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Economist Mom

When money's no object, bad choices abound

If the US continues to act without minding how much money it spends, it will continue to make poor policy decisions

By Guest blogger / March 28, 2011

Are the wars we're fighting to preserve freedom and save lives worth their costs? It's hard to say when we're not paying for them yet, writes guest blogger Diane Lim Rogers.

Photo illustration/Colette Scharf/Design Pics/Newscom

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Ezra Klein has a really excellent column on war costs in today’s Washington Post (Business section). His essential point is pretty much a central philosophy here on EconomistMom.com: if we behave as if there are no budget constraints (yet there really are underlying tradeoffs among scarce resources that we just choose to ignore), we’re almost certainly going to make poor choices where marginal benefits fall short of marginal (and true) costs.

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Some of my favorite parts of what Ezra has to say (emphasis added):

[F]or more than a decade now, we’ve waged war as if it were free, keeping our wars off the budget and, rather than paying for them as they were fought, slapping them on the national credit card. Paying as you go, after all, is hard. It forces you to make decisions about competing priorities. When you don’t pay up front, those decisions become easy. And war should never be easy...

Honest budgeting serves a purpose beyond making sure revenue matches spending… The numbers on the page — and the trade-offs they demand — are as close to rational as the political process can get. That’s the point of them. By forcing us to make the tough decisions, they help us make good decisions…

The Obama administration has improved the process some, mostly by asking for war funding when the budget is submitted (although the funding itself is still classified as “emergency” spending, and so is not actually ruled by the budget process), including some funding in the budget and more tightly defining what can go into the emergency packages so they don’t simply become budgeting by other means for the Pentagon. But the wars are still charged to the credit card and the Pentagon is still protected from trade-offs.

Even some within the armed forces worry about the Defense Department getting used to this system. Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, gave an unusually frank news conference in January. “The budget has basically doubled in the last decade,” he said. “And my own experience here is that in doubling, we’ve lost our ability to prioritize, to make hard decisions, to do tough analysis, to make trades.”