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No Iraq Recession

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"No Iraq Recession"

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There’s a bunch of progressive groups experimenting with some interesting “Iraq recession” messaging which sounds promising to me, but as Paul Krugman explains doesn’t fit the facts particularly well:

The fact is that war is, in general, expansionary for the economy, at least in the short run. World War II, remember, ended the Great Depression. The $10 billion or so we’re spending each month in Iraq mainly goes to US-produced goods and services, which means that the war is actually supporting demand. Yes, there would be infinitely better ways to spend the money. But at a time when a shortfall of demand is the problem, the Iraq war nonetheless acts as a sort of WPA, supporting employment directly and indirectly.

Krugman mentions the war’s impact on the price of oil as one potential caveat. I would also add that the war’s been going on long enough at this point that we’re feeling some of the long-term consequences of war-related spending along with the short-term ones. Americans are probably somewhat poorer on average than we would be had the war never been fought. But the war’s not responsible for the economic slowdown — in the short-term it’s helping to prop the economy up. Indeed, the DC area in particular (though also, I would note, Arizona — though obviously Saint John’s hawkish views reflect pure straight talky principle and owe nothing to the large number of defense contractors he represents) has seen a lot of defense-fueled growth.

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