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The cost of the Iraq war is somewhere around 360 billion dollars. However, this staggering figure does not include the economic impact to the American economy, its people, and its future vitality. Harvard budge expert Linda Bilmes and Columbia University Professor and Nobel Laureate Joseph E. Stiglitz estimate that the total impact of the war could be over 2 trillion dollars. Joseph Stiglitz further states that cost of war can be divided into two sections. This includes up to 1 trillion dollars for the direct impact of the war and an additional trillion dollars for macroeconomic costs. Macro economic costs include everything from oil prices to job loss. From the U.S. Census Bureau we learn that there are approximately 301 million people living within the U.S. Assuming that Mr. Stiglitz is correct and the war costs 2 trillion dollars that means the overall cost per person is something like $6,644 dollars per every man woman and child. Each person living within the U.S. will be responsible to pay for this cost. Someone may raise the argument that their taxes have not been raised this much and they have not had to issue a check to the government. This is true however the money is costing American tax payers in one way or another. The cost will be divided up in terms of inflation, taxes, energy, loss in other programs, economic growth, etc. One way or another we are going to pay this amount in terms of our personal incomes. Let us say that you are a family of 4 and your personal stake in the war is $26,567. Over the next 10 to 20 years you are going to find interest rates rising, your children’s school will not get all the extra amenities, the government may reform social security, college loans for your local university will be diminished, your gasoline and heating prices will rise, employment opportunities may suffer, your health care could be reduced, your taxes might rise, inflation may increase reducing your personal wealth, your investments might be sluggish, etc. The impact of this money will not be noticeable to the average American but they are still paying it. From a business standpoint the U.S. has to consider the overall costs and benefits of going to war. If the prize is oil and there are about 112 billion barrels in Iraq then the total benefit at $65/barrel is 7.3 billion dollars. According to the U.S. Energy Department 18% of the cost of gasoline at the pump is from federal taxes. At the pump this morning I paid $2.09 and current oil price per barrel is $58.00. At $65 per barrel this would represent a pump cost of $2.34 per gallon. 42 gallons per barrel would be worth $98.28 at the pump. Assuming that the government would be able to take all of the oil out of Iraq it would earn the government $1.9 billion dollars in tax revenue. The U.S. consumes about 20 million barrels of oil a day. Using all of the oil in Iraq would allow the U.S. economy to run 15.34 years. Thus the $1.9 billion in tax revenue would be collected over these 15 years. From a business standpoint we can see that a 2 trillion dollar economic impact cost from the war would put about 2 trillion dollars revenue worth of taxes into the U.S. government coffers. Since it is nearly impossible to extract all of the oil out of Iraq without having to divvy it up among other countries, it is doubtful the U.S. will receive such a benefit. There is an unknown extra benefit to having a cheap oil source. If the War in Iraq was won quickly and without much cost the benefits would be insurmountable. However, since the War is dragging on and costing more per year, the overall move was a poor business decision. If Congress would have looked at the war in a business mentality they would have concluded that the cost of a dragged out war doesn’t justify its benefit. Murad Ali is a three time published book author, a human resource manager, and a Ph.D. candidate. For more articles visit the following: http://www.thenewbusinessworld.blogspot.com http://www.onlinebusinessconcepts.blogspot.com
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economic, Iraq, Oil, War, cost, benefit,
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