Back in the late 1960’s, David Rockefeller was Chairman of Chase Manhattan bank when he became one of the first business leaders to publicly speak out against the war in Vietnam. Louis Lundborg was then the Chairman of the Bank of America, so from the U.C. Berkeley business school, I wrote him a letter asking if he would be expressing a similar sentiment. I said I thought it was important for the business and financial community to make a case for what they thought was wise public policy. Sometimes, advice from a well-known business figure can carry more weight with the public than more blather from a politician. This all spawned what I recall became “Businessmen Against the War” and other groups whose views, twenty years too late, were ultimately embraced by Robert McNamara, the architect of the entire mistake.
Today, by comparison, we have what is now recognized as a $1.2 trillion sunk cost for the war in Iraq that is costing $8 billion per week. The total cost beyond the $700 billion of direct military spending will include veterans’ rehabilitation costs estimated to be as much as $250 billion and equipment replacement costs of $100 billion.
I find myself wondering, “What’s to stop any of this from doubling to $2.6 trillion before it’s all over?” The only generals who get to keep their jobs are those who agree to support the administration’s vague notions of victory. It will apparently be the next president’s job to evacuate the remaining Americans from rooftops in the Green Zone.
This kind of money could be better spent strengthening our homeland security and other domestic issues that are closer to home. Fixing social security and Medicare also comes to mind. One point made repeatedly is that outside of military personnel and their families, no Americans have had to pay a price for this war. There have been no tax increases, no call for victory gardens, no draft, no energy conservation policy or anything else linking the costs of Iraq to our charmed life back here in the USA.
I think this will change. Like Winston Churchill’s pre-World War II book, “The Gathering Storm,” the costs of Iraq will come back to haunt us for years. We are borrowing all this money. As I understand it, the costs of the war are termed “a special appropriation” which does not even become part of the regular budget process, which, excluding the war, is already running at a deficit. Among much that was written recently about President Ford, he was described as the last President who had the capacity and experience to understand the budget process and its goofy accounting…thanks to his years as a legislator creating those budgets.
Meanwhile, we do have as part of our budget an ongoing cost of the military that continues at $450 billion a year. This includes about $18 billion to maintain over 10,000 nuclear bombs, $33 billion on new aircraft carriers, and a whole generation of new fighter planes that cost $125 million each. We’re spending five times the combined military expenditures of our two cold war enemies, Russia and China. There is no accountability. It’s like Silicon Valley in the late 1990’s. In the light of our current war effort, nobody is asking whether of not this is the right way to be spending our military budget. A most instructive illustration of why this can be happening is seen in the film “Why We Fight” (now on DVD) which begins with Dwight Eisenhower warning about the military industrial complex.
What does this have to do with retirement? In my mind, it is a fundamental financial condition that could undermine the economy well into the future. The current strong economic conditions, and a spectacular three-year stock market run, could be lulling us into a false sense of security. If you harbor any of the concerns I’ve expressed, this doesn’t mean abandoning the stock market, but it could mean a better night’s sleep with a little more money in money market and bond funds.