Monday, February 25, 2008

"Financial" Cost of War

Look at all the money the war is costing us! We hear this all the time in the media. As one discusses the financial cost of war, we have to be careful not to forget those who have paid the ultimate price, those who have been wounded and those who have dedicated their lives for our freedoms. Unfortunately wars cannot be won without sacrafice.

But liberal accounts say the war has cost us $495,000,000,000.00 plus. Yes that is billions. Let us also try to understand that this site states "War in Iraq" but I will be willing to bet it includes the "War in Afghanistan" and the collective "War on Terror". So semantics seem to confuse the issue.

Now let's try to get our hands on this figure. Ever take an economics course? Ever take an accounting course? Cost has two factors to it called fixed cost and variable cost. Fixed cost is explained as cost incurred that does not change and are considered hard to lower and comes as the cost of operating a business, in our case National Defense. Variable cost is cost that fluctuates daily and with certain events. One needs to add Fixed Cost and Variable Cost together to get a Total Cost. For our purposes, Fixed Cost of War in Iraq and Afghanistan (War on Terror) + Variable Cost of War in Iraq and Afghanistan (War on Terror) = Total cost of War in Iraq and Afghanistan (War on Terror).

So our War on Terror (Iraq War + Afghanistan War + plus just maintaining a Defense Department) has a cost of $495 Billion dollars.

We have a standing Military. We have equipment for our standing military, and we have support for our standing military. Whether we are fighting a war or not, we would have all of these associated costs. (FIXED COST) Now we have this war on Terror. Due to this war we have to ship equipment to the war. We have ammunition (bullets, missiles, Unmanned Ariel Vehicles that have missiles called Predators, bombs, cruise missiles, etc). We also have to replace vehicles that have been damaged or "taken out." We also have to establish support for our warriors that are now farther away. All of this has associated costs which we label Variable Cost. Add them up and we have Total Cost of War on Terror.

Let's us understand our fixed cost. 850,000,000 personnel in the military. Each receives a salary to defend us. Each is given a set of uniforms, each is trained for a specific MOS (Military Occupational Specialty), each is issued a rifle or something to fight with and each is fed and housed. We can see very quickly that the fixed cost of running our defense is enormous. It is actually about 4.3 percent of our Gross Domestic Product (GDP). During WW2 it was 38 percent of our GDP. (Yes there is no decimal point in this percent) Just to try to get a handle on these costs. I recently read that the USS Reagan cost $127 million per day to operate.

So my question and I can't find the answer is how much of Variable Cost is our War on Terror costing us? It is not fair to present the total cost because we would have to pay for our military whether it is at war or not. The true cost of the War on Terror is only the additional Variable Cost. Why is it we never are given that figure?

Oh! By the way Americans spend $1 billion on chewing gum per year, and this past year Americans spent $41 billion on our pets. Current U.S. aid to Africa is expected to be $ 9 billion. Just for perspective.

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