The Cost Of War On Terror

President Bush has made clear on many occasions that the war on terror (WOT) will be a long war and a war that will be “fought on many fronts”. The goals and objectives were set out very clearly in the National Strategy for Combating Terrorism - February 2003, which called for defeating terrorists and their organizations; denying support, sponsorship or sanctuary to terrorists and ensure that other countries follow this same goal; diminish the underlying conditions that terrorists seek to exploit; and defend U.S. interests at home and abroad (The White House, 2003, pp. 15-32). This is referred to as a 4D strategy (defeat, deny, diminish, and defend). Each of these goals contains several objectives within it, and the policy does not only focus on states or state sponsored terrorism, but this is clearly the emphasis of the policy.

Under the first goal, of defeating terrorists and terrorist organizations, there are three key tasks; identify terrorists and terrorist organizations, locate terrorists and their organizations, and destroy terrorists and their organizations (Ibid, pp.15-17). The emphases on this section is placed on improving intelligence and intelligence capabilities, improving the use of law enforcement, and improve the use of special forces and other military arsenals. It is important to note that the use of national law enforcement, an agency often considered lower on a scale of importance to the FBI, is recognized and can be utilized as a power resource.

Within the goal of denying sponsorship, there are five key goals; end the state sponsorship of terrorism, establish and maintain an international standard of accountability with regard to combating terrorism, strengthen and sustain the international effort to fight terrorism, interdict and disrupt material support for terrorists, and eliminate terrorist sanctuaries and havens (Ibid, pp. 17-22). This section briefly details how to work with, enable, persuade, and compel states to work with the U.S. on this goal.

The third goal, of diminishing the underlying conditions that terrorists seek to exploit, has two key objectives; partner with the international community to strengthen weak states, and win the war of ideas (Ibid, pp. 22-24). This goal focuses on issues of development and democracy in order to improve the lives of those less fortunate and allow for an outlet for those who are exploited or abused. The final goal, of defending US citizens and interests at home and abroad, is the largest and consists of key objectives; implement the national strategy for homeland security, attain domain awareness, enhance measures to ensure the integrity, reliability, and availability of critical physical and information-based infrastructures at home and abroad, integrate measures to protect U.S. citizens abroad, and ensure an integrated incident management capability (Ibid, 24-28). The section addresses several of the issues that are presented in the previous sections, such as intelligence gathering, the use of law enforcement and other emergency agencies, and working with the international community. This section actually does not present issues of dealing with terrorism, as much as it deals with preparing for a potential terrorist attack.

When combining the National Strategy for Combating Terrorism - February 2003, with the Bush Doctrine, a clear, but still contrasting, picture is created. The Strategy is a largely defensive document, emphasizing the use of intelligence networks and the support of the international community and organizations. The Bush Doctrine, by comparison, is a much more aggressive approach to dealing with the issue of terrorism, as it focuses on offensive measures to ensure security. It is in this example that a distinction can be seen as U.S. policy advisors tend to act as defensive realists, where the Bush administration tends to act as offensive realists.

But financing the WOT is too expensive. In the recent ratification of FY2007, the government allotted a whopping $610 billion for the funding of the above-mentioned 4D or for the goals of National Strategy for Combating Terrorism. Such cost will be used for “military operations, base security, reconstruction, foreign aid, embassy costs, and veterans’ health care for the three operations initiated since the 9/11 attack” (Belasco, 2007), which will be divided into different Operations against terrorism.

Governments have at their disposal three methods for financing the WOT: taxation, borrowing from the public, and monetary inflation or the creation of new money. Governments may also resort to coercive requisitioning, that is, confiscating the material resources and conscripting the labor services they deem necessary for the war effort without compensation or in exchange for below-market prices and wage rates. Historically, a combination of these methods has generally been used to affect the transfer of resources from civilian to military uses during a large-scale war. From the viewpoint of technical economic theory, however, the government could always realize the funds necessary to carry out its war aims exclusively from increased taxation and non-inflationary borrowing on capital markets.

Why, then, if strictly fiscal measures are capable of yielding sufficient revenues to pay market prices for all the resources required to conduct WOT, have belligerent governments almost always taken recourse to the methods of monetary inflation and the direct commandeering of commodities and services? The answer lies in the fact that war is an extremely costly enterprise and the latter two methods, although in very different ways, operate to partially conceal these costs from the public's view (Robbins, 1950). When the public is accurately apprised of its full costs, war becomes increasingly unpopular, civilian enthusiasm and labor efforts flag, and unrest and even active resistance may ensue on the homefront and spread to the frontlines.

As Robert Higgs (1987) points out with regard to the tendency of governments to partially substitute a command-and-control economy for the regular fiscal mechanism during wartime and other so-called national emergencies:

Obviously, citizens will not react to the costs they bear if they are unaware of them. The possibility of driving a wedge between the actual and the publicly perceived costs creates a strong temptation for governments pursuing high-cost policies during national emergencies. Except where lives are being sacrificed, no costs are so easily counted as pecuniary costs. Not only can each individual count them (his own tax bill); they can be easily aggregated for the whole society (the government’s total tax revenue). It behooves a government wishing to sustain a policy that entails suddenly heightened costs to find ways of substituting non-pecuniary for pecuniary