The Cost of War

The President submitted his budget to the Congress last week and the numbers were staggering. With supplementals, the proposed defense budget at $620 billion is the highest it has been since the Korean War.

I was in the Navy when Reagan was spending the military out of it’s post-Vietnam malaise (and the CCP back to it’s pre-Soviet roots) so I thought I knew what high military spending looked like. A 600 ship Navy, star wars weapon systems, complete new facilities for bases one step from the brac list and etc.
We are spending that much or more now. The difference is that in the 80’s we were spending in a sense just to spend it; we simply needed to out-spend the Soviets and drive them into a hole as we forced them to try to keep up. In some ways the “what” mattered less than the “how much.”

Now we are spending it to meet very real and pressing needs. Today we are spending it to replace equipment being worn out in the desert sand, to pay for the troops who run that equipment, while at the same time we continue to equip our forces for tomorrow’s potential threats.

This budget was sent to Congress the same week that I was gathering my tax stuff together and it got me thinking. Numbers this large become little more than an abstraction to an individual (and I suspect that our political leaders are happy to keep it that way) but in a democratic republic it seems to me that citizens should understand things like this in more concrete terms. How much is this war costing me this year? How much is it going to cost me in total?

I’m an engineer… so I reached for a mechanical pencil and a napkin.

There are approximately 300 million men, women, and children in the U.S. What if each one of them got an invoice for their share?

Here’s yours:

Invoice_1

Where did that number come from?

This year’s supplemental request is $141B spread across those aforementioned 300 million men, women, and children. You’re share will be $470. If your kids don’t have jobs pay theirs too.

Wait though… the $170B is only the supplemental. Current operations are also being paid for out of the normal defense budget. The amount is a little bit murky; but when you consider equipment wear and tear, operational and training costs, the cost of in-country re-building etc, it is probably another $100B or so (the budget acknowledges at least $30B for equipment re-set). If we call it roughly $240B when all up then your share becomes $800; again, you’ll need to write a check that covers your entire family.

By the way, your share of the entire defense budget (not just associated with this war) will be $2,076 (per person).

Since this is the first time we’ve sent out these invoices, we’re going to need to re-coup fees for the previous years as well. All told, estimates of the war’s cost to date run about $1.35 trillion, or about $4,500 per person; we’ll add that to the $800 you already owe for a total so far of $5,300 per person.

The ‘07 budget will get us through the end of ‘07 and maybe we will have wound down our presence by then. I’m going to go out on a limb and guess that we won’t be completely out yet (though it would be wonderful if I’m wrong). If we are half way out, our ‘08 budget will add another $400 to your total, plus we need to account for two years of $15B per year to replace worn out equipment. No worries, that’s only another $50.

All up it is looking like $5,750 per person plus or minus 25% (after all, we are doing this on the back of an envelope).

Of course, this isn’t how our tax code works. We never adopted a straight tax and you don’t get an invoice labeled “War on Terrorism Fee” (at least not until we outsource the rest of the military to Blackwater and Canopy).

So to figure out what you’ll really pay we have to account for where you are in the tax bracket hierarchy. If you are poor, this may be one time in your life you’ll consider yourself lucky as you will pay for less of the war than what is indicated above. If you are in a higher bracket generally you will pay more for the war.

Back to our assumption that the war should cost about $240B in ‘07. With a total budget request of $2.8T the war will cost about 8.5% of the total budget this year. Just multiply your estimated ‘07 taxes paid (the net, not the gross) by that percentage to figure out what share of your taxes will be going to the war. To estimate your 2007 taxes just take your latest return and scale it up by any expected pay increases. I’m not going to say what this number is for me when I figure it out, but it is significant.
For example, if you will make $100,000 in 2007 and are in the standard 28% tax bracket, your total bill for the war in 2007 will be approximately $2,380 (not accounting for deductions).

Don’t forget, that’s just one year. Do the same thing for each of the last four years and then guess how many more years you’ll need to do it for just like we did above to estimate the total cost of the war to you and your family. For our $100,000 family that might end up around $11,210 or more.

Wait… that’s not quite right. That math assumed that we are paying for this war as we go. But since our current rate of deficit spending is 15% after the adminstration’s tax cuts ($2.8T in budget against optimistically estimated revenues of $2.4T) we aren’t paying for it as we go. We are paying for no more than 85% of it as we go, and the Chinese are paying for the rest by buying Treasury bonds. So, if you are the hypothetical $100,000 income family, you are actually going to pay $11,210 and you’ll be in debt by an additional $1,681.

When you get the invoice you’ll have to use your own political persuasion to inform how you think that $1,681 or more will be paid back to the Chinese. Either pay it yourself when a new administration comes in and starts paying down our debts or just turn around and give the invoice to your kids. They can write IOU on it. Maybe China will let them wash dishes when they grow up to pay it off.

If you want to completely eliminate any remaining vestiges of abstraction in this math, just ask yourself how many hours, deals, days, or whatevers you are going to have to work to earn that much after tax income. I’m sure the number feels significant but I’m equally sure it pales in comparison to the fees being paid by our soldiers, Marines, airman, and sailors who are participating in a much more personal way.

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