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A Deafening Silence on War Costs

By Christopher Farrell The news on the war front is disturbing. The American military is still enmeshed in fighting in Fallujah, it's trying to negotiate an end to an insurgency in Najaf, and it's confronting a rising murmur of discontent throughout Iraq over the occupation. Then there are the heartrending stories on public radio of the funerals of soldiers killed in action, the sad and charming memories of friends and family, the grief and support in small towns like New Berlin, Wis., and Elk River, Minn. The Bush Administration still plans on handing over limited power to a caretaker Iraqi government on June 30. Yet it's clear to everyone that the U.S. will likely be in Iraq for a long time to come.

Money may seem like a secondary priority at times like this, but it really shouldn't be.

The government's efforts to downplay the cost of war and delay paying the tab is dismaying. The fiscal irresponsibility does the troops on the ground no good. The accounting gimmickry disillusions citizens with government leaders. The long-term economic price of fiscal irresponsibility measured in terms of jobs and gross domestic product growth is high.

DANCING AROUND. It's past time for the Bush Administration to abandon its reticence and level with the American public about spending for the war. What's its best "guesstimate" of how much the Iraq occupation will cost? And how does Team Bush plan to pay for transforming Iraq into a secure democracy?

It won't say. The Administration keeps dancing around money questions, saying a firm answer won't be possible until January, a clear political calculation since that's a time frame well past the November Presidential election. The White House justifies its reluctance to talk fiscal matters by highlighting wartime imponderables while reciting its mantra that it will give the troops what they need.

No one doubts that the cost of occupying Iraq is going up. The Pentagon is grudgingly increasing the number of troops on the ground. The military is asking for more tanks and armored vehicles to better protect soldiers under daily assault.

DISTURBING HISTORY. Pentagon and senior military officials recently testified that the price tag for military operations in Iraq is about $4.7 billion a month, a sum that would drive the cost of war overbudget by perhaps $4 billion in late summer. Senator Chuck Hagel (R-Neb.) seems right when he remarked that "every ground squirrel in the country" knows the Administration will need an additional $50 billion to $75 billion, on top of last year's $87 billion appropriation.

Yet White House has a disturbing history of avoiding cost estimates. Remember when economic policymaker Lawrence Lindsay gave out a back-of-the-envelope guesstimate of $100 billion to $200 billion? His figure was quickly disavowed, and Lindsey was shortly out of a job. But it was a respectable guess at the time.

Like his predecessors of a generation ago, Bush is reluctant to ask citizens to pay for an overseas conflict that's turning out to be a lot more expensive than originally announced. President Lyndon Johnson played down the costs of waging war in Southeast Asia. His economists had recommended a tax increase to help pay for it in 1965, but Johnson waited until 1968 before introducing a 10% income tax surcharge.

CONFLICTING AGENDAS. Richard Nixon also attempted to lowball costs. The price of fiscal irresponsibility during Vietnam was high indeed. Budget deficits soared, inflation took off to double-digit levels, and the economy careened from one crisis to another. The intangible cost of citizens losing confidence in government leaders may have been even greater.

President Bush has compounded the problem faced by all White House occupants during a military conflict by simultaneously running for reelection as the War President and the Tax-Cutting President. The latter stance may have to be abandoned to support the former.

One way for Bush to pay for the war is to discard his campaign pledge to make temporary tax cuts permanent. Alternatively, he could propose a temporary income surtax to help foot the war bill. His father came up with an innovative way to maintain sound fiscal policy during war: America's foreign allies essentially foot the bill for the first Persian Gulf War. But the current Administration is too isolated internationally to even consider replicating that technique.

I realize that asking Bush to change his tax-cutting philosophy is naïve, about as credible as calling for the Pentagon to embrace a national draft. But what I want to know -- and think everyone deserves to know -- is how he plans to maintain troops in the field while embracing sound fiscal policy at home? The silence says it all. Farrell is contributing economics editor for BusinessWeek. His Sound Money radio commentaries are broadcast over Minnesota Public Radio on Saturdays in nearly 200 markets nationwide. Follow his weekly Sound Money column, only on BusinessWeek Online

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