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

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Three trillion dollars for the war in Iraq is an incredible amount, almost beyond comprehension, and certainly far beyond the figures provided by the Bush administration. Yet this total is made both credible and comprehensible through the documentation of Joseph Stiglitz (2001 Nobel Prize-winner in economics, and Professor at Columbia) and Linda Bilmes, Harvard University expert on public policy and finance.

Compelling alternative uses for the money are numerous. For example, we could have put Social Security on sound financial footing for a fraction of that cost, and avoided the nearly 4,000 American deaths (plus $500,000/death benefits) and 100,000 estimated Iraqi deaths - plus an untold number of seriously wounded and their long-term disability and health costs. (Stiglitz found that 40% of Gulf War troops were declared disabled, and that was only a one month war; he sees Pentagon estimates of Gulf War II wounded and disabled as grossly understated, and documents that conclusion. Another key point - peak disability expenditures for WWII veterans did not occur until 1993; thus this war will affect spending decades into the future.) Alternatively, America's trillion dollar+ infrastructure needs could be met with only half that expense.

Other costs include skyrocketing re-enlistment bonuses (up to $150,000 - their alternative is personal safety or much higher-paid private security work), the extra costs of using reserve and guard troops, up to $1,222/day for private security guards to replace servicemen paid less than one-sixth that, lost billions to reconstruct Iraq and spent in non-competitive bidding, and massive equipment replacement costs.

Then there are the opportunity costs associated with spending the money overseas, with no return to the American economy, increased pressure on the dollar, and the likely increased cost of oil. Finally, what about the interest costs of financing this war with debt, and our increased reliance on foreign nations holding that debt?

Supposedly this war is being fought to promote democracy. Yet, as Stiglitz points out, it is being mostly sold and funded through hiding the costs from the public. Continuing our presence in Iraq may, with interest, raise the total to $6-7 trillion. Meanwhile, bin Laden roams free, and even more Islamicists hate us.

"The Three Trillion Dollar War" is MUST reading.

This is one of those very rare endeavors that is a tour d'force on multiple fronts, and easy to read and understand to boot.

It is a down-to-earth, capably documented indictment of the Bush-Cheney Administration's malicious or delusional--take your pick--march to war on false premises.

As a policy "speaking truth to power" book; as an economic treatise, as an academic contribution to the public debate, and as a civic duty, this book is extraordinary.

Highlights that sparked my enthusiasm:

1) Does what no one else has done, properly calculates and projects the core cost of war--and the core neglect of the Bush-Cheney Administration in justifying, excusing, and concealing the true cost of war: it fully examines the costs of caring for returning veterans (which some may recall, return at a rate of 16 to 1 instead of the older 6 to 1 ratio of surviving wounded to dead on the battlefield).

2) Opens with a superb concise overview of the trade-off costs--what the cost of war could have bought in terms of education, infrastructure, housing, waging peace, etcetera. I am particularly taken with the authors' observation that the cost of 10 days of this war, $5 billion, is what we give to the entire continent of Africa in a year of assistance.

3) Fully examines how costs exploded--personnel costs, fuel costs, and costs of replacing equipment. The authors do NOT address two important factors:

+ Military Construction under this Administration has boomed. Every Command and base has received scores of new buildings, a complete face lift, EXCEPT for the WWII-era huts where those on the way to Iraq and Afghanistan are made to suffer for three months before they actually go to war.

+ The Services chose not to sacrifice ANY of their big programs, and this is a major reason why the cost of the war is off the charts--we are paying for BOTH three wars (AF, IQ, GWOT) AND the "business as usual" military acquisition program which is so totally broken that it is virtually impossible to "buy a ship" with any degree of economy or efficiency.

4) The authors excel at illuminating the faulty accounting, the subversion of the budget process, and they offer ten steps to correction that I will not list here, but are alone worth the price of the book. What they do not tell us is:

+ Congress rolled over and played dead, abdicating its Article 1 responsibilities--the Republicans as footsoldiers, the Democrats as doormats.

+ The Office of Management and Budget (OMB) has not done the "M" since the 1970's and is largely worthless today as a "trade-off manager" for the President.

5) I am blown away by the clear manner in which the authors' show the skyrocketing true cost up from a sliver of the "original estimate" out to a previously unimaginable 2.7 trillion (cost to US only, not rest of world). The interest cost in particular is mind-boggling.

6) They note that the costs the government does NOT pay include:

+ Loss of life and work potential for the private sector
+ Cost of seriously injured to society
+ Mental health costs and consequences
+ Quality of life impairment (I weep for the multiple amputees)
+ Family costs
+ Social costs
+ Homefront National Guard shortfalls needed for Katrina etc.

7) The authors go on to discuss the costs to other countries and to the globe, beginning with the refugees and the Iraqi economy. They do NOT mention what all US Army officers know, which is that Saddam Hussein ordered all the nuclear and chemical materials dumped into the river, and the mutations, deaths, and lost agricultural productivity downstream have yet to be calculated.

8) They touch on three delusions that John McCain and others use to demand that we "stay the course" and this also merits purchase of the book. I was in Viet-Nam from 1963-1967, and I well remember exactly the same baloney being put forth then. We ought to apologize to the Iraqi people, and instead of occupying the place, give them the billions they need to restructure after our devastating occupation.

The conclude the book with 18 recommended reforms, each very wise, and these I will list--the amplification provided by the authors in the book is stellar.

1. Wars should not be funded through "emergency" supplementals.
2. War funding should be linked to strategy reviews (and guys like Shinseki should kick morons like Wolfowitz down the steps of Capitol Hill when they contradict real experts and lie to Congress and the public)
3. Executive should create a comprehensive set of military accounts that include all Cabinet agency expenditures linked to any given war.
4. DoD should be required to present clean, auditable financial statements to Congress, for which SecDef and the CFO should be accountable (let us not forget that Rumsfeld was being grilled on the Hill on 10 September about the missing $2.3 trillion, and the missile that hit the Pentagon rather conveniently destroyed the computers containing the needed accounting information)
5. Executive and CBO should provide regular estimates of the micro- and macroeconomic costs of a military engagement (over time).
6. [simplified] Congress must be notified by any information controls that undermine the normal bureaucratic checks and balances on the flow of information.
7. [simplified] Congress should reduce [or forbid] reliance on contractors in wartime, and explicitly not allow their use for "security services, while ensuring all hidden costs (e.g. government insurance) are fully disclosed.
8. Neither the Guard nor the Reserve should be allowed to be used for more than one year unless it can be demonstrated the size of the active force cannot be increased.
9. [simplified] Current taxpayers should pay the cost of any war in their lifetime via a war surtax [rather than imposing debt on future generations]

These next reforms address the care of returning veterans:

10. Shift burden of proof for eligibility from veterans to government
11. Veteran's health care should be an entitlement, not for adjudication
12. Veteran's Benefit Trust Fund should be set up and "locked"
13. Guard and Reserve fighting overseas should be eligible for all applicable active duty entitlements commensurate with their active duty.
14. New office of advocacy should be established to represent veterans
15. Simplify the disability benefits claims process.
16. Restore medical benefits to Priority Group 8 (400,000 left out in the cold)
17. Harmonize the transition from military to veteran status so that it is truly seamless
18. Increase education benefits for veterans.

I put this book down totally impressed. Completely irrespective of one's political persuasion, strategic sagacity, or fiscal views, this book is a tri-fecta--a perfect objective combination of wise policy, sound economics, and moral civic representation.

BRAVO!

I also recommend:
DVD Why We Fight
DVD The Fog of War: Lessons from the Life of Robert S. McNamara
Wilson's Ghost: Reducing the Risk of Conflict, Killing, and Catastrophe in the 21st Century
A More Secure World: Our Shared Responsibility--Report of the Secretary-General's High-level Panel on Threats, Challenges and Change
The Unconquerable World: Power, Nonviolence, and the Will of the People
The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic (The American Empire Project)
The Landscape of History: How Historians Map the Past
Fog Facts: Searching for Truth in the Land of Spin
Web of Deceit: The History of Western Complicity in Iraq, from Churchill to Kennedy to George W. Bush

Afterthought: David Walker, Comptroller General, has resigned from his 15-year appointment after failing to find adult attention within Congress when he briefed them this summer to the effect that the USA is "insolvent." His word. Our government is broken beyond anyone's wildest imagination. [Note: Mr. Walker is now running the Peter G. Peterson Foundation, with the objective of providing to the public the factual budget information that Congress is ignoring, concealing, or manipulating. As Mr. Walker says, the public is now ahead of the politicians in its understanding, and all that remains is to flush all the incumbents down the toilet in 2008.

I generally have a hard time dealing with writing that deals with accounting. I was not a business major, and it is hard for me to follow some of the monetary flows. It was startling to me when I discovered that this book was very easy to follow and was written for the average person. It is well written, with wonderful documentation and an easy to read and follow style.

The numbers presented are mind boggling and numbing. How do you account for such huge numbers, and why haven't we known before that the numbers were this big? The answer lies, primarily, in accounting tricks used by the government to hide certain expenses of to put them off onto other budgets so that the true cost could never be accurately accounted for. It's quite a statement that the DOD flunked its last 7 audits; a trick that would send private company executives to prison.

If you really want to know what the war will cost, where each of those costs is hidden and what those costs consist of, then this book is well worth the money. Every American should read this book now, before the election, to truly understand how we have been hoodwinked.

This book not only describes the cost of the Iraq War long term, but explains how billions of dollars were wasted in Iraq due to the total corruption of the Bush administration, starting with Bush refusing to allow open bidding on the contracts to rebuild Iraq. Those contract then went to his or the Vice President's cronies. In addition the Bush administration makes no mention of the long term costs of the injured soldiers returning from Iraq. Bush has also lied to the American people about the number of injured soldiers and after being caught on the government's own web site, they took the site down.

The Bush administration told taxpayers that the Iraq war would cost about $50 billion dollars and be paid for by that country's oil revenues. Joseph Stiglitz, chairman of President Clinton's Council of Economic Advisers and a 2001 recipient of the Nobel Prize in Economics, and Harvard professor Linda Bilmes, estimate that the real cost of the war is three trillion dollars. And that's almost certainly a "gross underestimate" due to the conservative methods and estimates used in their calculations. Even worse, because of the gross incompetence and deliberate secrecy of the DOD accounting procedures, no one can know the true cost of the war.

If you divide three trillion dollars by the number of households in the United States, you get $25,000 per household. That's your share for the Iraq war. But don't worry. You won't have to pay because because the war has been funded entirely by borrowing money. We'll let others pay our debts. Plus, the economic costs of the war are off the books, above and beyond the DOD's bloated budget. The richest country in the world, the authors observe, hasn't been able or willing to live within its means. But there's a "simple message of this book, one that needs to be repeated over and over again: there is no free lunch, and no free wars. In one way or another, we will pay these bills."

We're already paying heavy "opportunity costs." The human consequences of the war have been as disastrous as the economic costs. After five years, the most powerful country in the world, a country that spends more on its military than all other countries combined, hasn't been able to subdue a country with only 10 percent of its size and 1 percent of its GDP. Iraq's middle class has been ravaged. A majority of its children don't attend school. The country now has only half the number of doctors as before the war. As of September 2007, over 4 million Iraqis (one of every seven) had been displaced from their homes. Oil has soared from $25 a barrel to $100 a barrel since the war began, making the oil companies (along with defense contractors) one of the few beneficiaries of war. Over 751,000 veterans of Iraq and Afghanistan who have already been discharged from the military will need medical care and benefits the rest of their lives (1.6 million men and women have been deployed to Iraq and Afghanistan).

Yes, it would be a disaster for us to leave Iraq. But the longer we wait, the more disastrous these consequences will be for the US, for Iraq, and for the world. With no exit plan in sight, and Bush intent upon running out the clock in order to pass the problem to the next president, it looks like we'll delay that debacle just as we've pushed the economic costs into the future. Given these economic and human costs, it's unconscionable that any administration can act with such impunity.

I'd rate this beautifully organized piece as a six-star book if six were available -- with a cautionary, calculation-related caveat. As past chairman of a large Middle-Eastern languages department for the US Defense Languages Institute (USDLI) on the Virginia side of Washington D.C., I've enough first-hand experience with Arabs, etc., to have profoundly lamented the Bush administration's brashly arrogant ignorance displayed by their invasion of Iraq, followed by the spectacular emptyheadedness of Bush's "Mission accomplished" boast.

So I relate well to the authors' points, most succinctly summarized in their Table 1.1. contrasting the $100 billion initial estimate, the $500 billion operation costs to date, $1400 billion future ops, $2000 billion future veteran-care costs, $2400 billion social costs, $4300 billion macroeconomic costs, $5100 billion current and future interest costs, and another $5700 billion overall for Afghanistan. The authors underscore their contention that the above represent ONLY costs to the USA, not other countries such as our allies, or Iraq itself.

Chapter two documents the above costs to our nation's budget. Chapter three explains the true costs of caring for US veterans. Chapter four outlines costs that the US government does NOT pay. Chapter five expands on the macroeconomic effects of the conflict. Chapter six is an outstanding presentation of the multifaceted global consequences of our Iraq involvement. Chapter seven is an intelligent explanation of the difficulties of exiting Iraq, with suggestions. Chapter eight, "Learning From Our Mistakes," is an outstsnding presentation of eighteen recommended reforms for the future.

Because, after leaving the academic world, I headed two national corporations, I find that I can quibble with the above numbers, though the authors' explanatory comments seem essentially uncontrived in a manipulative sense.

Now for the caveat: Though as I make these comments I don't excuse the outrageous stupidity of our involvement in Iraq, my accountancy experience in running large companies requires that I face the reality of a few unpleasant facts. The authors do not include factors such as the US's (admittedly immoral) economic gains from the war -- such things as employment gains in certain sectors, and war-equipment manufacture shown as national-productivity gains. In other words, there has been income as well as expense in this war, and a more thorough accountancy presentation would have included figures on the income side of the balance sheet. But I repeat, especially for you readers who aren't accountancy-oriented, my comments on this side of the ledger do not excuse the ignorance, the arrogance or the immorality of this war. I'm only pointing out the relatively well known fact that wars do produce economic gains along with costs, and some wars have been waged with the ill-gotten economic benefits in mind.

I also want to reemphasize that I believe the financial costs of this war FAR economically outweigh any narrow income on the other side of the ledger.

Please read and recommend this outstandingly important book.

This book is enough to make an anarchist out of anyone who reads it. I won't review the contents (admirably done elsewhere by reviewer Steele), but if anyone doesn't believe a Nobel Prize winning economist from Harvard and his associate, also from Harvard, then there is no one left to tell us the true story. According to the authors, the government is certainly not going to tell the complete, true story about Iraq.

How our government in a representative democracy could have gotten us into the situation in Iraq boggles the mind. As Stiglitz and Bielmes point out repeatedly, our involvement was/is a combination of lies, stupidity, poor planning, "big ideas" (transform the Middle East!), cronyism, arrogance and the influence of a foreign country, Israel (if you doubt this, see THE ISRAEL LOBBY, Mearsheimer and Walt, pp. 229-262).

And what have we gotten out of it? 4000+ dead, tens of thousands wounded, gas approaching $4.00 a gallon (the war was about oil, right?), the hatred and contempt of the rest of the world ("hypocrites," they rightly call us), a worn-out army, and, very important to these economists, a debt of borrowed money that will take years and decades to pay back.

As the authors point out, what could we have done with that money to make our own counry better! And the tens of thousands of talented men and women who, if not dead, will suffer the effects of this war for the rest of their lives. . ..

So, what have we gotten out of our involvement in Iraq? Nothing, absolutely nothing. Less than nothing. We even have a Presidential candidate stupid enough to claim that we should stay there for years. And a government that we elected to look after our interests got us into this.

Joseph Stiglitz, co-author of this book, has street cred, since he is a Nobel laureate. That said, I suspect that there will be predictable responses to this book. Those who oppose the war will love it; those who support the Iraq War will be displeased. That is unfortunate in that, even though Stiglitz and co-author Linda Bilmes are clearly anti-war and anti-Bush, there are still many useful contributions of this book, as it addresses its purpose (Page xvii): "Our goal was simple: to determine the true cost of the war. regardless of whether one supported or opposed U.S. actions in the region, we believed that voters had a right to know the real cost of our policies."

The authors note that four factors have pushed increased direct spending in Iraq and Afghanistan and, overall, the GWOT (Global War on Terrorism): costs of increased number of troops; rising cost of personnel (military forces plus contractors); increasing cost of fuel; keeping equipment in working condition and replacing deteriorated equipment. However, the authors also note that these direct costs of the conflict understate what the actual cost is (and will be). The costs not showing up in official budget numbers: cost of over 4,000 dead troops; the large number of casualties and the care that will be needed to address their injuries; interest payments on the borrowing for the war. They also note that it is difficult to calculate actual costs because the national government accounting system is phony, and would not be tolerated in the private sector. The "cash accounting" system actually hides future costs. They conclude their estimate that the real costs of the war will be around $3 trillion.

As they estimate costs in area after area, they note that (Page 55) "There is a simple message in this book, one that needs to be repeated over and over again: there is no free lunch, and there are no free wars." Pages 57-59 lay out their estimated budgetary costs of the war, category by category.

Following chapters examine issues such as the cost of caring for veterans, costs of war that the government doesn't pay (e.g., lost productive capacity of those Americans killed or seriously wounded or suffering mental health problems, and so on), macroeconomic effects of the war (e.g., rising price of oil, opportunity costs of funds not being available for other socially useful projects, borrowing for the war crowds out money available for domestic investment [the tally of such costs shows up on page 130]), other costs imposed on the global community (e.g., costs to Great Britain).

They conclude with a series of lessons that they believe should lead to reforms, to reduce the odds of such an "adventure" in the future. Some of the suggestions are budgetary, others are structural (making sure that Congress has accurate and relevant information so that it can serve its original role on checks and balances with the President).

This is a good book in that it provides what seem to be some reasonable estimates of the actual cost of the war. There are some problems, though, too. For one, there is at some places political naiveté. For instance, among opportunity costs, they cite the less money is available for important policies such as education, roads, and research. Question: Would such funding be provided, given the political currents in the United States? The fact that funds might be freed up does not mean that they will be spent on such projects as those noted by the authors. Also, their critical orientation toward the President and war almost automatically mean that some readers will turn off in terms of considering the many useful aspects of their work. Finally, while I am not overly optimistic about the end result of our Iraqi involvement, to say that it and must be a failure is a bit too cocky a statement to me. I am pessimistic, but none of us can foresee the future. . . .

Anyhow, this is an important work, rather dry in its style but readable enough.

Joseph Stiglitz is a Nobel Prize winning economist who teaches at Columbia and served on President Bill Clinton's Council of Economic Advisors from 1993-1997 and at the World Bank from 1997-2000. Linda Bilmes lectures at the Harvard Kennedy School of Government who specializes in budgeting and applied budgeting. Both hate the Bush Administration and the War in Iraq. At least the voice of the book is quite passionate in its railing against it as a disaster and declares other more harsh accusations.

I think this book does three things well. First, it exposes the way government misuses budgeting for political purposes. That is, it always and in every case for every program that it wants to start misrepresents its true costs. The authors limit these accusations to this war, but if you are willing to go look at what was said in every other war and welfare program, similar disingenuousness was on display.

Second, it shows how poorly our country treats its veterans. A national shame that others have spoken of since the Revolutionary War down to present times. And a global tradition of all armies since the first army ever created by man. I hope we heed the calls for caring for the widows and orphans and those who were wounded and maimed in our service. Even if we think we don't have the money to bear these costs, this is an obligation that would justify cuts in other government spending to meet.

Third, I think that exposing the collateral costs of war (not just this war) in terms of opportunity costs, international relations, and the future state of the world is worth considering. Just dashing into a conflict simply because you believe you might be able to beat the enemy militarily quickly isn't really enough is it. You still have to live and work in the world after the war. Of course, not going to war has the same considerations. If you don't show strength in the face of aggression, you invite more of it and what then? When you don't act in the face of genocide (say, Rwanda and Sudan) because they are not strategic countries that also says something about the sincerity of your moral positions as more or less posturing.

However, there are also some things I think the book gets wrong. While I am all for giving the PROJECTED all-in cost of this war, the publicity makes this number seem like a fact and isn't clear until you read the book about how much of the cost is projected out-year costs in caring for veterans and interest on the debt of money borrowed for the war. In fact, the borrowing is for running the government, and putting the interest completely on the one program you don't like is cheating. For example, let's say someone was for the war and against the prescription drug program and they treated the borrowing as if it were for that social program and that the war was funded out of current receipts in order to inflate the projected cost of the program and how unaffordable it was. You would throw a flag on that play, right? Well, it's the same here. Nor are they clear in how much of the cost they bundle in would still be spent on national defense even if we were at peace (including all the out year costs they count in their war model). Plus we were already in Iraq trying to maintain the sanctions and fighting all the associated political battles. How much was that costing us? The authors also don't really cover all the costs associated with 9/11 because Iraq wasn't directly involved in that attack. However, it seems as if we are keeping the terrorists at least somewhat occupied because they haven't managed a major attack here since then. If they did, most of the supposed trillions that could be used for other things would be gone. This should have been addressed in their calculations.

Second, they severely understate the comparison costs of previous wars to make this one sound terribly costly. For example they note on page 6 that there were more than 16 million men under arms in World War II, but say that it cost only $5 trillion in 2007 dollars. This is foolishly low, I believe. Did they really use the same methodology for every facet of that war (including what unleashing the nuclear bomb and the Cold War, the cost of stationing armies in Europe for sixty years, the Veteran's Administration, the cost of NATO, and so forth) as they do for the Iraq War? Or did they just take government figures and adjust them for inflation (which seems more likely).

Third, while they rightly admit that we can afford $3 trillion dollars with our present economy (and rightly complain about the opportunity costs of spending so much money on war), they don't provide a similar context for previous wars. The cost of World War II was much greater as part of the GDP and national treasure, as was the Civil War and so forth. Economics is all about context and to not provide such meaningful comparisons in context is politics more than economics. Again, it is cheating.

Their suggested reforms to the budgetary process for war are interesting, but have only a small chance to be implemented in anything like their presentation in the book. But they make interesting reading, even when you disagree with them (such as reforms 6, 8 and 9, which are really political arguments about this war and could either be irrelevant or deadly in future wars).

If you hate Bush and the war, you will love this book. If you support Bush and the war, you will get angry at this book. However, if you want to take a balanced look at what the authors actually provide, I think you will learn quite a bit about the political views of the authors, a bit about the war and its costs, and get examples of why political arguments make for bad science, even social science.

Reviewed by Craig Matteson, Ann Arbor, MI

This exceptional book lays out for the reading public what wars really cost. It also lays out explicitly the causes and the effects of this madness and clearly identifies those other costs that are unquantifiable.

Once again Stiglitz, and in this book Bilmes, prove that they not only know how to write a readable book on a tough suibject, but also they know how to collect and stack the facts so that the conclusion is inescapable. No spin here!

Congratulations to both on an outstanding production!