Obama Contemplates a Tax on the War

Two days after the announcement to send another 30,000 soldiers to Afghanistan, there is a dispute in the United States about how to finance the war. Reinforcements will cost $1 million per soldier; over $30 billion more than the $130 billion already inserted into the budget for the mission that Congress will vote on soon.

In order to defeat the skepticism of those Republicans against escalation and the opposition of the liberal and pacifist left, which asked for the withdrawal of troops, Barack Obama has to explain how he will pay for the war. The reinforcements will cost $2.5 billion per month, or almost $195 per taxpayer – enough to double war expenses for the 2010 fiscal year compared to 2009. According to the Center for Arms Control and Non-Proliferation in Washington, at this rate, in 2010 alone, the investment in the mission will be equal to half of what the USA has spent since 2001 until today.

Such enormous figures, which could cause the total cost of the wars in Afghanistan and Iraq to break through the roof of the trillions, weigh on the already heavy public debt, which rose this year to 85 percent of GDP. Furthermore, the rise occurs in a very delicate stage for the U.S. economy, with a post-crisis slow, cumbersome recovery and unemployment over 10 percent.

“Obama and Congress now have to face the issue in a credible and fast way,” warns the New York Times in an editorial, which also expressed appreciation for the efforts of the president to set a credible price for the escalation and for his promise to work with Congress for the funds. This is in contrast to what George W. Bush did when he “tried to hide the real cost of the wars in Afghanistan and in Iraq.”

The problem is figuring out where to draw funds from to avoid chasms in the budget. There has been discussion of cuts on other items of expenditure, or the recourse of war bonds, modeling what Franklin D. Roosevelt did during the Second World War. What has been gaining ground in recent days is the idea of a war tax – a way to make the rich and big corporations pay for the burden of the reinforcements. The idea is backed by influential democrats, but is blocked by the Speaker of the House, Nancy Pelosi, who fears repercussions due to the unpopularity of such a measure.

According to estimates, however, the real per capita cost could rise to between $400 and $600 billion within the next two years, even if everything goes according to Obama’s plans. Obama still has to explain what criteria he will look at to determine when Afghanistan will be able to stand on its own. “Although it is a good idea to set a deadline” for withdrawal, states the Times, doubts about whether the president “will be able to respect the deadline announced for July 2011 are strong.”

In the meantime, in the Senate yesterday, the head of the Pentagon, Robert Gates, after signing the order to send 30,000 soldiers, revealed that the number of reinforcements could rise to about 33,000 men, thanks to the flexibility granted by the president for sending “medical teams, intelligence, engineers and deminers; or in other words, all the necessary personnel to save the lives of our soldiers.”

Although the auditors in Congress and the White House are announcing that difficult times lie ahead, Wall Street is spreading the slogan, “As long as there is war, there is hope.” In fact, the defense and aerospace securities sector in the S&P 500 have marked increases since the eve of the Obama’s announcement. This trend seems destined to continue, given that the industry sub-index has risen by 75 percent (compared with one percent of the general) for eight years now, since Washington inaugurated a new phase of the war.