The Three Trillion-Dollar War
By Joseph Stiglitz and Linda Bilmes
The Times of London UK

Saturday 23 February 2008

The cost of the Iraq and Afghanistan conflicts have grown to staggering proportions.
The Bush Administration was wrong about the benefits of the war and it was wrong about the costs of the war. The president and his advisers expected a quick, inexpensive conflict. Instead, we have a war that is costing more than anyone could have imagined.

The cost of direct US military operations - not even including long-term costs such as taking care of wounded veterans - already exceeds the cost of the 12-year war in Vietnam and is more than double the cost of the Korean War.

And, even in the best case scenario, these costs are projected to be almost ten times the cost of the first Gulf War, almost a third more than the cost of the Vietnam War, and twice that of the First World War. The only war in our history which cost more was the Second World War, when 16.3 million U.S. troops fought in a campaign lasting four years, at a total cost (in 2007 dollars, after adjusting for inflation) of about $5 trillion. With virtually the entire armed forces committed to fighting the Germans and Japanese, the cost per troop (in today's dollars) was less than $100,000 in 2007 dollars. By contrast, the Iraq war is costing upward of $400,000 per troop.

Most Americans have yet to feel these costs. The price in blood has been paid by our voluntary military and by hired contractors. The price in treasure has, in a sense, been financed entirely by borrowing. Taxes have not been raised to pay for it - in fact, taxes on the rich have actually fallen. Deficit spending gives the illusion that the laws of economics can be repealed, that we can have both guns and butter. But of course the laws are not repealed. The costs of the war are real even if they have been deferred, possibly to another generation.

On the eve of war, there were discussions of the likely costs. Larry Lindsey, President Bush's economic adviser and head of the National Economic Council, suggested that they might reach $200 billion. But this estimate was dismissed as "baloney" by the Defense Secretary, Donald Rumsfeld. His deputy, Paul Wolfowitz, suggested that postwar reconstruction could pay for itself through increased oil revenues. Mitch Daniels, the Office of Management and Budget director, and Secretary Rumsfeld estimated the costs in the range of $50 to $60 billion, a portion of which they believed would be financed by other countries. (Adjusting for inflation, in 2007 dollars, they were projecting costs of between $57 and $69 billion.) The tone of the entire administration was cavalier, as if the sums involved were minimal.

Even Lindsey, after noting that the war could cost $200 billion, went on to say: "The successful prosecution of the war would be good for the economy." In retrospect, Lindsey grossly underestimated both the costs of the war itself and the costs to the economy. Assuming that Congress approves the rest of the $200 billion war supplemental requested for fiscal year 2008, as this book goes to press Congress will have appropriated a total of over $845 billion for military operations, reconstruction, embassy costs, enhanced security at US bases, and foreign aid programs in Iraq and Afghanistan.

As the fifth year of the war draws to a close, operating costs (spending on the war itself, what you might call "running expenses") for 2008 are projected to exceed $12.5 billion a month for Iraq alone, up from $4.4 billion in 2003, and with Afghanistan the total is $16 billion a month. Sixteen billion dollars is equal to the annual budget of the United Nations, or of all but 13 of the US states. Even so, it does not include the $500 billion we already spend per year on the regular expenses of the Defense Department. Nor does it include other hidden expenditures, such as intelligence gathering, or funds mixed in with the budgets of other departments.

Because there are so many costs that the Administration does not count, the total cost of the war is higher than the official number. For example, government officials frequently talk about the lives of our soldiers as priceless. But from a cost perspective, these "priceless" lives show up on the Pentagon ledger simply as $500,000 - the amount paid out to survivors in death benefits and life insurance. After the war began, these were increased from $12,240 to $100,000 (death benefit) and from $250,000 to $400,000 (life insurance). Even these increased amounts are a fraction of what the survivors might have received had these individuals lost their lives in a senseless automobile accident. In areas such as health and safety regulation, the US Government values a life of a young man at the peak of his future earnings capacity in excess of $7 million - far greater than the amount that the military pays in death benefits. Using this figure, the cost of the nearly 4,000 American troops killed in Iraq adds up to some $28 billion.

The costs to society are obviously far larger than the numbers that show up on the government's budget. Another example of hidden costs is the understating of US military casualties. The Defense Department's casualty statistics focus on casualties that result from hostile (combat) action - as determined by the military. Yet if a soldier is injured or dies in a night-time vehicle accident, this is officially dubbed "non combat related" - even though it may be too unsafe for soldiers to travel during daytime.

In fact, the Pentagon keeps two sets of books. The first is the official casualty list posted on the DOD website. The second, hard-to-find, set of data is available only on a different website and can be obtained under the Freedom of Information Act. This data shows that the total number of soldiers who have been wounded, injured, or suffered from disease is double the number wounded in combat. Some will argue that a percentage of these non-combat injuries might have happened even if the soldiers were not in Iraq. Our new research shows that the majority of these injuries and illnesses can be tied directly to service in the war.

From the unhealthy brew of emergency funding, multiple sets of books, and chronic underestimates of the resources required to prosecute the war, we have attempted to identify how much we have been spending - and how much we will, in the end, likely have to spend. The figure we arrive at is more than $3 trillion. Our calculations are based on conservative assumptions. They are conceptually simple, even if occasionally technically complicated. A $3 trillion figure for the total cost strikes us as judicious, and probably errs on the low side. Needless to say, this number represents the cost only to the United States. It does not reflect the enormous cost to the rest of the world, or to Iraq.

From the beginning, the United Kingdom has played a pivotal role - strategic, military, and political - in the Iraq conflict. Militarily, the UK contributed 46,000 troops, 10 per cent of the total. Unsurprisingly, then, the British experience in Iraq has paralleled that of America: rising casualties, increasing operating costs, poor transparency over where the money is going, overstretched military resources, and scandals over the squalid conditions and inadequate medical care for some severely wounded veterans.

Before the war, Gordon Brown set aside £1 billion for war spending. As of late 2007, the UK had spent an estimated £7 billion in direct operating expenditures in Iraq and Afghanistan (76 percent of it in Iraq). This includes money from a supplemental "special reserve", plus additional spending from the Ministry of Defense.

The special reserve comes on top of the UK's regular defense budget. The British system is particularly opaque: funds from the special reserve are "drawn down" by the Ministry of Defense when required, without specific approval by Parliament. As a result, British citizens have little clarity about how much is actually being spent.

In addition, the social costs in the UK are similar to those in the US - families who leave jobs to care for wounded soldiers, and diminished quality of life for those thousands left with disabilities.

By the same token, there are macroeconomic costs to the UK as there have been to America, though the long-term costs may be less, for two reasons. First, Britain did not have the same policy of fiscal profligacy; and second, until 2005, the United Kingdom was a net oil exporter.

We have assumed that British forces in Iraq are reduced to 2,500 this year and remain at that level until 2010. We expect that British forces in Afghanistan will increase slightly, from 7,000 to 8,000 in 2008, and remain stable for three years. The House of Commons Defense Committee has recently found that despite the cut in troop levels, Iraq war costs will increase by 2 percent this year and personnel costs will decrease by only 5 percent. Meanwhile, the cost of military operations in Afghanistan is due to rise by 39 per ent. The estimates in our model may be significantly too low if these patterns continue.

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Joseph Stiglitz was chief economist at the World Bank and won the Nobel Memorial Prize for Economics in 2001. Linda Bilmes is a lecturer in public policy at the Kennedy School of Government at Harvard University

Thank you very much for the information. I knew it was bad, but this actually confirms it.

The annual Budget for all aspects of public health is $67.2 billion...

Hmmmm....

$12 billion a month??? SO, approx $144 Billion in a year, on a war, give or take a few, and only HALF of that amount spent on the Nation's health system....

Where are the people's elects priorities?


Thanks Dragoness... I was number crunching with Karma, my last night, and we arrived at something similar, sadly... I had so hoped I could be wrong..

well there goes my social security. Guess Ill be getting a check for ummmmm...what? 50 bucks a month??? Well at least I can eat with that here.

that article is from a book published two years ago and the authors are biased so the estimates they make are just that...bloated estimates...

do you people have something more recent and credible?

Yes google your governments official site, and it will give you both the health budget per annum, and the defence budget...

surely there is nothing more credible that the USA's government site... or is it FOX news that is the leader in fact?

well instead of pasting some old and biased info why wasn't the info from the goverment posted ...

keep in mind that the money is made on a printing press, it just costs a few bales of cotton and some ink to make the stuff. hmmmmmm
its not like its costing us Gold bars or something with real value.....

All that war money is likely going into Zionists pockets. They seem to just love WARS. If we put the SERPENT PEOPLE on trial and then put them in jail where they belong,Things will start getting better over night!!

smo says " its the jews". lol.

I wonder what the price would be if the war was in the US and not in Iraq and Afghanistan.....one saving is the military could cab it to the front lines maybe....

these closet commies just dont realise that its not fun to get shot at. I for one am glad we take the fight to the enemy. its simple common sense.

Holy crap!! You two are so funny...

Not one scrap of viable information offered, nor substantiated... just the usual rhetorical diatribe...

yank..., the veterans of foreign wars wouldent be getting any new members either. you might have a good plan there. Lets ship the enemy here, camp them out im madmans backyard, and see if he is of the same opinion next month after they have raped and murdered his wife and kids in front of him for sport.

i for one dont need any more evidence. ive seen plenty with my own eyes. If you do, just ask any returning vets what they think we should do...
do you really believe that if we tell the enemy that on november 13th, at 0935 we will be finishing up our troop withdrawl, that the enemy will go home too? if so you are hopelessly naieve about how this enemy thinks. in reality, they would declare victory,( and rightfully so since we packed up and went home) then kill everyone that collaborated with us and thier families. We have no choice now but to finish the job, whatever and however long it takes. sorryaboutit.

Well, John McCain was right when he said today: "All of us want out of Iraq, the question is how do we want out of Iraq".

Unfortunately, McCain never explains how he will get us out of Iraq.

at last someone that understands tactics... I am a veteran of this conflict and was kinda in the heart of things (Baghdad, Sadre City, Mosul, etc.) I agree in pulling out as soon as possible providing our mission being accomplished. Why does everyone think we should just pull out before? Even if we went over for the wrong reasons how would just leaving solve anything? This isn't some game where boys and girls are just playing "Army". This isn't a game at all. lives are at stake and so is the future. All these people that get worked up over all the Iraqis that have died since the beginning of the conflict somehow don't choose to see the genocide it would cause by us leaving. My god, the biggest body count of Iraqi civilians killed were caused by insurgents not us. Anyone who disbelieves me needs to talk to another veteran... not the media. (Sorry if i offended anyone i'm kinda in a "mood".)

Does anyone?

I like your mood... and there are conflicting numbers on innocents who died there, I tend to go with the Red Cross, and World Health Organisations, as they have a total count overall, rather than specific regions of conflict, and have no agenda to fudge the figures...

Did you travel to every morgue, and do a count, and a cause of death? Or are you talking specifically in regards to your experiences?

I don't deny innocents died in the cross fire of BOTH..it appears that very few military US, Australia, and the Coalition as a whole will fess up, when they stuff up..

well since your so clever how would one figure out how much the war would cost in the US...and then figure out what it would cost Australia......or are you that naive to think that the terrorists would just stay home and watch Johny Carson reruns?