The Hidden Cost of War: A Connection Between Afghanistan, Iraq, and the Rise of U.S. Personal Bankruptcies?
It has widely been reported that, despite a budding recovery, personal bankruptcies are still on the rise in the United States. (See, for example, this blog entry). Although Congress overhauled the nation’s bankruptcy laws in 2005 with the intention of limiting the ability of many individuals to get rid of their debt (see “How Important Were the ’05 Bankruptcy Law Changes?”), bankruptcy filings had returned to pre-2005 levels by the middle of 2009. And, as John O’Connor recently wrote on this site, nationally there are now approximately 6,000 bankruptcies being filed daily.
All of this comes against the backdrop of two protracted foreign conflicts that have no real end in sight. The effect of these conflicts on the national economy (and in turn, on commercial bankruptcies) is debatable, but cannot be ignored. In March 2008, near the start of the current recession, the Council on Foreign Relations took a close look at the impact these conflicts have had on the U.S. economy. (The entire report is available here). The report acknowledged an ongoing debate about the extent to which war spending in general affects a country’s economy. Although many experts attribute massive U.S. national defense spending during World War II to ending the Great Depression, even this proposition is disputed by some economists. A historical survey of the U.S. economy from the U.S. State Department reported the Vietnam War had a mixed economic impact, while the first Gulf War typically meets criticism for having pushed the U.S. into recession.
Turning specifically to the economic impact of the current wars in Iraq and Afghanistan, the report indicated that by some estimates, the total long-term cost of the wars will be $2.4 trillion or $3.5 trillion. While some of this spending has created jobs for Americans, most of it has not. At the same time, nearly all of this has been deficit spending, which can ultimately weaken the dollar and increase the federal government’s cost of borrowing.
Apart from direct spending, the report noted that the wars touch the U.S. economy in a variety of indirect ways. These include, but are not limited to, volatility in energy prices. Rising energy costs combined with increased deficit spending can also fuel inflation. This can be especially painful for working class families when their income goes down or stays the same (or in some cases, is lost altogether), as the costs of getting to work and heating a home increase.
Finally, the report suggested that some of the gravest economic effects of the wars in Iraq and Afghanistan may be intangible. For example, the psychological effects of the conflicts may depress stock market prices. This can have negative consequences for job creation and retention.
Regardless of whether Afghanistan and Iraq are a cause, there is little doubt that multiple economic conditions are leading many into Chapter 7 bankruptcy. If you have experienced a recent job loss, reduction in hours, or business failure, contact a bankruptcy attorney in your jurisdiction to discuss your options.
