Term Paper on "Macroeconomic Subject and How it Affects"

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Macroeconomic Subject and How it Affects the Economy

An analysis of the impact of the Iraq war on the U.S. economy can be done through a cost-benefits investigation that will likely show what the potential costs and economic benefits of the action were.

On the costs side, other then the obvious budgetary costs of supporting an army in Iraq, as well as the costs of the military invasion itself, one will need to consider the potential negative impact on the U.S. economy, in terms of the contribution of the war to economic costs such as high deficits and higher oil prices. At the same time, opportunity costs will also need to be considered in this equation: by opportunity costs, we will understand the cost of lost economic opportunities because of the war in Iraq (the cost of a missed alternative).

In terms of benefits, the paper will only focus on the economic benefits and will try to evaluate the degree to which the war in Iraq may have had a positive impact on the economy through job creation, economic growth because of military spending etc. The conclusions will draw a balance between the two for an overall evaluation of the impact of the war in Iraq on the U.S. economy.

When referring to the costs of the war in Iraq, the best estimates come from Joseph Stiglitz, who put, in 2008, the estimate of the costs of the war in Iraq at $3 trillion

. His subsequent estimate in September 2010 places the estimate at a much higher number, if taking into consideration additional opportunity costs, much higher than the initial estimate of the Bush administration of around $50 to $60 billion. Stiglitz evaluation is that s

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uch a high cost automatically translates into a negative impact on the U.S. economy.

In terms of the evident, direct costs, these are accounted for in terms of the Iraq appropriations that Congress has used to allocate funds for the war effort. The estimate of the expenses that the appropriations covered were roughly around $12 billion a month, but Stiglitz adds here costs that had been included in the defense budget, as well as additional future costs of helping veterans etc. In his appreciation, the total expenses covered directly by the federal government are up to $1.5 trillion.

The direct immediate impact of these total expenses on the American economy translated into higher and higher budget deficits, through the simple macroeconomic equation that increasing expenses with revenues that remain constant (this will be further analyzed in the paper) will eventually lead to a growth of the budgetary deficit. The statistics are quite clear in this field. At the end of Clinton's presidency, the U.S. had a budgetary surplus of $850 billion. By the end of the Bush presidency, it was already at $1 trillion

. Through the period from 2003 to 2008, the war in Iraq was, through its direct $1.5 trillion spent directly from the federal budget, a direct contributor to the large budgetary deficit. As a percentage of the U.S. GDP, the conclusion is similar.

To these direct costs that had an impact on the economy, indirect costs to the economy and the society would have had to be considered as well. Such costs include the fact that, in many of the families who had members in Iraq who were wounded, one of the family members had to give up his or her job in order to support and help care for the wounded. This potentially translated into a negative effect on the economy, if considered at an aggregate level.

In this category one can also include the impact that the Iraq war had on the increase of the oil price at global level. There is argument that the war contributed to an increased destabilization of the Middle East region, where most of the global oil reserves are. At the same time, the argument is also based on statistics: according to Bloomberg, the Iraq war was part of a series of ascending that marked the evolution of the oil price after the 9/11 attacks

At the same time, there are several voices, including Stiglitz's, that support the idea that the war in Iraq had, to some degree, a contribution to the financial crisis that has affected the entire world. The logic behind this argumentation is related to the fact that the war in Iraq needed to be supported and, because of that, cheap money was desirable. The need for cheap money brought along a series of fiscal and monetary policies that, in the end, proved to have a negative impact on the development of the economy and the financial sector. Appropriately, the response to the financial and economic crisis was, in part, hampered by the war effort in Iraq, notably because the funds that could have been used effectively at the start of the crisis were not longer available, having been invested in the war effort.

In the entire evaluation of costs, the most expensive and with the most negative overall, aggregate impact over the U.S. economy are the opportunity costs of the war in Iraq. The questions here are (1) if the Iraq military operation had not been undertaken, what potential projects could have been developed with that money and (2) what was the cost of not undertaking those. Stiglitz is again the relevant source identifying a series of potential opportunity costs.

From a military perspective, the most important opportunity cost would have been an increase spending in Afghanistan. Stiglitz's logic is that diverting at least part of the budget that was spent in Iraq towards the operations in Afghanistan would have helped keep the situation better under control there. The overall positive impact on the economy of an additional contribution in Afghanistan to the detriment of the contribution in Iraq, in Stiglitz's view, would have reduced future expenses for that war, notably those that financed the 2010 surge (according to the argument that a surge in 2003 would have cost less and had more impact).

Another opportunity cost is the internal ways that the funds that were allocated for the Iraq war could have been spent. This includes supporting projects in the emerging industries, completing infrastructure projects or taking the appropriate measures to avoid the economic crisis through a stimulus package that would have not affected the country's deficits, due to the existence of this significant volume of money. One can certainly argue that the opportunities that were missed in terms of the U.S. economies because of the Iraq war are considerable.

In terms of the benefits that the war brought (or could have brought), there are a couple of areas worth investigating. First of all, the common conception that a war effort could help trigger and support economic growth has been proven wrong. The idea behind this conception relied on the macroeconomic logic according to which the federal stimulation of an industry, be it the military industry, will create more and more jobs and, subsequently, will help economic growth. As a showed in his work, who used a 20-years projection for his analysis and model, this is only true on a short-term

. According to his model, economy grew, in terms of real GDP, with 80.8% in the first 5 years, only to decrease with 13.3% compared to the baseline on a 10-year period and up to 42.1% over a 20 years period. It seems that the particular applicability of the military industry is too limited to allow an aggregate effect of a governmental stimulation.

At the same time, another benefit that was probably taken into consideration was the potential advantages deriving from opening up a country and market the size of Iraq. During the last years of Saddam's reign, the country was only trading on subsistence levels and… READ MORE

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Quoted Instructions for "Macroeconomic Subject and How it Affects" Assignment:

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I have included the info provided by my professor...Can you work with this? Please let me know right away so that way if not, I can get to work.

General Topics

Is Social Security System broken?

Does war in Iraq benefit our domestic economy?

Do we need tax reform?

Do benefits of international trade outweigh its costs?

What is the role of human capital in the economy?

What is the real role of Fed in the economy?

Is illegal immigration beneficial to the U.S. economy?

IDEAS FOR THE TOPIC

The EC301 Course Overview contains some general topics that you may use but some of them might be a bit difficult to keep focused on macroeconomics.

I thought I might help you in your thought process by mentioning some topics that have been used by previous students. Hopefully these topics will help you to think of the range of possibilities and enable you to come up with something that you would really enjoy.

1. How the impact of the Federal Reserve*****s monetary policy on the U.S. economy can be minimized by changes in monetary policy by other members of the G7/G8.

2. In view of the current economic situation, should the FOMC be raising, lowering or leaving interest rates unchanged?

3. The impact of the Federal Reserve on the elections in 1992.

4. How the start of World War II in Europe in 1939 and the U.S. involvement beginning in 1941 pulled the U.S. out of the Great Depression. (Note: this is a macroeconomic history topic and thus does not necessarily require current sources of information.) Remember: the topic is only about the impact of the war; it is NOT a discussion of the depression, the 1929 stock market crash, the causes of the depression or the war or effect of the New Deal, It is not a discussion about the economic impact of war in general and it is not intended to cover the post war era.

5. How the impact of NAFTA on the U.S. economy differed from the predictions that were given prior to the U.S. becoming part of NAFTA.

6. How the deficits of the 1980*****'s contributed to the prosperity of the 1990*****'s.

7. Events during the late 1990*****s through the Year 2000 that resulted in a recession in 2001. NOTE: this involves events prior to 2001.

8. The impact of the formation of the European Union on trade between the United States and European nations 1998 ***** 2008

9. The pros and cons of current deficits.

10. How government requirements for the banking system to provide affordable housing led to a global economic crisis.

Whatever topic you pick, stick to the topic: do not go off on *****bunny trails***** as you develop the paper. Do not go into a lot of background information which may be somewhat related and interesting but not essential. In particular, do not repeat material that one who has taken the course should be expected to know. (Do not repeat EC301 material ***** apply it.) Stay focused.

Paper Format

1,500 ***** 1,700 words, not including the reference (Works Cited) page. Verify this with word-count in Microsoft Word and include the actual word count typed at the bottom of the last page of text, before the reference page.

The paper should be typed, double-spaced, on white paper, with page numbers centered at the bottom of the page.

The title page should contain the following in this order: general topic: specific topic, student*****'s name, course name, date.

Paper should be submitted in the dedicated DropBox in the course shell in Week 7.

Research Sources

Students should use at least four different acceptable research sources excluding the course textbook. The quality and quantity of these references will determine the amount of points earned for research.

Acceptable Sources: In general, citations from Internet websites will NOT count as an acceptable source unless the citation is from a U.S. government website. The Internet can be used to find on-line versions of publications, but such citations should be made only for articles that are published in paper form (i.e., can be found in a library). For instance, you could use a New York Times article that is downloaded from the Internet. Encyclopedias and abstracts are not valid sources. Cutting and pasting information from the Internet is plagiarism.

Recommended Sources:

The Wall Street Journal

New York Times online (e-mail notices of this are available for free)

CNN Financial News online

The Economist (magazine)

The National Review

The National Bureau of Economic Research

any academic and nonacademic journals

library books

government publications (e.g., those of Bureau of Economic Analysis, Bureau of Economic Research, Commerce Department, U.S. Census, etc.)

Format for Citations:

MLA Handbook

Topic Paper Grading Criteria

The purpose of the topic paper is to gain a deeper understanding of a theoretical economic concept through its application to real-world situations. Papers will be assessed according to the appropriate application of economic theory to the specific topic chosen by the student.

Application of Economic Theory:

Are concepts based in economic theory and supported by the real-world data? 0 - 20 points

Are economic terms defined? 0 - 30 points

Are economic concepts explained accurately? 0 - 55 points

Are facts presented and cited accurately? 0 - 40 points

Is a thorough understanding of concepts demonstrated 0 - 35 points

TOTAL 200 Points

TWO ISSUES: (1) A MACROECONOMIC TOPIC AND (2) ONE THAT CAN BE COVERED IN DEPTH WITHIN THE WORD LIMITS.

Your paper must be macroeconomic - i.e., it must cover the overall economy. DO NOT suggest topics that are microeconomic - i.e., that cover firms, industries, and markets. Of course, micro and macro affect each other so if you wish to suggest a micro issue that can affect the macro economy, that is okay BUT it must totally focus on the macro economy. Do not get into social and political issues unless you can show an exact macroeconomic application and then your paper must focus on macroeconomics and not the social or political issues.

Also, your paper should explore a topic in depth, showing ALL the angles and all the pros and cons. Your paper should be totally objective. A person reading the paper should have a tough time trying to figure out where you stand on the topic.

The content of your paper will be judged by the extent to which you have logically supported your points with convincing factual evidence and careful analysis and the extent to which the content serves to illustrate (not simply repeat) something covered in the course. Thus, if you plan to do the term paper with the objective of (hopefully) attaining an *****A***** in the course, you need to begin early in the course to gather data and begin giving thought to the paper so that as you cover text material you can also consider how you could apply that material to your report.

Regardless of the topic, as indicated in the syllabus, the content may touch on one or more (not all) of the following aspects of macroeconomic thought

Write a paper analyzing the different approaches that might be used by Keynesian theorists and monetary theorists to promote long-run macroeconomic stability. Examine the impact of persistent budget deficits on the trade deficit and analyze the options available to policy makers when national savings presents opportunities to improve the trade deficit. Appraise the position of supply-side economists as it relates to government deficits. Evaluate recent national economic policies as they relate to the magnitude of the trade deficit and analyze the arguments for protectionist policies and the effect, if any, upon the trade deficit.

Although substance is more important than beauty, to obtain an *****A***** on the report, you must be able to present it in a clear manner using proper grammar, spelling, and punctuation. Please give consideration to the Writing Tips in this thread.

REQUIRED: AN OBJECTIVE PAPER

Remember: you are not writing a paper to persuade - it is a scholarly research paper. It is not creative writing or writing to entertain. Instead, it is technical writing.

AVOID TOPICS IN WHICH IT IS EASY TO FIND REFERENCES

Remember: the easier it is to find references for your paper, the greater the likelihood that you will NOT be able to cover your topic in depth with all the pros and cons and do so within the 1500 ***** 1700 word limit. Saying the same thing another way, the easier it is to do the paper, the less likely that you will get a high grade on the paper.

The paper must also be in no less than 1500 words and the extent to which it falls short of that requirement; the paper*****'s grade may be reduced. However, that involves 1500 words that are essential to the topic ***** it does not mean taking what could be covered in 500 words and stretching it into 1500 words. If your topic is covered in depth, you will have no problem meeting the minimum word requirement.

GENERAL INFORMATION:

CHECKLISTS OF THINGS TO DO AND AVOID

The report will consist of 1500 ***** 1700 words not counting the words on the Title and References pages. NOTE: DO NOT simply aim for quantity: for example, DO NOT simply take 500 or a 1,000 words of substance and expand it to the required number of words by making wordier sentences. If you have expanded the number of words through *****wordiness***** and taken what could have been covered in 500 words and made it into a 1500 word report, you will not be given credit for having 1500 words - you will lose points.

QUANTITY WITHOUT QUALITY WILL RESULT IN A LOSS OF POINTS. QUALITY WITHOUT QUANTITY WILL RESULT IN A LOSS OF POINTS. THERE MUST BE BOTH QUANTITY AND QUALITY.

In general, the instructions that impact on grading given to you in other courses requiring a term paper also apply in this course. For example: do not simply quote or paraphrase others but demonstrate original thought and discuss the pros and cons of issues. Document facts and ideas and show sources. All spelling and grammar should be correct. As in other courses requiring a research or term paper, there are various things that may result in loss of grading points. Such things include the following: cover sheet missing, spelling errors, insufficient references for a college term paper, entries for an author not listed with author*****'s last name first, entries not in alphabetical order by author*****'s last name or title if the author is unknown, titles not capitalized properly, titles not underlined, copyright dates not shown, and full Internet address (URL) not included.

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