New report released by the Institute for Economics & Peace analyses the macroeconomic effects of US government spending on wars and the military since World War II.
The IEP’s latest report, Economic Consequences of War on the US Economy, analyses the macroeconomic effects of US government spending on wars and the military.
The report studies five periods – World War II, the Korean War, the Vietnam War, the Cold War, and the Afghanistan/Iraq wars – exposing the effect of war financing on debt, consumption, investment, jobs, taxes, government deficits, and inflation.
The findings of the report show devastating trends for US tax, debt and deficit debates.
Download the report here
The U.S. has paid for its wars either through debt [World War II, Cold War, Afghanistan/Iraq], taxation [Korean War] or inflation [Vietnam]. In each case, taxpayers have been burdened, and private sector consumption and investment have been constrained as a result.
The report shows the following economic indicators experiencing negative effects either during or after the conflicts:
- Public debt and levels of taxation increased during most conflicts
- Consumption as a percent of GDP decreased during most conflicts
- Investment as a percent of GDP decreased during most conflicts
- Inflation increased during or as a direct consequence of these conflicts
The higher levels of government spending associated with war tends to generate some positive economic benefits in the short-term, specifically through increases in economic growth occurring during conflict spending booms. However, negative unintended consequences occur either concurrently with the war or develop as residual effects afterwards thereby harming the economy over the longer term.