Total Cost of the Iraq War

An old saying in economics: there is no "free lunch". Last week it was Joseph Stiglitz point, speaking at Seattle U about his new book Three Trillion Dollar War, that there is no such thing as a "free war".

I thought Stiglitz, whose Nobel Prize work is related to information asymmetry and market failure, would be out of his league when discussing the accounting costs of the Iraq War. But as he described it - it's not very difficult to add up these costs, it just takes a bit of investigation.

Bad accounting procedures, attempts to deceive US citizens about the costs of the war, hidden costs in terms of health and opportunity costs, diminish the official costs of the Iraq War. The number, $3 trillion, is an enormous number. But it is still the conservative accounting estimate; Stiglitz claims the range of costs is somewhere between $3 and $5 trillion.

In 2003, Chief Economic Adviser Lawrence Lindsey said the Iraq War might cost, $100 to $200 billion dollars. He rewarded by being fired. Secretary of Defense D. Rumsfeld said the War would cost $50 billion. This is the amount we actually spend every 3 to 4 months in the "official" Iraq War budget. But the up-front budgetary costs are much smaller than the hidden costs.

For example, war contractors must have disability insurance and death benefits by law. But the insurance premiums are not surprisingly so high that the Department of Labor pays for it out of taxes. It is not counted in the Iraq budget. And while taxes pay for the insurance premiums, a lot of the money has gone to AIG, the company which has recently gained notoriety from the financial crisis. Stiglitz says the company was essentially stealing tax-payer money to pay for disabilities and death benefits, but it included a cynical little clause stating that AIG would not pay for disabilities or deaths arising from "hostile action". So taxpayers pay these insurance premiums, in fact, twice.

Cost like this that increase the real cost and decrease the budgetary cost are abundant. At this point, the occupations of Iraq and Afghanistan are two of the four longest notorious hot wars in US history.

• Vietnam War .................. 8 years, 5 months
• Afghanistan ..................... 7 years, 1 month
• Revolutionary War ............ 6 years, 9 months
• Iraq .............................. 5 years, 8 months
• First Barbary War..............5 years
  
• Civil War ....................... 4 years
• Philippine Insurrection........4 years
  
• WWII ............................ 3 years, 8 months
• Korean Hot War............... 3 years, 1 month
• Kosovo...........................3 years
• Somali Civil War...............3 years
  
• War of 1812 ................... 2 years, 6 months
• Bosnia............................2 years
  
• U.S.-Mexico War .............. 1 year, 10 months
• WWI ........................... 1 year, 7 months
• Invasion of Grenada..........1 year
• Second Barbary War..........1 year
  
• Spanish American War....... 8 months
• Persian Gulf War ............ 1.5 months

The Gulf War was only a 1.5 month hot war, costing $200 billion in disability and health benefits. Of the 1.1 million US soldiers in the first Gulf War, 300,000 were granted disability compensation, many of which is long-term. By comparison, one-third of soldiers coming back from Iraq have been diagnosed with deep depression, PTSD, and traumatic brain injuries. Many will not be able to work full-time and will have other problems associated with mental health and their quality of living. A disproportionate number of homeless in the US are Vietnam Veterans; we are creating the new generation of homeless and disabled by, even with the exorbitant military spending levels, lack of adequate VA funding.

The DOD website says the number of wounded American soldiers in Iraq is 30,000. This number only counts those wounded in hostile actions. But non-combat wounds Stiglitz discovered through a FOIA request was more than double the official number. That is over 60,000 soldiers that are not included to make the war appear less volatile to the US public.

The costs I outlined here are actually more overt than others Stiglitz covers: there are hidden costs from borrowing foreign money to finance the war, deficit-spending (an all time high), the opportunity costs from occupying Iraq versus managing crises in the U.S., like Hurricane Katrina or the Iowan tornadoes; increases in oil prices and the effect on futures markets; the lost investment in young people who are dead or disabled from the war who would have lived productive lives otherwise; the cost of Iraq versus funding research in medicine and mental health, and so on.