Tags: ISIS | GOP | war | spending

Your Money Will Be Drafted for the Coming Mideast War

By Wednesday, 12 November 2014 07:56 AM Current | Bio | Archive

Last week's midterm elections weren't only about political power. Money was at stake, some of it probably yours. Would you like to know which direction it will go?

Your money will go somewhere; staying in your pocket is not an option. The voting machines were still warm when Senate Minority Leader Mitch McConnell, R-Ky., surrendered the GOP's best budget weapon. On Nov. 5, one day after winning control of the Senate, McConnell said, "We are not going to be shutting down the government or defaulting on the national debt."

That statement is all you need to know about the Republican leadership's spending discipline. True, shutting down the government might not be the best tactical move, but being able to threaten it credibly is a powerful weapon. McConnell just holstered it for the next two years.

Controlling both sides of Capitol Hill will not embolden Republicans to cut spending. They will simply change spending priorities — and their new priority is clear.

The U.S. is going back to war.

I don't mean the back-burner drone war that has never stopped. I mean another massive boots-on-the-ground Middle East war. This time the enemy will be ISIS instead of Al Qaeda, but in all other respects, it will be an Iraqi rerun. I make this prediction with high confidence because fighting ISIS is the one thing on which Obama and the new GOP majority are in complete agreement.

Is it the right strategy? I think not, but that isn't really the point. We're going to back to war and it will be more expensive than ever.

We don't often talk about the impact of defense spending on the economy, but we should. Add up the regular Pentagon budget, plus the intelligence community, Veteran Affairs and other national security programs in different agencies. Relative to the size of the economy, we spend far more money on defense now than we did at the height of Reagan's Cold War buildup.

Some of this spending is necessary, but much of it simply blows up the budget and misallocates the resources of an economy that doesn't have resources to spare. This big problem is about to get even bigger.

The military-industrial complex that Eisenhower warned about is alive and well. Obama and Congress will use your money to keep it alive a few more years. That's where your money will go.

What can you do about it? Not much until 2016. You can follow the war-driven capital flows and try to stay ahead of them, if you have any capital to invest. Economically, the main consequence is that federal spending will take off like a SCUD rocket in the next few years. Kiss any hope of a balanced budget goodbye. Don't presume the greenback will reign supreme much longer, either.

The U.S. doesn't draft soldiers anymore, but it still drafts dollars. Yours are about to get the call.

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Last week's midterm elections weren't only about political power. Money was at stake, some of it probably yours. Would you like to know which direction it will go?
ISIS, GOP, war, spending
Wednesday, 12 November 2014 07:56 AM
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