Osama bin Laden: Economic Analyst

According to a story on-line at the Washington Post (http://www.washingtonpost.com/wp-dyn/articles/A16971-2004Nov1.html) , Osama bin Laden claims to have destabilized the U.S. economy:

“On the tape, the Saudi millionaire brags that he is succeeding beyond his dreams in destabilizing the U.S. economy and bankrupting the U.S. government…Bin Laden also suggested that the huge sums of money Washington spends on homeland security and the military serve his agenda of weakening the U.S. economy…He added: ‘We are continuing this policy in bleeding America to the point of bankruptcy….Every dollar of al Qaeda defeated a million [U.S.] dollars . . . besides the loss of a huge number of jobs…As for the size of the economic deficit, it has reached record, astronomical numbers estimated to total more than a trillion dollars.’"

Whatever other effects that the Iraq misadventure has had, destabilizing the U.S. economy is not one of them. Currently, U.S. GDP runs about $10.8 TRILLION (in real terms, 3rd quarter 2004; http://www.bea.gov/bea/dn/gdplev.xls). So far, over about 20 months, our total authorized spending on Iraq is about $225 billion. This pro-rates to about $135 billion per year, or about 1.25% of our real GDP. [For what it's worth, the total U.S. government debt is right now about $7.5 trillion, and, between June 30, 2003 and June 30, 2004, increased by about $600 billion; http://research.stlouisfed.org/fred2/data/GFDEBTN.txt). Almost certainly less than half that increase is a consequence of the increased federal government spending on Iraq and on security. Apparently bin Laden is not accurately informed about the magnitude of our existing government debt.]

Economically, this is sustainable. It’s not even the principal component of the current federal government budget deficit—that’s a consequence of the Bush tax cuts. It’s only about one-third more than the increase in health care spending in 2004 compared with 2003. (Health care spending seems likely to have increased by a little over $90 billion; see http://www.bea.gov/bea/dn/nipaweb/nipa_underlying/TableView.asp?SelectedTable=19&FirstYear=2003&LastYear=2004&Freq=Qtr).

The invasion of Iraq was wrong for a whole slew of reasons--undertaking an offensive war is not something I think the U.S. should do. The cost to the standing of the U.S. in the world has been tremendous. The human cost, mostly to Iraq (see the Lancet study), but also to the U.S., is insupportable. But economcally destabilizing to the U.S.? I don't think so.

I guess it’s a good thing for him (and a bad thing for the rest of the world) that bin Laden is a better terrorist leader than economist. And at least this helps us understand why his wealth is inherited.