The question of a near future war with Iraq is on everyone’s minds these days. You can’t open a newspaper or watch the news without hearing about it. With the call up of thousands of American reservists this crisis has taken on a personal note. This paper will discuss the effects of a war with Iraq on the American economy. An American attack on Iraq will most definitely affect the American economy. One of the main reasons for this is because the United States would have to bear the cost of the war, and the brunt of any oil price shock or other market disruptions. If oil supplies are disrupted, as they were during the 1991 gulf war, and prices rise sharply, the economic effects would be felt by the entire world. This isn’t going to be anything like the previous war with Iraq in 1991. During that war the U.S. was spending almost $500 million a day on its operations. The war cost all of the allies $60 billion, but the costs of that war were picked up by all of the countries belonging to the alliance. Saudi Arabia, Kuwait and Japan divided the cost of the 1991 war with the United States, but today none has offered to assist with financing a new military campaign. They contributed for 80% of the costs of the Gulf War, leaving the U.S. with the remaining 20%. It is difficult to predict how much Americans would pay for a new war with Iraq, one fact seems indisputable: It will be many times more than the cost of the last war.In 2002 dollars, the cost of the Persian Gulf War is $79.9 billion, providing a very rough benchmark for what a conflict of similar dimensions might cost today.
The previous war can be blamed for much of the problems in our economy today.