Tag: wastefulness of government spending

Afghanistan: Obama’s War

Last week, when President Obama made his trip to Bagram Air Base in Afghanistan, he claimed that “America’s war in Afghanistan will come to a responsible end.” This turned out to be the greatest applause line of his speech. With his assertion, Obama, in effect, declared himself the hero of the Afghan war – the one who put an end to that nightmare. But what Obama failed to mention was that it was his war, and that nothing but unattractive scenarios lie ahead for that war-torn state. Indeed, Afghanistan might just continue to hold down its ranking as the most violent country in the Global Peace Index.

This gloomy prognosis would not have surprised Thomas Jefferson. Yes, Jefferson’s words point to a fundamental truth, “Governments constantly choose between telling lies and fighting wars, with the end result always being the same. One will always lead to the other.”

Graciana del Castillo, one of the world’s leading experts on failed states, has just written a most edifying book on the Afghan war (Guilty Party: The International Community in Afghanistan. Xlibris, 2014). Del Castillo’s book allows us to finally understand just what a fiasco the Afghan war has been.

Why is Afghanistan, as Bob Woodward correctly termed it, Obama’s war? Del Castillo’s sharp pencil work shows that during the period 2002-2013, $650 billion have been appropriated for the Afghan war effort, and a whopping $487.5 billion of that (or 75%) took place after President Obama took office (see accompanying chart).

If one pulls apart that $650 billion price tag, a variety of interesting sleights-of-hand emerge. For example, about $70 billion was disbursed to what is euphemistically termed reconstruction. But, in reality, 60% of this $70 billion (or $42 billion) was actually spent on beefing up the Afghan National Security Forces. And not surprisingly, 75% of the $42 billion spent on national security forces was spent under President Obama’s watchful eye.

To put these outsized numbers into perspective, just consider that the total cost of the Afghan war from 2002-2013 amounts to $7089 per American taxpayer (based on the number of income tax returns). More revealing is the fact that the annual expenditure rate under the Bush administration was already $222 per taxpayer. Then, it exploded to an annual expenditure rate of $1329 per taxpayer under President Obama.

In addition to laying out the phenomenal spending magnitudes on President Obama’s watch, del Castillo demonstrates just how unsustainable all this Afghan spending is. For example, in 2013, the United States financed over $5 billion of the $6.5 billion needed to field the Afghan National Security Forces. This $5 billion of U.S. financing was roughly 10 times more than the Afghan government actually spent from its own revenue sources. In fact, the U.S. funding of Afghan forces was almost three times the total revenue collected by the Afghan government.

To put Afghanistan’s financing gap into perspective, the Afghan government estimates the total fiscal deficiency that they will face over the next decade would amount to a whopping $120 billion. Considering that a July 2013 Washington Post/ABC poll showed that only 28% of Americans say the war in Afghanistan has been worth the cost, it is unlikely that the U.S. would even contemplate continuing to finance the house of cards it has built at anything close to these estimates.

And if this isn’t bad enough, consider that the countryside has been forgotten and neglected during the war years. It is here where 75-80% of the population resides, and produces its livelihood. The rural population has done what is only natural – farm a cash crop. And, the most attractive cash crop in Afghanistan is poppies. Not surprisingly, the poppy plantations have greatly expanded, from 75 thousand hectares in 2002 (near the start of the war), to over 210 thousand in 2013, surpassing the previous peak of 190 thousand hectares in 2007. Just another small example of the collateral damage associated with war and misguided economic policies in Afghanistan.

Another Dismal Assessment of Obamanomics: United States Drops to 7th in WEF’s Global Competitiveness Index

Every year, I look forward to the annual releases of both Economic Freedom of the World and the Index of Economic Freedom. With their comprehensive rankings, these two publications enable interested parties to compare nations and see which countries are moving in the right direction.

As an American, I’m ashamed to say that these publications also show which nations are moving in the wrong direction. And the United States ranks poorly by this metric, having dropped from 3rd place to 10th place since 2000 according to Economic Freedom of the World.

The United States also has dropped to 10th place in the Index of Economic Freedom, and is now ranked only as a “mostly free” nation.

Some people dismiss these pieces of data because the two rankings are considered to reflect a pro-free market bias.

But the folks at the World Economic Forum surely can’t be pigeonholed as a bunch of small-government libertarians, and the WEF’s Global Competitiveness Report shows the same trend.

The United States took the top spot in the WEF’s Global Competitiveness Index as recently as 2007 and 2008, but then dropped to 2nd place in 2009.

I think Bush bears the full blame for that unfortunate development. But the decline has continued in recent years, and Obama deserves a good part of the blame for the drop to 4th place in 2010.

The United States then fell to 5th place last year, in part because of horrible scores for “Wastefulness of Government Spending” (68th place) and “Burden of Government Regulation” (49th place).

Given this dismal trend, I opened the just-released 2012 Report with considerable trepidation. And my fears were justified. The United States has now dropped to 7th place.

Here is some of what was said about America.

The United States continues the decline that began a few years ago, falling two more positions to take 7th place this year. Although many structural features continue to make its economy extremely productive, a number of escalating and unaddressed weaknesses have lowered the US ranking in recent years. …some weaknesses in particular areas have deepened since past assessments. The business community continues to be critical toward public and private institutions (41st). In particular, its trust in politicians is not strong (54th), perhaps not surprising in light of recent political disputes that threaten to push the country back into recession through automatic spending cuts. Business leaders also remain concerned about the government’s ability to maintain arms-length relationships with the private sector (59th), and consider that the government spends its resources relatively wastefully (76th). A lack of macroeconomic stability continues to be the country’s greatest area of weakness (111th, down from 90th last year).

For people who like to look at the glass as being 1/10th full, the United States does beat Portugal (116ht place) in the score for macroeconomic stability.

Here are a few additional highlights. Or lowlights might be a better word.

  • The United States scores 42nd in property rights, behind Namibia and Uruguay.
  • The United States ranks 59th in government favoritism, behind Guinea and Bolivia.
  • The United States scores 76th in wastefulness in government spending, behind Mali and Nicaragua.
  • The United States also is 76th in the burden of government regulation, behind Kenya and Thailand.
  • The United States scores 69th in extent of taxation, behind Gambia and Ethiopia.
  • The United States ranks 103rd for total tax rate, behind Greece (!) and Philippines.

Now time for some caveats. The WEF report is based on survey results, for better or worse, and it also probably is best characterized as a measure of the attitudes of the business community rather than an estimate of economic freedom.

Regardless of limitations, though, it is a good publication. As such, it is downright embarrassing to see the United States fare so poorly in key indices—particularly when third-world nations score better.

We know that small government and free markets are the keys to prosperity. Bush took us in the wrong direction, however, and Obama is repeating his mistakes.

So don’t be surprised to see the American score decline further as additional reports are issued.