Iraq War on the US economy essay

The impact of Iraq War on the US economy is still under discussion and no single opinion exists to illustrate its costs. Experts agree that the US spending on the Iraq war is harmful to the US economic development and stability. However, economists can’t reach agreement whether the war would have negative or positive long-term economic effects as compared, for example, with World War II total military spending is relatively modest. World War II resulted in shocking defense spending and 37. 8% of the country’s GDP (gross domestic product).

When calculating the costs of Iraq war, economists say that even if to include terrorism expenditures and supplements, the number will be about 6% of GDP. Also experts assert that the costs of Iraq war are still in perspective and they distinguish direct and indirect (or collateral) economic consequences of the war. Primary economic consequences are claimed to be: volatility on the global oil markets, international debts because of war costs, and geopolitical uncertainty. [Sabrin, 2006] Direct and Collateral Impact on Economy

Apart from abstract questions about whether war spending is helpful or hurtful, economists also debate the specific economic impact of the current wars in Iraq. [Teslik, 2008] The war costs country’s taxpayers more than $350 billion, whereas President George Bush asked for more $180 billions during the 2007-2008 periods. Without direct costs, the replacement of war equipment will amount about $60 billion for taxpayers over the next five years. Further, total long-term costs are estimated at amore than $2. 4-3.

5 trillion, according to the CEO of the Democrats on the Joint Economic Committee. Therefore, experts are really worrying of the direct impact that expenditures provide to the country’s economy as it would be hard to restore current resources and to maintain current economic and financial relations with other countries. Economic stability is affected by the fact that many European countries don’t support America’s war in Iraq stressing that it is inhumane. Consequently, they may call a halt to import-export relations with the USA.

Moreover, experts provide different figures of economic impact. For example, according CBO’s prediction the total costs of war will be about $2. 4 trillion up to 2017 provided the same population levels in the country or, in other words, the costs are $7,793 per average citizen or $570 per every year. [Sabrin, 2006] By contrast, the Democrats on the Joint Economic Committee, which estimated a $3. 5 trillion cost through 2017, say the war will cost the average U. S. family $46,400. per person, or, in other words, $46,400 per average family ($11,627, or $830 per year).

[Teslik, 2008] Lee Teslik in the article “Iraq, Afghanistan, and the US Economy” writes that “both estimates factor in interest payments on foreign debt, which the United States has sold in order to help finance the war”. [Teslik, 2008] Actually, debt payments account fro total costs percentage. For example, if to analyze long-term costs perspective, the actual costs will account for more than $1 trillion, and interest payment will provide additional $700 billion. Beyond the direct impact Iraq war affects country’s economy in variety of ways.

For example, it is a well-known fact that Iraq is important source of oil production in the world and, therefore, instable situation in the country leads to increased prices on oil for all countries including the US. Summing up, the country has higher expenditures on oil. According some estimation, Iraq is listed as the second amount of oil in the world after, of course, Saudi Arabia. It is reported that improving security and economic conditions in Iraq would allow the country’s oil production to return to pre-war oil pricing. Nevertheless, Iraqi oil ex-minister argues that it is hardly possible to maintain current production levels.

Teslik asserts that “whether Iraq is able to sustain—or possibly increase—its oil production, the fighting of the Iraq war ground production nearly to a halt in 2003”. [Teslik, 2008] Since 2003 oil production appeared to have proved choppy. It is necessary to underline that geopolitical turmoil is one more factor affecting oil prices. Since Iraq war the prices have spiked, but economists assume that turmoil in Iraq is not so dangerous for country’s economy. However, oil production in Iraq accounts for about 3% and, therefore, turmoil may have significant effect on increasing prices.

It strikes heavily the US economy. Douglas Holz-Eakin, CBO’s ex-director, argues that oil prices will be increasing, but the US economic development will be decreasing. Experts say that it is rather hard to define economic effects of the war quantitatively. Furthermore, country’s economy is strongly affected by increased energy prices. Market experts say that increase in energy prices together with dollar falling will stain the budgets of country’s consumers and companies. In such a way the country will be pushed toward possible recession.

Increased oil prices will lead to increased inflation rates which are at low levels now, but analysts assume that inflation may become major economic issues in country’s Federal Reserve provides additional interest rates cuts. Finally, economists admit that of security is improving in Iraq, future benefits from oil production may help to prevent economic pressures. [Sabrin, 2006] Conclusion Experts argue that psychological involvement in Iraq war also negatively influenced US economy. Us war in Iraq undermined what it is called now ‘open and expansive’ attitude toward economics and foreign policy, as it was mentioned above.

The US is argued to become a nation consumed by pessimism and fear which have nowadays led to protectionist policies on markets, legal and illegal immigration, domestic and international trade, etc. All these issues are threatening future development of country’s economy. Moreover, medical care for veterans and disabled in Iraq war provides one more page of expenditures – more than $350 billion. The question appears: was war in Iraq worthy of such expenditures?


Sabrin, Murray. 2006. “The Impact of the Iraqi War on the U. S. Economy”. Database online. Available from