The Three Trillion Dollar War: The True Cost of Iraq

On March 19, 2008, the United States will have been in Iraq for five years – longer than the three years and eight months we were involved in World War II; the two years and two months in World War I; the three years and one month in Korea; and even the four years Americans fought each other in the Civil War.

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 twelve-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 World War I. The only war in our history which cost more was World War II, when 16.3 million US troops fought in a campaign lasting four years, at a total cost (in 2007 dollars, after adjusting for inflation) of about $US5 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 $US100,000 in 2007 dollars. By contrast, the Iraq war is costing (directly) upward of $US400,000 per troop.

The chronic underestimation of costs has continued throughout the war. In January 2007, the administration estimated that it would cost $US5.6 billion to deploy an additional 21,000 troops for the proposed “surge” in troop levels.

But this estimate referred only to the cost of deploying the combat troops themselves for four months. According to the non-partisan Congressional Budget Office (CBO), the surge would also require deployment of 15,000 – 28,000 combat support troops, a mobilisation that would raise the cost to at least $11 billion (for four months), rising to $US27 – $US49 billion if the “surge” continued for 12 to 24 months.

Even this expanded estimate did not take into account the long-term health and disability costs for veterans and the cost of replacing the equipment that these additional troops would use.

Nor did it factor in other costs of the surge that the CBO pointed out in a separate report, including the reduced availability of US troops for other potential conflicts for a period well beyond the actual deployment.

Guns and butter

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.

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 $US12.5 billion a month for Iraq alone, up from $US4.4 billion in 2003, and with Afghanistan the total is $US16 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 $US500 billion we already spend per year on the regular expenses of the Defence Department. Nor does it include other hidden expenditures, such as intelligence gathering, or funds mixed in with the budgets of other departments.

‘Priceless’ lives

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 $US500,000 – the amount paid out to survivors in death benefits and life insurance. After the war began, these were increased from $US12,240 to $US100,000 (death benefit) and from $US250,000 to $US400,000 (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 $US7 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 $US28 billion.

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 $US3 trillion. Our calculations are based on conservative assumptions. They are conceptually simple, even if occasionally technically complicated.

A $US3 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.

Extracted from The Three Trillion Dollar War: The True Cost of the Iraq conflict by Joseph Stiglitz and Linda Bilmes. 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.