Costs of War

Ever wonder how much America’s wars cost and how we pay for them? I’m doing a radio show in the Bay Area tonight on that topic (subject of a previous book of mine), so here’s a summary of the big picture.

Most people get overwhelmed by the large numbers and their complexity, so let’s think about the average U.S. household. Every billion dollars in the national budget is equivalent to a ten-dollar bill for the average household. Now look how that translates…

The overall U.S. military budget is around $900 billion a year (15 percent of that is for veterans’ benefits). So, easy, that’s 900 of those little ten-dollar bills — whoa, that’s a lot of moola. Each household is paying $9000 a year for the military. Of that, about $1600 a year is for the wars in Iraq, Afghanistan, and the “war on terror.” The bulk of the $9000 pays for heavily armed forces waiting around in case we need to fight a real war against another mechanized army. We probably won’t (see my next book in September). By the way, U.S. defense spending is nearly half the world total, way more than all the other great powers combined.

Cumulatively, over the decade since 9/11 the cost of these wars has now exceeded $1 trillion, or $10,000 per household — about $1000 a year over the last decade. Of that, nearly two-thirds has been Iraq, and one-third Afghanistan, according to an excellent new report from the Congressional Research Service. The Libya operation is small change; it has cost America $700 million to date, $7 per household.

Foreign aid is not in the same league at all — about 5% of military spending each year, and a similar share of the overall spending related to the “war on terror” in the past decade.  The current foreign aid budget, which is being reduced, is about $50 billion a year, 80 percent economic and 20 percent military aid. That totals $500 a year per household, and is a lot more cost-effective than the military budget.

The best bargain of all is UN peacekeeping. For a world total of $7 billion, or half of one percent of world military spending, the UN has more than 100,000 peacekeepers deployed in 16 operations worldwide. Since Americans pay only about a third of the cost, the average household’s share is $25 a year.

Before you grumble about that $25 let’s go back to the real problem, the $10,000 a year you pay for the U.S. military. Historically, we got that money from taxes, especially by taxing the rich. The tax rate on higher-income Americans (usually those earning more than a few hundred thousand dollars) was 70 percent in World War I, 94 percent in World War II, 92 percent in Korea and 77 percent in Vietnam. During the “war on terror,” for the first time ever, tax rates were lowered in wartime. The top rate is now 35 percent, and 15 percent for capital gains where rich people get a lot of their money.

So now military spending is sky high and tax rates are low. This is not the only main cause of the federal deficit, but it’s one of the main ones. Historically, poor Americans fought our wars and rich Americans paid for them. Today, poor Americans fight them and we are borrowing the money to pay for them. Our children and grandchildren will pay.

The solutions:  Reduce military spending and restore higher taxes on the rich, as part of an overall long-term deficit-reduction plan (which will also have to include Social Security and Medicare). Maintain foreign aid and increase support to peacekeeping. And when you hear “billion,” think of that ten-dollar bill.



7 responses to “Costs of War

  1. Add to the list of solutions:
    reduce extremely excessive compensation to top corporate executives.
    A recent (long) Wash. Post piece on this

  2. Pingback: Costs key to Afghan withdrawal strategy |


    21 July 2011. Hello. I am intrigued by your comment that “..Historically, poor Americans fought our wars and rich Americans paid for them. Today, poor Americans fight themorically…”. I have heard this stated a number of times ref Iraq II & Afghanistan, and have also heard it disputed. I have seen a number of individual local news articles from time to time ref National Guard and Regular Army folks joining up/re-enlisting in order to get health care and/or jobs for their families (and then having to go into the combat arms vice the navy, USAF etc). Question: do you have any sources for this comment (i.e., the poor fight our wars)? Thanks. JOHN

  4. Good point, thanks. I was referring to “historically” as U.S. armies of draftees, and the ways some rich people could avoid serving if they wanted. And I don’t mean the poorest, just “poor” versus the rich ones who historically have been taxed more in wartime. Re today’s U.S. forces, someone probably has statistics on their family incomes but I don’t have it.

  5. Pingback: The UN – Bang for the Buck |

  6. Pingback: Wars, Debt, and Inflation |

  7. I am doing my PhD in Politics & international Relations from
    International Islamic University Islamabad, Pakistan.
    I am working on my research proposal under the title of “Cost – Benefit Analysis of War on Terror in
    Pakistan: 2001-211”
    The immediate costs of terrorist acts are loss of human lives, destruction of property and infrastructure and curtailment of short-term economic activity. Additionally, terrorism creates uncertainty, reduces confidence and increases risk perceptions; leading to lower rates of investment and lower economic growth. In fact, Pakistan has not only lost precious lives and infrastructure; according to official estimates, it has also suffered a loss of around $ 67.93 billion since 2001-2010 and 37,000 deaths and 42,000 injured.
    Pakistan had one of the biggest internal displacements in the history of world with nearly 2.3 million migrating to other areas, being taken care of and then finally being repatriated and rehabilitated to their homes. The country received around $0.8 billion for an operation that cost Pakistan approximately $10 billion.
    I seek your advice/help for the operational definition of “COST”, and “BENEFIT ‘from Pakistani and US Governments and majority of their publics. Point of view. How Cost can benefit can be defined?
    I shall be thankful to you for your kind and positive help in this regard. I shall be thankful to you for your kind and positive help in this regard. I shall be very thankful if you could please provide me with email addresses of concerned Professors/Academicians or Institutions.
    Looking forward towards your kind and positive response