Costs in Dollars of Iraq War: One Trillion to Two Trillion Dollars

"The real cost to America of the Iraq war is likely to be between $1 trillion and $2 trillion, up to 10 times more than previously thought, according to a report written by a Nobel prize-winning economist and a Harvard budget expert." -- from the article, Iraq to cost U.S. more than $2 trillion, says report

"I spend your money the way I want to and not the way you would like me too"
Heh Heh Heh

43 pages including valuable footnotes.

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. 

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