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1/18/2008
IRmep Opportunity Cost Analysis
Is the "Project for a New American Century" Killing off the US Economy?

The plunging US economy and drastic efforts by the Bush administration to stimulate consumption through a $145 billion package raise an important question, "how did we get into such dire economic straits?"

In the year 2000, neoconservative ideologues called for a major overhaul of US military strategy in their policy paper "Rebuilding America's Defenses" (PDF).  This followed their 1998 call for the overthrow of Saddam Hussein in Iraq on "weapons of mass destruction" pretexts.  The overall economic implications have been disastrous.  Core goals for the incoming Bush administration mandated by PNAC advisors included securing forward military bases in the Middle East and increasing military spending from 3% to 4% of GDP (absent some catalyzing "Pearl Harbor" type event). 

9/11 and the subsequent "Global War on Terror" have provided their pretext for a radical increase in US military spending to finance US occupations in Iraq and Afghanistan and hostile posturing toward Iran.  This resource misallocation has reverberated throughout the entire economy, cutting off investment in growth industries and overall middle class American wealth creation.  While it is highly debatable whether the administration's ground wars in the Middle East have increased American security, the long term economic impact of run-away military spending no longer carries any mystery:

  • Military spending (cited from the OMB financial statements) will consume 6% of Gross Domestic Product (GDP) in 2008, double the level of the 1990's.
  • Military spending will have grown on average 13.36% per year (2001-2008) while the US economy has only grown 2.24% per year.
  • Tax revenues collected from individuals increased 6% per year over the last five years, while tax revenues from businesses have grown 23% per year to pay for increased military spending; this still has not been enough to close the yawning budget deficit.
  • Military spending will contribute to a US budget deficit of $10 trillion by 2010 (if not sooner) double the 1997 deficit. 
  • Mismanagement and malfeasance (including corrupted mortgage markets) and military industrial resource misallocation has hobbled the US economy to a forecast rate of only 1.2% GDP growth in 2008, a quarter the growth level of the year 1999.

This is the end result of the "Global War on Terror" and policies of the "New American Century".  Louder and even more vacuous calls to "support the troops" and other red herring can no longer hide the massive damage wrought upon American households and businesses.

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