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Will Obama's war strategy produce a peace dividend?

A move out of Iraq could save America $370 billion.

By David R. Francis / December 22, 2008

When The father of President George W. Bush was in the White House, the end of the cold war in the early 1990s gave him a "peace dividend" – a drop in military spending that opened the door to fund more constructive federal programs.

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President-elect Obama probably hopes for the same advantage should he manage to wind down the war in Iraq as promised during the election.

The savings are potentially substantial. A back-of-the-envelope estimate earlier this month by Lawrence Korb and other experts at the Center for American Progress in Washington calculates a total savings of $370 billion through 2013 if operations in Iraq are shrunk dramatically.

But if more troops are sent to Afghanistan, as Mr. Obama has signaled is likely, the extra cost could reach $54 billion. So the net saving for those years would drop to $316 billion.

At a time when the financial crisis has led Washington to spend more than $1 trillion in rescue efforts this year, that $316 billion spread over several years might seem minor. If normality returns to the federal budget, however, that sum could be useful for, say, launching Obama's plan to improve the nation's healthcare system.

It remains unclear what the new president will want to do, other than his promise to remove combat troops from Iraq in 16 months – and what he will actually do after consulting with key generals and other advisers.

Any savings are "very uncertain," cautions Winslow Wheeler, director of the Straus Military Reform Project at the Center for Defense Information, another Washington think tank. He adds that it's "plausible" there will be no change in costs.

Any savings depend in large degree on how fast Obama can draw down the troop levels in Iraq, says Steven Kosiak of the Center for Strategic and Budgetary Assessments in Washington. At present, about 200,000 armed services members are in the Middle East, some 150,000 in Iraq and 35,000 in Afghanistan.