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Bush War Turns Out To Be Quite Expensive. Now 3/5 of WW II.
« on: 2008-02-25 07:34:57 » |
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The three trillion dollar war
The cost of the Iraq and Afghanistan conflicts have grown to staggering proportions
Source: The Times
Authors: Joseph Stiglitz, Linda Bilmes
Dated: 2008-02-23
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. Extracted from The Three Trillion Dollar War, to be published by Allen Lane on February 28 (£20). Copies can be ordered for £18 with free delivery from The Times BooksFirst 0870 1608080.
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 (that's $5 million million, or £2.5 million million). 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 Deficit spending gives the illusion that the laws of economics can be repealed, that we can have both guns and butter. But of course the laws are not repealed.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 Defence 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 programmes 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 Defence 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 Defence 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 per cent of it in Iraq). This includes money from a supplemental “special reserve”, plus additional spending from the Ministry of Defence.
The special reserve comes on top of the UK's regular defence budget. The British system is particularly opaque: funds from the special reserve are “drawn down” by the Ministry of Defence 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 Defence Committee has recently found that despite the cut in troop levels, Iraq war costs will increase by 2 per cent this year and personnel costs will decrease by only 5 per cent. Meanwhile, the cost of military operations in Afghanistan is due to rise by 39 per cent. The estimates in our model may be significantly too low if these patterns continue.
Based on assumptions set out in our book, the budgetary cost to the UK of the wars in Iraq and Afghanistan through 2010 will total more than £18 billion. If we include the social costs, the total impact on the UK will exceed £20 billion.
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With or without religion, you would have good people doing good things and evil people doing evil things. But for good people to do evil things, that takes religion. - Steven Weinberg, 1999
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Blunderov
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Re:Bush War Turns Out To Be Quite Expensive. Now 3/5 of WW II.
« Reply #1 on: 2008-02-25 09:41:16 » |
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[Blunderov] According to Bush, the Iraq war has stimulated the economy. He may even be partially right; the injection of extra money into the economy by means of borrowing and printing may well have made the books look good for a while. But the debt remains to be repaid; the extra money supply has further diluted the value of the dollar and now employment is faltering and the GDP is falling. The chickens are roosting and Bush will get out leaving the mess for someone else to clean up - a management technique that has served him well down the years.
http://www.presstv.ir/detail.aspx?id=43741§ionid=3510203
Bush: War nothing to do with economy
Tue, 19 Feb 2008 05:26:31
George W. Bush
US President George W. Bush has denied that there is any link between faltering US economy and huge money being spent on the Iraq war.
"I think actually the spending in the war might help with jobs…because we're buying equipment, and people are working,” Bush said in strange remarks about US economy.
“I think this economy is down because we built too many houses and the economy's adjusting," Bush said in an interview with NBC's Today Show.
National unemployment in the United States is increasingly going up five years after the US invasion of Iraq.
[Bl.] The Bush analysis has the advantage of simplicity - to the point of being simple minded some might say. He glosses over the fact that the credit crunch has infected all quarters of the global economy and that the the American consumer, upon whom the American economy deeply depends, is now totally busted.
http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article3422319.ece?openComment=true
One Iraq war –that’s $3 trillion to you, Mr Bush
The Nobel laureate economist Joe Stiglitz says the US has grossly understated the cost of the conflictDavid Smith
What a difference a few months make. Iraq was going to be Gordon Brown’s big prime ministerial headache but since the withdrawal of British troops from Basra it has slipped well down the political agenda. Brown took the poisoned chalice left by Tony Blair and quickly poured it down the drain. He has a sea of troubles, but Iraq, for now at least, is not high on the list of them.
In America, Iraq was going to dominate the presidential campaign, pundits predicted. If Barack Obama’s team have their way, it still will. They have been trying to generate some heat by reminding the electorate that John McCain and Hillary Clinton supported the war at first, unlike Obama, and have even been calling it the “Bush/McCain war”.
But, partly because of the success of the US troop surge in reducing casualty numbers in Iraq, and in particular the bodybag count for American forces, the issue is not as salient as it was. Polling in America shows that voters think the troop surge is working. They think the war was a mistake and are highly critical of George W Bush’s handling of it, but Bush is on his way out and Americans have something else to think about: the state of their economy. With main-stream forecasters talking about an election-year recession, even a foreign policy issue as explosive as Iraq has slipped into the background.
If Joe Stiglitz has anything to do with it, however, it will not remain there. He is the Nobel prizewinning economist who, unlike most who get to those dizzy intellectual heights, has refused to remain in an ivory tower.
Eight years ago he quit his position as chief economist at the World Bank, having launched an outspoken attack on its sister organisation, the International Monetary Fund. He said the fund was made up of “third-rate economists from first-rate universities”, peddling snake-oil remedies to poor countries desperate for economic development.
He wrote a book, Globalisation and Its Discontents, which made him a poster boy for the antiglobalisation movement. Another, Making Globalisation Work, tackled the question of how to make the world’s poor benefit from free trade. Having been an economic adviser to Bill Clinton in a decade he calls the Roaring Nineties, he has been keen to contrast the success of that era – in which a Democrat president slashed the budget deficit – with the troubles of the Bush era.
Stiglitz’s big passion now, however, is Iraq. In his new book, The Three Trillion Dollar War, written with Linda Bilmes (and published in Britain by Allen Lane), he argues that not only has the cost of the conflict been much greater than anybody close to the White House has admitted, but that the war is closely tied in to America’s present economic woes.
Three trillion dollars – or about £1.5 trillion – is a lot of money, particularly when contrasted with the White House’s initial estimates of $50-$60 billion. It dwarfs even official estimates of the cost of the war so far as about $645 billion.
Yet the book’s title, if you believe the figures, undersells it. Three trillion dollars is just the cost to America. The cost to the rest of the world, he suggests, is roughly the same again. Six trillion dollars, to put it in perspective, is nearly half America’s annual gross domestic product. Are these numbers plausible and why do they differ so much from the official figures?
It comes down, in the end, to what you choose to measure. The White House, which has an interest in playing down the financial impact, has focused on direct budgetary costs to America. Even these can be played in a number of ways. If you are maintaining a large regular army anyway, what is the additional cost of deploying it in the theatre of war?
Stiglitz and his co-author, in contrast, have looked at the wider costs of the war, not just the direct military costs but the social costs, the economic costs, even the effect on the world of higher oil prices, part of which he attributes to the war. Pretty well everything has gone in, including the kitchen sink, though he still claims that his numbers are almost certainly underestimates.
There is even a figure for Britain: more than £20 billion for direct military and social costs, not including some of the wider economic consequences. That, however, no longer looks such a big number when set against the £100 billion of Northern Rock debt the government has just taken onto its books.
When you talk to Stiglitz, it is hard to resist his enthusiasm, if not his precise figures. He has a way of putting things straightforwardly. Should US troops remain in Iraq, if only for another two years? His come-back is in the numbers. “Two years would cost us over half a trillion dollars,” he says. “Is that the best way to spend over half a trillion dollars?”
But do the big numbers really help the debate? Take the assumption that between $5 and $10 of the current near-$100 a barrel price of oil is due to the Iraq war. It may or may not be true: we are dealing here with what Donald Rumsfeld might have called “unknown unknowns”.
Even if it is true, costing it is by no means easy. The loss to oil consumers from paying more for crude is offset by the gain to oil producers. If things had followed the patterns of the past, when the global economy was brought to its knees by high oil prices, pointing the finger at Iraq would have been a powerful rhetorical device.
This time, however, high world oil prices appear to have been a reflection of the global economy’s strength, and the rise of China, rather than the fault of America’s Iraq blunders.
The fact that the $3 trillion figure has the imprimatur of a Nobel economist will give it weight, however. If that means Americans recognise what Stiglitz describes as the “terrible mistake” of the war and insist their government does not go down that road again he will say it has served its purpose.
It is hard to deny his compassion. Having dedicated the book to those who have died in both Iraq and Afghanistan but also the returning veterans, he gives an 18-point reform plan, a blueprint, ranging from giving Congress greater power to veto wars on financial grounds, to wide-ranging improvements in how America looks after its veterans.
One idea is that taxes should be raised explicitly to pay for wars, making voters immediately aware of the costs; another is that veterans should be given the automatic right to health-care. Britain’s treatment of its Iraq veterans has been much criticised. Compared with the conditions in America, where stressed and injured soldiers often have to fight for entitlement, it stands up pretty well.
Stiglitz, despite having worked for Bill Clinton, thinks Obama has the right answers on Iraq. Who knows, if Obama triumphs in November, he could find himself back in the White House, trying to put his blueprint into practice. That will be no easy task.
[Bl.] Some people just don't get it. This from the comments to the above:
"Yes, but what would be the cost of not fighting this war now? Other 9/11's perhaps with nuclear material destroying cities and killing millions of us 'non believers'? This followed by the collapse of our economies or an even more costly war later?George, London."
[Bl.] One more time. Iraq had nothing to do with 9/11. Amazing how pernicious this meme has proved itslf to be. We have nothing to fear except fear itself as someone once said.
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Fritz
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Re:Bush War Turns Out To Be Quite Expensive. Now 3/5 of WW II.
« Reply #2 on: 2008-02-25 18:03:12 » |
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Had some down time this weekend, was watching the Learning and Discovery channels and was really disturbed at how;
[Blunderov]<snip>pernicious this meme has proved itself to be<snip>.
3 different science programs; one on aircraft development, one on medicine and one on the internet, stated as fact, that the threat realized from 9/11 had to be dealt with by democratizing Iraq and defeating terrorism. This is all the more insidious as these are touted as educational programming that are also used by schools .... sigh... du ya tink wees kood get da COV-BBS on high school curriculum in North America instead of the Lord's Prayer. 
Thanks for the posts !
Fritz
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Where there is the necessary technical skill to move mountains, there is no need for the faith that moves mountains -anon-
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Blunderov
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Re:Bush War Turns Out To Be Quite Expensive. Now 3/5 of WW II.
« Reply #3 on: 2008-02-28 00:39:05 » |
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[Blunderov] Bush's grasp of economics, and indeed reality, is sketchy at best. Stiglitz gives the lie to The Boy General's contention that the Iraq war has boosted the economy. (Bush was born without any capacity for conscience at all apparently: he might just as well have boasted of raping someone and then stealing her purse as well.)
(I'm sure we all look forward to "the minutes of two cabinet meetings in the days before the war" which have been demanded by the Information Commissioner in the UK. Blair will pay for his crimes. One day. Maybe sooner than he thinks.)
Vector : thinkprogress.org
www.theaustralian
Peter Wilson, Europe correspondent | February 28, 2008
THE Iraq war has cost the US 50-60 times more than the Bush administration predicted and was a central cause of the sub-prime banking crisis threatening the world economy, according to Nobel Prize-winning economist Joseph Stiglitz.
The former World Bank vice-president yesterday said the war had, so far, cost the US something like $US3trillion ($3.3 trillion) compared with the $US50-$US60-billion predicted in 2003.
Australia also faced a real bill much greater than the $2.2billion in military spending reported last week by Australian Defence Force chief Angus Houston, Professor Stiglitz said, pointing to higher oil prices and other indirect costs of the wars.
Professor Stiglitz told the Chatham House think tank in London that the Bush White House was currently estimating the cost of the war at about $US500 billion, but that figure massively understated things such as the medical and welfare costs of US military servicemen.
The war was now the second-most expensive in US history after World War II and the second-longest after Vietnam, he said.
The spending on Iraq was a hidden cause of the current credit crunch because the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit.
"The regulators were looking the other way and money was being lent to anybody this side of a life-support system," he said.
That led to a housing bubble and a consumption boom, and the fallout was plunging the US economy into recession and saddling the next US president with the biggest budget deficit in history, he said.
Professor Stiglitz, an academic at the Columbia Business School and a former economic adviser to president Bill Clinton, said a further $US500 billion was going to be spent on the fighting in the next two years and that could have been used more effectively to improve the security and quality of life of Americans and the rest of the world.
The money being spent on the war each week would be enough to wipe out illiteracy around the world, he said.
Just a few days' funding would be enough to provide health insurance for US children who were not covered, he said.
The public had been encouraged by the White House to ignore the costs of the war because of the belief that the war would somehow pay for itself or be paid for by Iraqi oil or US allies.
"When the Bush administration went to war in Iraq it obviously didn't focus very much on the cost. Larry Lindsey, the chief economic adviser, said the cost was going to be between $US100billion and $US200 billion - and for that slight moment of quasi-honesty he was fired.
"(Then defence secretary Donald) Rumsfeld responded and said 'baloney', and the number the administration came up with was $US50 to $US60 billion. We have calculated that the cost was more like $US3 trillion.
"Three trillion is a very conservative number, the true costs are likely to be much larger than that."
Five years after the war, the US was still spending about $US50billion every three months on direct military costs, he said.
Professor Stiglitz and another Clinton administration economist, Linda Bilmes, have produced a book, The Three Trillion Dollar War, pulling together their research on the true cost of the war, which does not include the cost to Iraq.
One of the greatest discrepancies is that the official figures do not include the long-term healthcare and social benefits for injured servicemen, who are surviving previously fatal attacks because of improved body armour.
"The ratio of injuries to fatalities in a normal war is 2:1. In this war they admitted to 7:1 but a true number is (something) like 15:1."
Some 100,000 servicemen have been diagnosed with serious psychological problems and the soldiers doing the most tours of duty have not yet returned.
Professor Stiglitz attributed to the Iraq war $US5-$US10 of the almost $US80-a-barrel increase in oil prices since the start of the war, adding that it would have been reasonable to attribute more than $US35 of that rise to the war.
He said the British bill for its role in the war was about 20 times the pound stg. 1billion ($2.1 billion) that former prime minister Tony Blair estimated before the war.
The British Government was yesterday ordered to release details of its planning for the war, when the country's Information Commissioner backed a Freedom of Information request for the minutes of two cabinet meetings in the days before the war.
Commissioner Richard Thomas said that because of the importance of the decision to go to war, the public interest in disclosing the minutes outweighed the public interest in withholding the information.
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