This week Truthdig salutes Joseph Stiglitz and Linda Bilmes for uncovering the true cost of the war in Iraq. Last year Nobel Prize-winning economist Stiglitz and Harvard budget expert Bilmes estimated the total price tag for Bush’s misadventure in Mesopotamia at $2.267 trillion—a tad higher than the $350 billion to $500 billion so often discussed.
According to Stiglitz, our current thinking on the cost of the war leaves out hidden Pentagon spending, long-term budget obligations—like disability pay for the wounded, the heightened cost of oil and losses sustained by not investing the same money back into our own economy.
Rolling Stone:
What’s wrong with dropping a lot of money on the Iraq war? Didn’t World War II pull America out of the Great Depression?
War is a lousy form of economic stimulus. The bang you get for the buck is very low. If we hadn’t had to fight during the Depression, we would have become a much richer country by investing the money we spent on the war. Think of the Nepalese contractors doing work in Iraq. They spend their money in Iraq or Nepal—not in America.
Because the war drove up oil prices, we are also giving more money to Saudi Arabia, Iran and Venezuela. It follows that we are not investing that money. And instead of spending the money we have left on things that will make us wealthier, we are spending it in ways that have just the opposite effect. I don’t want to reduce this to cold, hard economics, but when you educate young people for 12 to 18 years, you’re investing a lot of money in them. If you then have them killed, maimed and debilitated, you destroy capital.
How did you arrive at the $2-trillion figure?
There were three parts to the calculations that I made with Linda Bilmes, a professor of public finance at Harvard. The first part is based on actual expenditures—the impact on the federal budget. But the budget doesn’t include a lot of expenditures we will be making in the future as a result of the war today, like paying for the health care and disability benefits of all the people who have been injured. These are lifetime expenditures, but they aren’t included in the $600 million a year the Defense Department expects to spend on Iraq. They’re just talking about the hardware of war.
The second part of our calculations estimates future expenditures to replace what we lose in the war. The budget includes spending for new ammunition, but not the wear and tear on weapons systems. Eventually the weapons must be replaced, but the administration doesn’t count that as part of the projected cost of the war.
A third important category is a little more hidden. The defense budget has gone way up, beyond the money earmarked for Iraq. You have to ask why. It’s not like the Cold War has broken out again. We infer that they are hiding a lot of the Iraq expenditures in the defense budget. We only attribute a small fraction of the increase to Iraq, but it would be hard to explain them any other way than the war.
You also examine the cost beyond the impact on the federal budget.
Yes. We look at where the budget underestimates the social cost of the war. Take disability pay. If you’re wounded, the government pays you only 20 percent of what you would have earned if you could work. The disability payment is a budget cost, but the economy misses the salary you would have been making now that you’re not able to do anything.
At least they saved taxpayers money on body armor.
Not really. Rumsfeld made the defense budget a little lower in the short term by not providing the troops with adequate body armor. But the government now has to pay for the care of vets with disabling brain and spine injuries—and society loses what their contribution would have been had they been gainfully employed. It’s a good illustration of how looking at the short-run number leads you to think the war isn’t costing all that much. It’s costing the government more, our society more and our veterans enormously more.
Another example of Rumsfeld’s budgeting is the huge bonuses we’re paying to get soldiers to re-enlist. He wanted to lessen the impact of the war on the military, so he used private contractors, who are more expensive. What he didn’t realize was that he was setting up a competition that has driven up the price of a soldier. If someone who has served his enlistment has a choice of working as a contractor for $100,000 or in the military for $25,000, what’s he going to do? Wages and bonuses had to go up. Maybe that’s a good thing—the regular military was being cheated, in a way. But it’s another cost of the war that isn’t figured into the budget.
Read the full interview
Bush the Infallible
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Jump to Comments
By jon eden, December 28, 2006 at 6:29 pm #
(Unregistered commenter)
I think we can save a lot of money by out sourcing the returning veteran’s health care to the streets.
We already know something about this because we did it with the returning Viet Nam Veterans. Unfortunately, these people wound up in our hospitals costing us fortunes and thus defeating our most callous efforts to save money.
On the positive side of the ledger though these vets have a considerably shortened life span sparing both themselves our downtown merchants a lot of grief.
Jon
http://StudentsForTheEarth.org
Report thisBy Fadel Abdallah, December 25, 2006 at 5:58 pm #
(Unregistered commenter)
When we were spewed so many lies and misinformation, for a long period of time, about the motivation for the war in Iraq, do you think those serial liars and evil warmongers are going to care about calculating the real long-term cost of the war?!
You expect learned professors, such as Joseph Stiglitz and Lind Bilms to give us a real picture of the cost of war, but to expect that from the serial liar and drunk-behind-the-wheel- George Bush- is really asking for too much.
I agree with Polly Ester that “at this juncture it does not make a difference if it cost trillions as opposed to billions;” for you will never be able to put a monetary price-tage on the thousands of lives, both Americans and Iraqis, cheaply wasted at the altar of evil Bush, for a fantasy called bringing democracy to Iraq or war on terror.
The real perplexing question is: “How come a nation, always braging about democracy and human rights, continue to foot the bill for such levels of atrocities and reckless policies without a real revolt- even a bloody one if necessary?!”
Report thisBy SPINOZA, December 25, 2006 at 4:25 pm #
(Unregistered commenter)
THIS IS A CRUSIAL FACTOR IN OUR ECONOMY
http://zmagsite.zmag.org/Dec2006/rasmuspr1206.html
Report thisBy Larry, December 24, 2006 at 6:30 pm #
(Unregistered commenter)
Comment #43538 by darby1936 on 12/23 at 4:10 pm
“This country has operated on an almost war time economy since World War II. What is utterly wasteful is the exotic weapon systems we continue to develop even though we are the sole super power and these systems are not needed for the type of warfare we are currently waging. Why in the world do we need ever new submarines or air power to secure Bagdad or Anbar Province. We are spending $8 billion a month and al Queda is self sustaining on kidnapping, money from terrorist groups,and indirectly from Arab govts. We, of course, fund theShiite death squads. Of course the exotic weapons mentioned above would only be used should we go to war with a country such as China. They would never go to war with us though because we are the goose that laid the golden egg. In fact China is helping us by loaning us the money to fight this war and fund our balance of payments deficit. Hell, China should print a new denomination of money and print Bushs picture on it.”
I think it is just Marvelous that we have someone named Darby on this thread who happens to be a military weapons expert. We are so fortunate. Now maybe he will even give us some of his weapons background and military service dates. Wow, I feel so much better knowing that Darby is here. What a guy! We are so lucky!
Report thisBy Jon B, December 24, 2006 at 4:01 pm #
(Unregistered commenter)
#43538 darby writes “In fact China is helping us by loaning us the money to fight this war and fund our balance of payments deficit...”
The war expenditure amounts to $2.27 Trillions while China holds about $300 Billion debt instruments issued by the US. This translates to 13% of the total war expenditure as this writing.
One can’t fight a war with 13% of funding.
Second, US can stop china’s trade surplus overnight, literally. All it takes is to impose stiff tariff and that would be the end of it with china but not rest of the world. In fact, all of the industrialized nations registered trade surpluses against US and there isn’t a thing US can do about it. For instance, foreign auto makers continue their inroad to the US markets at the expense of Detroit. Do you know how US tv and some electronics met their demise?
Report thisIf US can’t compete with other industrialized nations, then scapegoating china aint gonna iron out the real problems.
By Jon B, December 24, 2006 at 3:31 pm #
(Unregistered commenter)
We have two major parties, dem and rep. Both parties passed the war expenditure but none said a thing concerning the real numbers. It took Joseph Stiglitz and Linda Bilmes to tell the truth and also the truth of no checks and balances anywhere in DC.
Report thisBy Ima Confused, December 24, 2006 at 7:47 am #
(Unregistered commenter)
When the Three strode up to the podium, it all came clearly into focus.
Report thisBush (Carlyle Group), Cheyney (Halliburton), and Rumsfeld (General Dynamics).
It doesn’t get much more in focus than that. Thanks for that crystal clear photo moment illustrating the paradigm of our current administration.
By Polly Ester, December 23, 2006 at 5:28 pm #
(Unregistered commenter)
“Bushs misadventure in Mesopotamia at $2.267 trilliona tad higher than the $350 billion to $500 billion so often discussed.”
Does it really make a difference--we were spewed lies and misinformation about Iraq, and hundreds of thousands of innocent civilians have died--so at this juncture does it make a difference if it costs trillions as opposed to billions--the war crimes and war profiteering is “priceless.”
Report thisBy darby1936, December 23, 2006 at 4:10 pm #
(Unregistered commenter)
This country has operated on an almost war time economy since World War II. What is utterly wasteful is the exotic weapon systems we continue to develop even though we are the sole super power and these systems are not needed for the type of warfare we are currently waging. Why in the world do we need ever new submarines or air power to secure Bagdad or Anbar Province. We are spending $8 billion a month and al Queda is self sustaining on kidnapping, money from terrorist groups,and indirectly from Arab govts. We, of course, fund theShiite death squads. Of course the exotic weapons mentioned above would only be used should we go to war with a country such as China. They would never go to war with us though because we are the goose that laid the golden egg. In fact China is helping us by loaning us the money to fight this war and fund our balance of payments deficit. Hell, China should print a new denomination of money and print Bushs’ picture on it.
Report thisBy Dr. Knowitall, PhD, PhD, December 23, 2006 at 4:03 pm #
(Unregistered commenter)
I don’t think this figure is far-fetched. There is a way to bring this cost more to the awareness of American workers. First, we need to go back to the Dept. of War moniker rather than Homeland Security Dept. of Defense. Call a spade a spade. Then, amortize that $2 trillion, that two thousand billion dollars over some reasonable length of time and make a payment deduction out of every American’s weekly paycheck under the heading of Dept. of War Tax until it’s paid. I just had a quick look at the U.S. budget. There’s nothing that comes within a lightyear to the size of the Department of War budget. Have a look. One more thing, I think that every person in congress who swallowed the rationale to invade Iraq should be required to volunteer 18 months in Iraq to help the rebuild effort. And I don’t mean sitting behind a desk. Bush and Cheney should serve years there in orphanages. Our leaders and legislators will walk away from this tragedy when they leave office; we’ll be left dealing with the fallout. This m.o. has to end.
Report thisBy Stephen Smoliar, December 23, 2006 at 3:57 pm #
(Unregistered commenter)
Joseph Stiglitz definitely deserves this honor; but, personally, I shall always honor him for the gentle skill he applied in revealing all of the fallacies in Tom Friedman’s proclamations about globalization!
Report thisBy Rodney Matthews, December 23, 2006 at 3:03 pm #
(Unregistered commenter)
What Bush is doing is emriching the friends of he and Cheney while looting the treasury of American taxpayers. They don’t care how much the war costs. If the country goes banrupt as this president is leading it to, then they’ll achieve their true and Republicans true objective. The elimination of Social Security, elimination of all social programs,medicad,medicare,welfare, school lunches,federal aid to states for education,roads, public safety, and housing. There intention is to create THE OWNERSHIP SOCIETY, which means if you don’t already own it, you won’t get any help from the federal government getting it. All aid to citizens reverts back to the states. Smaller government or as it will be no government, unless we need money for war. We will live in a society of haves and have nots. It’s happening now look at the disparity of wealth between the rich and poor. It’s only gotten worse under the tax policies of George Bush no child of a millionaire left behind. We will eventually have a economy where we will have slave owners,[the wealthy] and slaves, [the poor and those of us trying to make ends meet]. Call me a fool but this may very well happen in our childrens or grandchildrens lifetime. And history will remember when it all started, the 2000 supreme court selection of George Bush,the treasury and commander in thief.
Report thisBy guillaume, December 23, 2006 at 2:39 pm #
(Unregistered commenter)
Correction: the prize was awarded to Aumann and Shelling last year. Joe received it in 2001, alongside Spence and Ackerloff.
Report thisBy Anthony, December 23, 2006 at 2:24 pm #
(Unregistered commenter)
Wait. Before you think $2 trillion is an impressive figure, add in the loss of what we could have used these resources for to improve things here at home. Call it “Homeland Improvement.”
Job training. College for disadvantaged. Food shelters. Homelessness. Drug addiction. Housing. An infinate list of needs that could have positively impacted & improved the lives of so many with this kind of money. And what a difference to our quality as a nation.
Could be $10 trillion if you factor this loss in.
Report thisBy DennisD, December 23, 2006 at 8:11 am #
(Unregistered commenter)
Sounds like the return to “voodoo economics” for Bu$h II Inc. The price of a gallon of gas just went up again...by how much! Anyone who expected an administration which hasn’t told the truth about anything not to lie about the cost of everything is a danger to themselves. I can’t wait for the first trillion dollar corporate merger next year with the hundred million dollar bonuses for Wall St. to follow.
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