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The Price of the War in Ukraine [1]

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Date: 2023-03-25  

We have heard many Republicans bleat about the cost of the war in Ukraine, or at minimum, ‘worry’ about the corruption and diversion of these weapons into the black market – as if the whole Putin regime were not a giant Mafia organization itself.

This is so tiresome! But when enormous resources are being wielded, it does make sense to ask if it’s a valid expenditure. So, let’s take a brief look at the cost of the Ukraine war to the USA, and to us as taxpayers.

According to the Council on Foreign Relations the US has sent more than $75 billion in assistance to Ukraine, which includes humanitarian, financial, and military support. That’s a lot, right? Well, it depends.

The total US annual budget for 2023 is $6.2 Trillion. So, our support the Ukraine War is 1.2% of the federal budget. That amounts to less than 0.4% of Gross Domestic Product.

Frankly, it’s a pittance. But wait, there’s more.

When companies calculate the cost of a new product, one of the important questions is the out of pocket cost of the product. Out of pocket costs are those that occur when the company sources materials or services from outside the company. That’s a very crude term that would infuriate a real accountant, but I’m going to use it anyway.

If the company is back-integrated, it means that the company makes the raw materials for the new product. So, when the new business buys raw materials, it simply transfers the money internally to a different division of the company. At some point the supply chain has to go outside the company, and those costs are out of pocket. The out of pocket cost is closer to the real cost that the company has when it makes a product.

If the company is heavily back-integrated, the out of pocket cost might be only a fraction of the total cost of the new product.

Think of the US as one giant back-integrated company. The tank that is sent to Ukraine from the US is primarily sourced in the US – and yes I know that capitalists are getting rich on war supplies. That’s another battle that needs to be fought separately. The point here is that the out of pocket costs for the US to support Ukraine are a fraction of that $75 Billion.

Most of that $75 Billion gets recycled back into jobs, taxes, and infrastructure that benefit Americans. In addition, supply chain bottlenecks are being exposed.

But, maybe you’re saying, “Well, it’s awful for the Ukrainians, but we really don’t have a dog in this fight. This is just about Eastern Ukraine and Crimea.” The question for you is, When does it become your fight? When the fight gets to Western Ukraine? The Sudetenland? Poland? France? Long Island?

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[1] Url: https://www.dailykos.com/stories/2023/3/25/2160176/-The-Price-of-the-War-in-Ukraine

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