Wednesday, June 22, 2011

Economic Effects of the Troop Withdrawals

The reduction of U.S. troop levels in Afghanistan will strengthen the U.S. economy, if only in a small way. Having workers of any kind located outside of the country affects the economy like an import of the same size. Either way, the money being spent is, for the most part, leaving the national economy.

The planned troop withdrawals over the next five quarters involve just .01 percent of the national population. That’s enough to care about but perhaps not enough to measure in economic aggregates. Obviously, not all of the U.S. military spending in Afghanistan goes for troops and troop support, and when the other spending is eventually cut back, that will make a slightly larger difference.

I realize that .01 percent might seem vanishingly small, but that’s not really the case either. We fret about each 1 percent change in national economic measures, and especially about the difference between the 1 percent growth rate that means growing unemployment and the 2 percent growth rate that means declining unemployment. If a single policy move can make up 1/100 of that difference, it is nothing to sneeze at.