America’s Biggest Mistake – Guns Instead of Butter


There’s no corner of the known world where some interest is not in danger or under actual attack. If the interests are not American they are those of our allies. America is constantly attacked by evil-minded neighbors, always fighting for a breathing space. The whole word is pervaded by a host of enemies and it is our duty to guard against their aggressive behaviors.

This passage actually isn’t about America, it’s about Rome and its over expended military which ultimately lead to crippling taxes and the fall of the Roman Empire. These images have been conjured by recent Presidents, from Reagan to Clinton to Obama and all in between. The truth is, adjusted for inflation, our defense budget is more than $200 billion dollars a year more than at the height of the Cold War. Spending on national security has reached nearly $1 trillion a year ($993 billion) according to Winslow Wheeler, a veteran analyst of Pentagon spending for Congress.

It has been a common dilemma facing previous ‘number-one’ countries, that even as their relative economic strength is ebbing, the growing foreign challenges to their position have compelled them to allocate more and more of their resources into the military sector, which in turn squeezes out productive investment and, over time, leads to the downward spiral of slower growth, heavier taxes, deepening domestic splits over spending priorities and a weakening capacity to bear the burdens of defense. – Paul Kennedy, Historian

Sound familiar?

To amass military power without regard for our economic capacity would be to defend ourselves against one kind of disaster by inviting another. – President Dwight Eisenhower

This is the problem we are increasingly faced with today. The Eisenhower Study Group has conservatively estimated the cost of the two wars (Iraq and Afghanistan) from inception through the year 2015 (including healthcare and services to veterans of the wars) at $3.513 trillion with a more “moderate” estimate being $4.4 trillion ($4,400,000,000,000). The sum looks huge, because it is HUGE.

Perhaps America’s greatest mistake in the past century has been the involvement in and the continuation of these wars – and it’s huge global military footprint. The United States has approximately 5,000 overseas bases with 662 foreign sites in 38 countries while it operates in over 130. And we can’t get out of any of them. When it was announced we were abandoning some bases in Europe (huge threat) the military pushed back. At the same time we are faced with massive budget deficits, a mounting debt, with no means to fund this footprint in the long-term. Sounds like Rome right? While yes, reducing the costs would have certainly helped out debt burden, why this is perhaps the biggest mistake of the century has nothing to do with the debt.

Like someone who borrows from their 401k without means to pay it back in the short-term, we have lost what could be compounding returns. $4.4 trillion annualized from 2001 to 2015 is roughly $314.3 billion per year. But since we are looking at lifetime health benefits for veterans in this account lets assume this number is lower… a conservative $285 billion.

I don’t want to suggest that we shouldn’t have ousted Osama Bin Laden’s group or beefed up security but the cost of protecting our domestic interests is well below the amount we have spent. Covert, special ops missions etc would have saved trillions. But to draw a picture of what the true costs of the wars have been let’s do a little exercise.

$285 billion per year provides:

5.27 million teachers

3.56 million students with fully paid college tuition at a 4-year university (averaging 20k / year in tuition expenses)

$1,850 dollars in cash for every working or unemployed citizen over the age of 16 years old

1.4 million homes for a families of four (assuming the average house costs $254,000)

1.9 million $150,000 loans to small businesses

8.14 million jobs subsidized by the government paying $35,000 a year


Of course, each of these could be continued for 14 additional years. It means:

80 million people would have been given a free home

Each American in the labor force would have received $26 thousand

27 million businesses would have been able to set up or expand

50 million students would have been subsidized 100% for college education

While it would be nice to say we have the lowest unemployment rate in our history, having the greatest number of college graduates entering the labor force debt free in the world, or having any of these other things- would make America the greatest example of excellence in the world…but for the money we spent we have very little to show for it.

What we have sacrificed is even bigger than what can be expressed by simple calculations. Each of these has a compounding effect on the economy. When you give Americans educational opportunity, or encourage small businesses, the economy grows as additional value is added. 14 years is a long time, if America invested the money it spent in the wars for something that generated a 5% rate of return (education? science?) the effects from the first year and each one after that would have doubled. Each year compounding the next as the economy regains its health, would make the simple calculations of “what if” be a drop in the bucket.

Spending is spending, and we know it has artificially boosted our economy at least a little. A lot of the money being spent on the wars ultimately comes back to our economy, a lot though unfortunately doesn’t. I can say that I would rather have any of the above than what we have ended up with today.

4 thoughts on “America’s Biggest Mistake – Guns Instead of Butter

  1. Reply Eliana Oct 22,2012 %I:%M %p

    Well said! I totally agree and personally I’ve nothing more to add to this excellent overview.

  2. Pingback: America's Biggest Mistake - Guns Instead of Butter | Economic Features |

  3. Reply jose Nov 1,2012 %I:%M %p

    Excellent article!

  4. Reply Robin Feb 5,2013 %I:%M %p

    Love the statistics on what $285 billion would pay for–a real eye opener. Though things may not be as black and white as it would seem. The cost in terms of maintaining our freedom is immeasurable, and on the flip-side the cost paid is even more dear considering all the future terrorists we may be creating by wars which inevitably hurt innocent civilians cultivating hatred towards the West. Seeking a better balance than what we have seen of late may be key.

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