The Economic Costs of the Iraq War: Presented in Detail

[Clara T]

THE ECONOMIC COSTS OF THE IRAQ WAR:

AN APPRAISAL THREE YEARS AFTER THE BEGINNING OF THE CONFLICT<1>

Linda Bilmes
Kennedy School, Harvard University
And
Joseph E. Stiglitz
University Professor, Columbia University

Three years ago, as America was preparing to go to war in Iraq, there were few discussions of the likely costs.  When Larry Lindsey, President Bush’s economic adviser, suggested that they might reach $200 billion, there was a quick response from the White House:  that number was a gross overestimation.<2>   Deputy Defense Secretary Paul Wolfowitz claimed that Iraq could “really finance its own reconstruction,” apparently both underestimating what was required and the debt burden facing the country.  Lindsey went on to say that “The successful prosecution of the war would be good for the economy.”<3>
Many aspects of the Iraq venture have turned out differently from what was purported before the war:  there were no weapons of mass destruction, no clear link between Al Qaeda and Iraq, no imminent danger that would warrant a pre-emptive war.  Whether Americans were greeted as liberators or not, there is evidence that they are now viewed as occupiers.  Stability has not been established.  Clearly, the benefits of the War have been markedly different from those claimed. 

So too for the costs.  It now appears that Lindsey was indeed  wrong—by grossly underestimating the costs.  Congress has already appropriated approximately $357 billion for military operations, reconstruction, embassy costs, enhanced security at US bases and foreign aid programs in Iraq and Afghanistan.  This total, which covers costs through the end of November 2005, includes $251bn for military operations in Iraq, $82bn for Afghanistan and $24bn for related foreign operations, such as reconstruction, embassy safety and base security. <4>  These costs have been rising throughout the war. Since FY 2003, the monthly average cost of operations has risen from $4.4bn to $7.1 bn – the costs of operations in Iraq have grown by nearly 20% since last year (whereas Afghanistan was 8% lower than last year).<5>   The Congressional Budget Office has now estimated that in their central, mid-range scenario, the Iraq war will cost over $266 billion more in the next decade, putting the direct costs of the war in the range of $500 billion<6>. 

These estimates, however, underestimate the War’s true costs to America by a wide margin.  In this paper, we attempt to provide a range of estimates for what those costs have been, and are likely to be.  Even taking a conservative approach, we have been surprised at how large they are.  We can state, with some degree of confidence, that they exceed a trillion dollars. 

<snip>

 It is of interest that our “moderate” estimate is not dissimilar to Nordhaus’ “high (protracted and unfavorable) case, $1.9 trillion.  His estimate of direct military spending, occupation, and reconstruction was $745.  However, he did not include a number of the long run costs (such as health costs and disability benefits and increased recruiting costs), nor the adjustments between economic and budgetary costs noted in section III.  His estimate of the direct impact on oil markets (the transfer effect) was $778 billion, which we believe to be more accurate than estimate of $300 million (in the moderate case), which was deliberately chosen to be conservative.  He uses a “macro-economic oil” multiplier that is similar to ours, but because he (realistically) assumes a large oil price effect, he obtains a larger macro-economic effect.  He does not include any “growth investment/displacement” or “expenditure switching” effects in his analysis.  Nordhaus’ historical analysis puts some perspective on the magnitude of the expenditures:  the projected direct expenditures in Table 1 are comparable to those of the Vietnam War ($494 billion), somewhat greater than the Korean war ($336 billion) and more than twice as large as World War I ($190 billion). 

http://www.informationclearinghouse.info/article11495.htm

It's rather nauseating to put this atrocity into dry quantitative data, as the authors mention, but here is a detailed account of how the "War" is costing far more than what we are being told which is in and of itself grotesque.

43 Pages in total including valuable footnotes.

Spread the word. Stop the War.

[phiddle]

1. Send this to every media outlet, Senator and Representative

[Clara T]

2. Total economic costs $1 and $2 trillion...

"The most important things in life—like life itself—are priceless.  But that doesn’t mean that topics like defense, involving the preservation of our way of life and the protection of life itself, should not be subject to cool, hard analysis of the kind for which economics has long earned a reputation." 

We therefore estimate that the total economic costs of the war, including direct costs and macroeconomic costs, lie between $1 and $2 trillion...

http://www.informationclearinghouse.info/article11495.htm

[Herman47]

3. Opportunity Costs

In looking over the paper, the authors evidently (and reasonably I might add) believe that it outside the proper scope of their inquiry to consider opportunity costs. Imagine if all that money had been spent on such things as malaria and schistomaisis eradication, land mine removal, hurricane and tsunami preparation, building schools in the developing countries and training people there, etc.

[Clara T]

4. kick for info