Writing in Forbes, Steven Hanke applies the economics of war to the war on terrorism:
“Not surprisingly, the war on terrorism has not caught Washington’s rent-seekers flat-footed. The latest call to arms has given cover to a multitude of parochial opportunists. Their proposals range from bailing out airlines to nationalizing vaccine production. The war has also given a major shot in the arm to what has rapidly become a ubiquitous security industry.
The effects on federal spending, which have gone largely unnoticed, are shocking. The annual increase in real federal spending during the current Bush Administration is 5.5%, and that percentage does not include the supplemental appropriation of $87 billion for Iraq. To put that rate of growth into perspective, the annual real growth in federal spending during the Vietnam-Great Society spending spree of the Kennedy-Johnson years was 4.8%.
If that doesn’t worry you, take note that the increase in real discretionary spending—the type of spending over which the President has the most control—has shot up 9.6% annually. That figure would have been lower if President Bush had bothered to apply his veto pen to even one appropriation bill.
What about taxes? Yes, the Bush Administration has delivered cuts. Enjoy them while you can. Wars are expensive and eventually have to be paid for. And big tax reductions are vulnerable to Washington’s whittling ways. Just look at what happened to President Reagan’s supply-side tax cut of 1981. Less than a year later the Gipper put his pen to another tax law that raised taxes by almost 1% of GDP, making it the biggest peacetime tax increase in American history. And that was not all. In every subsequent year of Reagan’s presidency, with the exception of 1988, Congress passed and Reagan signed tax increases.
The wages of war are always the same: a more obese and intrusive government and, yes, more inflation, too. The prices of precious metals and other commodities, an early indication of inflation, are already in a bull-market phase.”
