Wednesday, September 7, 2011

The Wind-Down Of Iraq/Afghanistan Wars Will Hurt and Help The Economy

Not that I am any fan of war but, Americans should be made aware of the economic consequences of winding down our involvement in the two wars in Iraq and Afghanistan in 2012. In a nutshell, we will lose jobs. That's because the military industrial complex, in support of any war effort, is a real job creator. It's what most economists call a "war-time economy" and, for those spendthrift Keynesians, it is often referred to as "military Keynesianism". But, like all Keynesian spending efforts, the direct economic benefits will also stop as soon as the spending stops.

Right now, we have thousands of workers who have been "employed" in the re-arming, feeding, and outfitting of our military. What percentage of those who will actually lose their jobs is hard to determine. It depends on how many will continue in the war effort by supplying Iraq and Afghanistan troops. In the short term, there is bound to be a hit on employment. However, in the long term, the economic benefits will be significant, because contrary to Keynesian spending theory, the U.S. deficits will be reduced; the dollar strengthened; and consumer spending will benefit from lowered import prices.

Of course, this will all be for naught if Obama and the Democrats try to use the decline in war-spending as some kind of new found money they can spend on more economy-killing social programs. Hopefully, the Republicans won't let this happen.

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