New York Times
March 19, 2008
By David M. Herszenhorn
WASHINGTON — At the outset of the Iraq war, the Bush administration predicted that it would cost $50 billion to $60 billion to oust Saddam Hussein, restore order and install a new government.
Five years in, the Pentagon tags the cost of the Iraq war at roughly $600 billion and counting. Joseph E. Stiglitz, a Nobel Prize-winning economist and critic of the war, pegs the long-term cost at more than $4 trillion. The Congressional Budget Office and other analysts say that $1 trillion to $2 trillion is more realistic, depending on troop levels and on how long the American occupation continues.
Among economists and policymakers, the question of how to tally the cost of the war is a matter of hot dispute. And the costs continue to climb.
Congressional Democrats fiercely criticize the White House over war expenditures. But it is virtually certain that the Democrats will provide tens of billions more in a military spending bill next month. Some Democrats are even arguing against attaching strings, like a deadline for withdrawal, saying the tactic will fail as it has in the past.
All of the war-price tallies include operations in the war zone, support for troops, repair or replacement of equipment, reservists’ salaries, special combat pay for regular forces and some care for wounded veterans — expenses that typically fall outside the regular Defense Department or Veterans Affairs budgets.
The highest estimates often include projections for future operations, long-term health care and disability costs for veterans, a portion of the regular, annual defense budget, and, in some cases, wider economic effects, including a percentage of higher oil prices and the impact of raising the national debt to cover increased war spending.
The debate raging on Capitol Hill, on the presidential campaign trail, in research institutes and in academia touches on such esoteric factors as the right inflation index for veterans’ health care costs; the monetary value of nearly 4,000 soldiers killed; and what role, if any, the war has had in higher oil prices.
Some economists who track the war expenses say they worry that politicians are making mistakes similar to those made in 2002, by failing to fully come to grips with the short- and long-term financial costs.
“The relevant question now is: what do we do now going forward? Because we can’t do anything about the costs that have already happened,” said Scott Wallsten, an economist and vice president of research with iGrowthGlobal, a Washington research institute. “We still don’t hear people talking about that.”
Congressional Democrats, led by Senator Charles E. Schumer of New York, the chairman of the Joint Economic Committee, have sought to spotlight the rising costs and limited political progress in Iraq.
“This administration still has no clear exit strategy for our troops, no path to political reconciliation, and no accounting of the costs to our budget or economy,” Mr. Schumer said.
The White House press secretary, Dana M. Perino, acknowledged that costs had risen higher than predicted, but said the administration was committed to giving the military everything it needed for success.
“None of these calculations take into account the cost of failure in Iraq,” Ms. Perino said. “Should Al Qaeda have safe haven in Iraq, we are more likely to be attacked again on our homeland. We know the cost of that.”
On the campaign trail, the Democratic candidates, Senators Barack Obama and Hillary Rodham Clinton, often say that money for the war would be better spent at home, as Mrs. Clinton did Tuesday when she pegged the war costs at “well over $1 trillion.”
“That is enough,” she continued, “to provide health care for all 47 million uninsured Americans and quality pre-kindergarten for every American child, solve the housing crisis once and for all, make college affordable for every American student and provide tax relief to tens of millions of middle-class families.”
But what the candidates often fail to note when making such points is that the full cost of the war has been added to the national debt, and that the money spent in Iraq would not necessarily be available for other programs. And, of course, anything short of an immediate withdrawal will entail billions more in continuing expenses.
Debate aside, there is general consensus that Congress will have allocated slightly more than $600 billion for Iraq operations through the 2008 fiscal year.
And some analysts say that may be half the final price.
“Under reasonable scenarios, assuming we don’t pull out rapidly, we may only be halfway through,” said Steven M. Koziak, of the Center for Strategic and Budgetary Assessment, a nonpartisan research group. “Even in direct budgetary costs, it’s quite easy to get up on the order of $1 trillion for Iraq alone.”
Meanwhile, the five-year anniversary of the war has focused a spotlight on the costs so far and on future projections.
In a new book, called “The Three Trillion War,” Mr. Stiglitz, the Nobel laureate, and a co-author, Linda J. Bilmes, a professor at Harvard, say the total economic impact may be a staggering $4 trillion or more. Even some economists who call themselves fans of Mr. Stiglitz say they think that number is exaggerated; the authors insist their projections are moderate.
Lawrence B. Lindsey, who was ousted as President Bush’s first economic adviser partly because he predicted the war might cost $100 billion to $200 billion, also has a new book that serves in part as an I-told-you-so.
“Five years after the fact, I believe that one of the reasons the administration’s efforts are so unpopular is that they chose not to engage in an open public discussion of what the consequences of the war might be, including its economic cost,” Mr. Lindsey wrote in an excerpt in Fortune magazine.
Mr. Lindsey insists that his projections were partly right. “My hypothetical estimate got the annual cost about right,” he wrote. “But I misjudged an important factor: how long we would be involved.”
He was not alone.
Congressional Democrats, for instance, predicted that the Iraq war would cost roughly $93 billion, not including reconstruction.
Virtually every forecast was off in this way. “It’s clear that operations in Iraq and Afghanistan have gone on longer and have been more expensive than the projections initially suggested,” Peter R. Orszag, director of the Congressional Budget Office, said in an interview.
Only one economist, William D. Nordhaus of Yale, seems to have come close. In a paper in December 2002, he offered a worst-case estimate of $1.9 trillion, “if the war drags on, occupation is lengthy, nation-building is costly.”
Getting at the true costs is difficult though. Expenses like an overall increase in troops were paid from the base defense budget, not the war bills.