It is widely believed that government spending in times of military conflict helps to boost a nation's economy.  Will this principle apply to the U.S. in the War with Iraq?

Many different estimates of the cost of war in Iraq have been debated.  These figures range from the Pentagon and White House suggesting 50 billion dollars to the Democrats in Congress saying around 93 billion dollars.  Lawrence Lindsey, President George W. Bush's assistant for economic policy, in an interview with The Wall Street Journal, estimated that the war would cost between 100 and 200 billion dollars.  It is interesting to note that he no longer works for the White House. Even if we take the liberal figure of 200 billion dollars, this war will only amount to about 2 percent of GDP.  If we compare with an average year's GDP during some of the other major U.S. conflicts, 2% doesn't compare to the impact of the entire Vietnam War at 12% of annual GDP or the cost of all of World War II at 130% of annual GDP.  These numbers reflect total military cost of a complete war compared to one year's GDP relative to that time frame (see page 60 of War with Iraq: Costs, Consequences and Alternatives for details).

It is also important to point out that the estimated 100-200 billion dollar figure includes all costs associated with the war including rebuilding costs, humanitarian aid, etc; and only 48-93 billion would be actual military spending.  This means that the military spending on the war with Iraq would only reflect ½ to 1 percent of today's GDP.  Clearly, the government spending during this war will not have the same effect on the economy felt during and after previous major U.S. conflicts. In fact, it might be that the negative shocks to the economy as a result of a volatile stock market and higher oil prices grossly outweigh any positive gains of government spending on the war in Iraq