Why Republican Wars Don’t Help the Economy

OK, so I promised by implication that I would eventually explain my theory that only wars run by Democrats can help the US economy. So here we go.

Before I begin, I should note that this is not particularly an argument for or against the war du jour; do not take it as such. Well, I suppose it would be something of a refutation of the argument that invading Iraq will fix the economy, but no one seems to be seriously arguing that.

So the issue is the interplay between taxes, government spending, and deficits. To briefly and simplistically review the macroeconomics: low taxes are good for the economy, because when people have more money, they spend more and invest more. Government spending is good for the economy because it either employs contractors, pays vendors, or puts money into the hands of consumers which they can then spend. Deficits are bad for the economy, because they flood the debt market, raising interest rates and making it harder to raise capital. We have big economic arguments about these things because people can’t agree on which one of the three is best to address in times of trouble. Democrats tend to favor government spending, as that’s what they tend to be big on anyway; Republicans call for tax cuts, as that’s their metier.

Now, war is a boon to the economy (aside from the labor shortage thing I discussed before) mainly as a source of government spending. War materiel needs purchasing; someone needs to be employed to supply it.

When Democrats get involved in a war, they usually have brought on line all the government spending that is politically feasible at that time. A war induces them to put more resources into the one area of government expenditure they tend to underfund, and opens the door to higher levels of spending than would usually be possible. Thus, war allows a Democratic administration to do even more of what they’re good at, economy-booster-wise.

A Republican administration, however, is usually very far from exhausting its possible spending venues when war breaks out, and generally defense is well-funded under Republicans anyway. Extra appropriations are not as great. Essentially, a war compels a Republican administration to start employing a Democratic strategy, but they don’t like it and aren’t good at it. The conflict of policy between small government and big guns leads to deficit spending rather than raised taxes. Debt, unfortunately, is harder to reverse than a tax hike.

At the end of the day, Democrats are just better than Republicans at spending money. If it was possible to win wars by cutting taxes, no doubt Republican wars would all trigger booms.

Originally published on LiveJournal