The Effect of War Expenditures on U.S. Output

The war with Iraq has become the most extensive U.S. military involvement since Vietnam. Although the duration and the political ramifications of the operation are still unclear, it is likely that the United States will bear a substantial share of the war’s financial cost, placing an additional burden on the federal budget. Aside from the obvious concerns about war’s devastation and the tragic cost in human lives, policymakers have also expressed concern about the impact that the war will have on the U.S. economy.