Bad analysis

On Sunday, the LA Times published a story detailing the 'historic' proportions of US spending on Iraq, Afghanistan and 'other fronts' in the WOT. The piece was picked up over the wire by other publications as well. More notable than it's widespread distribution is it's just plain bad analysis.

The Iraq war is far smaller and narrower than those conflicts, and it has not extended beyond the tenure of a single president. But its price tag is beginning to reach historic proportions, and the budgetary "burn rate" for Iraq may be greater than in some periods in past wars.

If U.S. involvement continues on the current scale, the funding for the Iraq war — combined with the conflict in Afghanistan and other foreign fronts in the war on terrorism — is projected to surpass this country's Vietnam spending next year.

Yes, it's all about Vietnam. Only it's not really. As you read the piece in it's entirety, author Joel Havemann makes valid points about funding for the global WOT. Sadly however, the graphs quoted here coupled with the headlines make it about Vietnam. But the comparison just doesn't work.

Point #1: Different times, different war. Havemann compares Iraq/Afghanistan and the rest of the current 'Shadow War' with the more conventional conflicts of the past:

By the time the Vietnam war ended in 1975, it had become America's longest war, shadowed the legacies of four presidents, killed 58,000 Americans along with many thousands more Vietnamese, and cost the U.S. more than $660 billion in today's dollars.

By the time the bill for World War II passed the $600-billion mark, in mid-1943, the United States had driven German forces out of North Africa, devastated the Japanese fleet in the Battle of Midway, and launched the vast offensives that would liberate Europe and the South Pacific.

While there are similarities in some respects, the current conflict in Iraq is not a mirror-image of World War II or Korea or Vietnam. This is a point that many critics of the conflict often make in rebuttal to supporter's protestations to the contrary. The critics are right and Havemann's comparison of Iraq or the WOT to these more traditional conflicts don't work.

Point #2: The Time Value of Money. What is it? Why does it matter?

It's one of the prime concepts in Finance and tells us basically that money now is worth more than the same amount of money received in the future. In the context of this article, the key notion is that, because money is worth more now, buying the same level of goods or services in the future will cost more money.

So when Havemann talks about our spending in the course of roughly four years what it took the US to spend in more than a decade during Vietnam, it's supposed to be some sort of financial bombshell. Only it's not.

It's a simple expression of the fact that it cost's much more now than it did 40-years ago to do comparable things. In addition, the comparison doesn't take into account the bang we get for the bucks now relative to our purchases in Vietnam.

We currently field a far better trained force and far more sophisticated weapons systems now than we did in the 1960's and 70's. The price tag on weapons systems alone is not at all comparable.

It's just another surface analysis that doesn't account for pesky details. But hey, splashing Vietnam in headlines is always fun.