Counting the cost of the Iraq war

May 9, 2008

The Three Trillion Dollar War: The True Cost of the Iraq Conflict

By Joseph Stiglitz & Linda Bilmes

Allen Lane, 2008

311 pages, $32.95 (pb)

It was to be a quick, and cheap, war but the US-led invasion of Iraq has been neither.

Then US Secretary of Defence, Donald Rumsfeld, who had put the total cost at just US$50-60 billion, has been off by some three to five trillion dollars on the cost, according to Stiglitz and Bilmes in The Three Trillion Dollar War: The True Cost of the Iraq Conflict.

Although the funding appropriated by Congress to meet the direct costs for military operations to date is now well on its way to a trillion dollars already (Iraq $643 billion and Afghanistan $202 billion), this still represents only a portion of the total cost.

This budgetary funding does not include military costs hidden elsewhere in the US Department of Defence budget, the costs to other branches of the federal government or to state and local governments. It does not include future liabilities incurred from the wars such as health care and disability compensation for veterans, the cost of restoring the US military to its pre-war strength, or interest on the money borrowed to pay for the wars.

The authors estimate, for example, that total life-time medical care, disability compensation and social security costs for Iraq/Afghanistan veterans will be $717 billion. Most expensive amongst the war-caused, disabling conditions are brain injuries, spinal cord injuries, amputations and mental health conditions including Post-Traumatic Stress Disorder. Compared to previous wars, many more casualties are surviving for a lifetime of costly physical and mental ill-health.

By the end of 2007, a total of 65,000 troops had been injured with 45,000 of these directly attributable to the two wars, including non-combat injuries (for example, vehicle accidents occurring at night-time because it is too unsafe to travel during the day).

A dead soldier is relatively inexpensive to the government: $100,000 paid out in death benefits and $400,000 in life insurance. The 4000 dead troops in Iraq and 300 in Afghanistan have therefore cost the government a mere $2.2 billion in death compensation.

To these combat deaths should be added non-combat deaths attributable to the war and the 1000 dead private contractors (translators, truck-drivers, security guards, labourers, engineers and other privatised combat support).

Other government moneys added to the budgetary pot by the authors include $18 billion in government reconstruction funding for civilian infrastructure (much of it siphoned off into military spending, "disappeared" into corrupt pockets or bloating the bottom line of the politically favoured private contractors like Halliburton).

A major component of government costs are interest payments which will amount to $800 billion in today's dollars. The US government has borrowed most of the money to fund the two wars and this debt will have to be repaid, with interest. The authors estimate that total federal budgetary costs from 2001 to 2017 will be $2 trillion for the Iraq war and $2.7 trillion for both wars.

To these budgetary costs the authors add social costs not borne by the government. These include the loss to the economy from reduced output and labour supply (soldiers — dead, injured and mobilised — have to be drawn from productive labour).

Using the government's own estimate of $7.2 million for the economic life-value of a person at the peak of their earnings capacity, the authors estimate that the 4300 dead US soldiers have therefore cost the US economy $30 billion and the 1001 dead contractors bring the total up to $50 billion.

Social costs also include the cost ($50 billion) of income reduction or job loss to carers of injured veterans (20% of families with injured veterans report that a family member has been forced to leave their job to become a carer).

The third suite of costs after budgetary and social costs are macro-economic costs such as higher oil costs caused by the war. The authors conservatively estimate that of the total oil price rise from $25 to $100 per barrel since the war, $5-10 has been due to disruption of supply caused by the Iraq war. Using standard econometric modelling, the economy-wide knock-on effects of war-caused higher oil prices, resulting inflation and rising interest rates, and lower investment and consumer spending, is estimated to cost $1.9 trillion.

The total economic cost from 2001 to 2017 will therefore be $5 trillion in today's dollars (budgetary $2.7 trillion, social $0.4 trillion, macro-economic $1.9 trillion). This is the authors "moderate-realistic scenario", a scenario that includes a continuing military presence (based on the presence of huge, city-like US bases) and Iraqi resistance (based on Iraqi popular opinion).

The authors also have a "best case" scenario (assuming, for example, a less banged-up military with fewer casualties, and troop withdrawal by 2012) that still comes out at a hardly bargain-basement total cost of $2 trillion. "Withdrawal" here means retaining a non-combat force of 55,000 (based on the historical precedents of the US keeping 80,000 troops in Korea and 20,000 in Kuwait after the end of hostilities there) — hardly "best case" for Iraqis but as "best case" as it gets for the US global superpower.

Iraqis also fare most poorly when the cost of the war to the rest of the world is considered. The almost 8,000 dead and 15,000 injured Iraqi soldiers, and up to a million civilians dead and a million injured, rack up $8.6 trillion in social costs. The 4.6 million displaced Iraqis are another cost to Iraq, and to refugee host countries.

Non-US invaders have suffered 306 dead at a cost of $2.2 billion and 675 injured for an additional 40%. Tony Blair's war lust has cost the British budget £18 billion. War-related oil price rises have cost the economies of Europe, Japan, South Korea and other developed countries $1.1 trillion. Total costs to the rest of world could be around double the cost to the US.

Ultimately, US (and global) citizens wind up paying the cost of the wars — the "opportunity costs" of the trillions wasted on war will be felt in higher taxes, and cutbacks in socially useful spending and investment such as health, education and the environment.

The only winners, say the authors, are the oil industry and "defence" contractors like Halliburton, General Dynamics, Raytheon and Lockheed Martin whose share prices have doubled or tripled since the Iraq war began.

The authors' cost estimates of the wars are robust, using orthodox methodologies and "excessively cautious" assumptions (to avoid charges of anti-war bias) but what they do with their results, however, is less convincing.

Both authors have been appointees to the former Clinton administration and, while their opposition to the Iraq war is a refreshing counter to the "relentless media and government fanfare, the nationalist flag-waving [and] the reckless bravado" of the Bush administration, the authors represent a "rational", not a principled, approach to US wars, with extensive "wiggle-room", in which cost is "one factor" to be considered.

They argue, for example, that one of the "opportunity costs" of the "mad" and expensive decision to invade Iraq was a diversion from the sensible Afghanistan war that could have been won by now, they believe, if the advice of former Secretary of State, Colin Powell, had been heeded to apply overwhelming force at the start of the Afghanistan invasion. North Korea and Iran are also "opportunity costs", in their bellicose view.

The authors' technocratic approach to war-making (improving the information flow, strategy reviews, access to data, realistic budgeting, etc) leaves open the likelihood that "humanitarian" interventions or wars against officially designated enemies can proceed, provided both the motive is "pure" (they believe that the US mission in Iraq is to "create a democracy"!) and the cost is right.

Missing from the authors' analytical framework is the centrality to US war-making of imperialism, corporate profits and access to cheap oil. The book's war costings will be useful to the anti-war movement but a principled, anti-imperialist political framework would go beyond the dollar figures and see the Iraq and Afghanistan wars as both obscenely wrong and costly, not wrong just because of their obscene cost.

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