.

Well, I have two things to say about that:

1. Don’t trust the numbers. The proposed defense budget for this year is 426 billion, 200 million per day would be almost twice that at 730 billion a year, and at the low end 60% of the defense budget is spent on things other than Iraq.

They dont tell us where these numbers are coming from, or how they are derived; but they seem to be completely impossible based on real hard numbers available through open sources.

The most likely number on actual Iraq war spending is something like 130-170 billion per year; or between 40 and 50 million per day.

Of course that's still a lot of money, but that brings me to point two,

2. So what

World War 2 cost us in comparison more than 50 times as much per year for seven years (from the beginning of increased war spending in 1938 until 1945, when there was a dramatic slowdown in production) nevermind the rebuilding costs.

Direct number comparison is a bit misleading, as the direct number cost to the U.S. of WW2 from 1938 to 1945 was appx 400 billion, which works out to about 5 trillion in todays dollars; or a bit more than 700 billion per year.

Our GDP during WW2 in inflation adjusted dollars varied from between 800 billion to 1.5 trillion. Over the 7 year period listed above, that GDP was 9.3 trillion (again in inflation adjusted dollars), divided by 7 is 1.33 trillion; or approximately 1/10th of what it is today.

Averaging the costs out over the same period gives you approximately 700 billion a year; or a little less than 50% of GDP.

Funny enough, that 700 billion per year exactly what the MSM is saying THIS war is costing us (and they are approximately quadrupling the real dollar costs as near as I can see), except our GDP today is approximately 13 trillion, and even using their inflated numbers, we’re spending about 6% of our GDP annually on this war; and more realistic numbers put it at more like 1.5-2%

The medicare prescription drug benefit should cost us more than that by the way. Not medicare as a whole, or Social Security; just the drug benefit.

Perspective adjusting yet?