Economy

War costs, while high, are a small part of budget deficits

WASHINGTON — President Barack Obama insisted last week that as the nation confronts record government debt and pressing economic needs at home, it cannot afford a lengthy, ambitious nation-building effort in Afghanistan — but limiting U. S. involvement is unlikely to make much of a dent in the record federal debt.

Liberals complain that the war has been a big contributor to the nation's budget problems, and are insisting that some way be found to pay for the buildup.

But the wars in Iraq and Afghanistan, though they've virtually all been funded by deficit spending, are not the main reason why the publicly held national debt has more than doubled — from $3.339 trillion to $7.709 trillion — since the Sept. 11, 2001 terrorist attacks.

"It's a small part of the deficit," said Todd Harrison, fellow in defense budget studies at the Center for Strategic and Budgetary Assessments, a Washington research group.

That's not to say the war costs don't matter.

"Over the short term, we are certainly spending a large chunk of money of the wars, money that could be devoted to other priorities or for deficit reduction, at least once the economy improves," noted Josh Gordon, policy director at the Concord Coalition, a bipartisan research group devoted to fiscal discipline.

But over the long term, he stressed, "Our fiscal challenges are substantially larger, and just ending the wars would not change those projections — because they all assume peacetime budgets."

Obama last week said that he'd deploy an additional 30,000 to 35,000 U.S. troops to Afghanistan. This year's expected $30 billion to $40 billion price tag for that should boost the total cost of wars in Iraq and Afghanistan past $1 trillion over the last nine years, according to the nonpartisan Congressional Budget Office (CBO).

That spending accounts for only about one-fifth of publicly held debt accumulated in that time.

National defense spending accounted for 20.7 percent of the federal budget last year. While that's higher than peacetime lows of around 16 percent in the late 1990s, it's less than the 26-28 percent annual shares between 1975, when U.S. involvement in Vietnam ended, and 1992, when first the Cold War and then the 1991 Gulf War ended.

What's driven the bulk of this decade's deficit boom has been spending growth in programs such as Medicare and Social Security. Human resources, which include those and other domestic programs, consumed 63.8 percent of the budget last year, compared to only 49 percent as recently as 1990.

The antidote to high deficits, say independent experts, is making tough choices on domestic spending and taxes.

"The purpose of a budget is to set priorities and make tradeoffs," said Susan Tanaka, director of citizen education and engagement at the Peterson Foundation, a New York-based fiscal watchdog group.

Since the U.S. invaded Afghanistan shortly after the 2001 terrorist attacks, CBO estimates that the U.S. has spent $943.8 billion through Sept. 30, 2009, to meet war and war-related needs, and could spend another $1.6 trillion over the next decade — no small sum, indeed.

About $891 billion has been spent on military operations in Iraq and Afghanistan. The Iraq share, 85 percent of 2007 spending, accounted for an estimated 74 percent last year.

Most of the rest has been allocated for diplomatic operations and foreign aid to Iraq, Afghanistan and other allies in the war on terror. About $16 billion has gone to the Iraq Relief and Reconstruction Fund.

Other estimates put the cost higher; a 2008 study by Nobel Prize-winning economist Joseph Stiglitz and Harvard University professor Linda Bilmes dubbed the conflicts the "$3 trillion war."

That figure appears consistent with current spending levels, since it assumes that the U.S. will continue to spend on the war and related activities through 2019, a mission CBO estimates could cost $1.6 trillion.

Also adding to the cost is interest on war-related debt; that's totaled at least $100 billion. Interest on future debt and other indirect costs are difficult to calculate, such as the cost of replacing equipment and providing benefits and health care to military veterans and families.

Direct war costs dropped in 2009, to about $154 billion, after reaching $187 billion in 2008. The administration had sought $130 billion in fiscal 2010; the defense spending legislation is still pending in Congress; that figure is now likely to grow by at least $30 billion.

A small band of congressional liberals insists that too much is being spent on the war, and that it's driving up the national debt.

War spending "has contributed to our economic crisis, exploded the lid off our national debt, and diverted funds from desperately needed domestic priorities," said Rep. Lynn Woolsey, D-Calif.

"We believe that if this war is to be fought, it's only fair that everyone share the burden," said House Appropriations Committee Chairman David Obey, D-Wis., who had pushed for a war surtax.

The surtax effort was seen as more a political than a fiscal initiative.

"Look at who's pushing this. It's people opposed to the war," said Roberton Williams, budget analyst at the Urban Institute-Brookings Institution Tax Policy Center.

House Speaker Nancy Pelosi, D-Calif., sensing scant support for the surtax, effectively killed the idea on Thursday.

The war cost will help boost a federal deficit that CBO estimates will reach $1.4 trillion this year, roughly the same as last year, and add to a total national debt that now tops $12 trillion when including debt held in government accounts. But Obama's extra $30 billion is only a drop in the $1 trillion, $400 billion deficit bucket.

CBO sees huge deficits ahead. Its latest projections show that even with stricter fiscal policies and a reviving economy, federal deficits are expected to total $7.1 trillion over the next decade, still reaching $722 billion in fiscal 2019 alone.

Those projections assume a continuation of current war policies. Should troop levels decline "significantly" over a three year period, as Obama hopes, the cost would drop to about $1.1 trillion over 10 years, or roughly $140 billion a year, which would still leave large deficits.

Democratic leaders lament that until the economy stabilizes, it could be hard to significantly dent those deficits.

"I am for paying for things that we do," said House Majority Leader Steny Hoyer, D-Md. But, he said, trying to offset spending "is complicated by the economic crisis."

MORE FROM McCLATCHY:

Nobel laureate estimates wars' cost at more than $3 trillion

Experts: Health care bills do nothing to lower costs

U.S. unemployment rate falls but job losses improve

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e-mail: dlightman@mcclatchydc.com

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