War With Iran Unlikely to Spur Growth

My colleague Matt Duss finds David Broder arguing that “as tensions rise and we accelerate preparations for war [with Iran], the economy will improve”. I had sort of considered writing a satirical piece along these lines, though my proposed plan of attack was going to be join US-EU military operations against Canada and Norway.

At any rate, Broder is kind of enough to observe the questionable moral logic here and hastens to add “I am not suggesting, of course, that the president incite a war to get reelected.” The economics, however, is questionable. It’s true that a net increase in government purchases would increase economic growth. But as Dean Baker notes one hardly needs a war to produce a net increase in government purchases: “If spending on war can provide jobs and lift the economy then so can spending on roads, weatherizing homes, or educating our kids.” The point is that anything that mobilizes real resources will fight idleness and unemployment. What’s wanted, however, is to mobilize real resources in order to do something useful.

One should also consider the very real possibility that war with Iran would lead to a depression inducing supply-side shock through a spike in energy prices. Even worse, war is bad for children and other living things! An alternative military stimulus would just involve doing the stepped-up military purchases but then doing absolutely nothing with the new equipment and personnel. That would have the same economic impact, but nobody would need to die.