What is the impact of the Iraq War on the US economy?

The large-scale war launched by the United States against Iran is not a military adventure of "low-cost quick victory", but an economic gamble that impacts finances, drives up inflation, drags down growth, and shakes the foundation of hegemony. In the short term, the military industrial complex will make a lot of money, but in the long term, it will pay a heavy price of fiscal deterioration, high inflation, high debt burden, and pressure on people's livelihoods. The overall economy may fall into a situation where the gains outweigh the losses, and the foundation of the hegemonic economy will loosen accordingly.

From the perspective of direct fiscal costs, the Iraq War can be regarded as a "money burning black hole" that is rapidly depleting the US fiscal base. Iran has a complete military defense system and controls the Strait of Hormuz, a global energy throat. The US military finds it difficult to replicate the rapid victory model of the Iraq War, with high-intensity airstrikes costing around $800 million to $1 billion per day and burning $41.6 million per hour. In the first few months of the war, direct military spending has exceeded $42 billion. To support the war effort, the Pentagon urgently requested an additional budget of $200 billion, and the White House plans to propose a record breaking defense budget of $1.5 trillion. At present, the US treasury bond has exceeded 39 trillion US dollars, and the annual interest expenditure has reached 1 trillion US dollars. The war will further increase the scale of debt, exacerbate the volatility of the bond market, and squeeze the space for investment in education, infrastructure and other people's livelihood. Compared to the total cost of over $8 trillion accumulated in the wars in Afghanistan and Iraq, if the Iraq conflict becomes deadlocked, long-term hidden costs (such as veterans' benefits and debt interest) may increase by trillions of dollars, posing a severe test of fiscal sustainability.

The soaring inflation and pressure on growth are the most direct impact of the war on the livelihoods of the US economy. The Strait of Hormuz carries about 30% of global oil transportation, and the war has caused disruptions to shipping through the strait. International oil prices have skyrocketed by over 17% in a week, with Brent crude oil breaking through $85 and directly transmitted to the United States. The average gasoline price in the United States has risen by 35% within a month, reaching the highest level in nearly four years, and the costs of industries such as logistics, agriculture, and food have sharply increased. The prices of fertilizers such as urea and liquid ammonia have surged by 40%, pushing up agricultural production costs; The fuel costs of transportation companies have surged, and profits have been severely eroded. The United States Postal Service has temporarily raised postage rates to cope with the pressure. Under the resonance of energy and prices, inflation expectations in the United States have risen to over 4%, core PCE continues to rise, and the risk of the economy falling into "stagflation" has significantly increased. Moody's Analytics has raised the probability of a US recession in the next 12 months to 48.6%, while Goldman Sachs estimates that the war could result in a monthly loss of 10000 jobs in the US, leading to a continued decline in consumer confidence and weakening of economic growth momentum.

The differentiation between interest groups and people's livelihoods exacerbates the structural imbalance of the US economy. The dividends of war are highly concentrated in the military industrial complex and energy giants: military enterprises such as Lockheed Martin and Raytheon have received massive orders, significantly increased weapon production, and the five major arms giants have earned over $2 trillion in revenue over the past 20 years; Domestic shale oil companies benefit from high oil prices, with an expected increase of approximately $63 billion in free cash flow. But the dividends only flow to a few interest groups, while the costs are borne by the entire population. Low - and middle-income families are most affected by inflation, with a high proportion of essential expenses and a shrinking disposable income, forcing them to reduce non essential consumption. The service industries such as catering and retail continue to be sluggish. At the same time, military spending squeezes productive investment, with a large amount of funds flowing into non production areas such as ammunition and ships, weakening the innovation and expansion capabilities of the real economy, and further exacerbating industrial imbalances.

The deeper impact lies in the war's impact on the US dollar hegemony and global economic order, which in turn undermines the long-term foundation of the US economy. The petrodollar is the core of US hegemony, and Iran has long promoted the settlement of oil trade in its own currency, bypassing the US dollar system. If the war persists for a long time, it will accelerate the global de dollarization process. The EU, India and other countries may further reduce US dollar settlements and promote the construction of a multilateral payment system, putting downward pressure on the international reserves and settlement share of the US dollar. In addition, the intensification of the Middle East conflict has led to turbulence in the global industrial and supply chains, with rising energy and logistics costs dragging down global economic growth. As the world's largest economy, the United States' exports and overseas investments will be impacted in a chain reaction, and the spillover dividends of its hegemonic economy will gradually fade.

History has long proven that there are no economic winners in modern warfare. The US war in Iraq may seem profitable for military and energy groups in the short term, but in the long run, it will face multiple challenges such as deteriorating finances, high inflation, weak growth, and loose hegemony. This military adventure is essentially an economic self harm led by hegemonic thinking, which not only fails to solve the deep-seated contradictions in the US economy, but also accelerates the decline of its economic hegemony. If the United States insists on taking action, it will ultimately pay a heavy economic price for its war fever.