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Experts Calculate Billions in Long-term Costs of War

May 22, 2007 at 6:25 PM EST
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JIM LEHRER: Now, what the war in Iraq is costing. Democrats in Congress are still trying to pass a war funding bill the president will sign. That legislation will provide money for military operations, but those funds are only part of the larger price tag. The NewsHour’s economics correspondent, Paul Solman, has our report.

PAUL SOLMAN, NewsHour Economics Correspondent: The cost of the Iraq war, it’s a far cry from the original estimates.

DONALD RUMSFELD, Former U.S. Secretary of Defense: The Office of Management and Budget estimated it would be something under $50 billion.

GEORGE STEPHANOPOULOS, Host, “This Week”: Outside estimates say up to $300 billion.

DONALD RUMSFELD: Baloney.

PAUL SOLMAN: The $50 billion estimate turns out to be a modest fraction of what the war has actually cost thus far, the out-of-pocket, mainly military costs.

GREG SPEETER, National Priorities Project: We’re averaging, over the period of the war, about $275 million a day.

PAUL SOLMAN: Greg Speeter runs the National Priorities Project and its costofwar.com Web site, which tracks the spending per second. At this point, says Speeter, the total is close to $450 billion.

GREG SPEETER: That gives you some indication of just how expensive this war is.

PAUL SOLMAN: But, no, it really doesn’t, according to those who’ve looked at the numbers more broadly. As economist Linda Bilmes explains…

LINDA BILMES, Harvard University: Even if we withdrew all of our troops from Iraq tomorrow, the war would still keep costing us money for many, many years to come, because there are several long-term costs which are not included in the running costs of the war.

PAUL SOLMAN: With Nobel laureate economist and former Bill Clinton adviser Joe Stiglitz, Bilmes did a cost study that’s received a lot of attention for its bottom line.

LINDA BILMES: The total cost of the war would be between $1 trillion and $2 trillion.

PAUL SOLMAN: But how do you get from $450 billion to as much as $2 trillion? Let’s take the added costs one at a time.

First of all, says Professor Stiglitz, during any war…

JOSEPH STIGLITZ, Columbia University: … you use up equipment. Equipment gets depreciated, deteriorates, and much of that doesn’t get replaced until after the war is over.

LINDA BILMES: There’s also the cost of what’s called resetting the military, retraining the troops and bringing the U.S. military force back up to its pre-Iraq strength.

PAUL SOLMAN: Plus, says Stiglitz…

JOSEPH STIGLITZ: One of the consequences of the war is that people are not volunteering for the Army. To recruit people into the Army, you have to pay big bonuses, so our overall recruitment cost skyrocketed.

The addition of medical costs

PAUL SOLMAN: Summing all increased military costs would add at least $125 billion to the total. An even bigger addition, though, comes from medical costs, present and, more importantly, future.

LINDA BILMES: In this war, there are eight wounds in combat for every fatality and another eight injuries and illnesses for people who are over there. So, in total, it's 16 wounded or injured soldiers for every one who is killed in Iraq.

INJURED VETERAN'S MOTHER: Joe, look at me. Joe, look at mommy. Give me a kiss.

PAUL SOLMAN: We've seen these costs before on the NewsHour: 23-year-old Sergeant Joseph Youn, for example, his brain hit by shrapnel two years ago, a hospital inpatient ever since.

SGT. JOSEPH YOUN, Injured Veteran: No!

PAUL SOLMAN: Eddie Ryan, also 23, shot in the head by friendly fire. The Veterans Administration pays $250,000 a year to care for him at his rural New York home for as long as he lives.

When Bilmes tried to estimate the cost of all long-term medical care due to Iraq casualties like these, she got a range of $200 billion to $400 billion, depending on how long the war lasts, to which she and Stiglitz also add the cost of long-term disability for soldiers like Brad Heun of Tennessee, a former auto mechanic whose vertebrae were crushed in Iraq.

BRAD HEUN, Injured Iraq Veteran: There's absolutely no way I could stand on my feet for that length of time or bend over the hood of a car.

PAUL SOLMAN: After the first Gulf War, which lasted about a month, nearly half of the 200,000 Americans who fought filed disability claims. Meanwhile, this time, close to a million Americans have been deployed in Iraq thus far, half of them more than once and for long periods of time.

LINDA BILMES: Just this year, there have been more than 50,000 claims by veterans, disability claims, which involved eight or more separate conditions.

PAUL SOLMAN: Rex Collier happened to be one of our audio men for this story. His son, Bradley, a Marine, was wounded in Ramadi.

REX COLLIER, Father of Injured Marine: He was hit by a sniper from a rooftop that popped up and shot him with an AK-47 down into his shoulder, through his Kevlar. It went into his lung. And then an RPG hit a truck behind him about the same time and took shrapnel in the other arm.

PAUL SOLMAN: He's been in constant pain ever since, suffers from PTSD, post-traumatic stress disorder. At a restaurant, says Collier, his son...

REX COLLIER: ... would not have his back exposed, was always on the lookout, constantly looking up and finding himself glancing up, looking around all the time, as if he were on patrol for somebody to possibly be hidden away to shoot him.

The issue of disability payments

PAUL SOLMAN: Bradley Collier's disability pay: some $15,000 a year. Brad Heun gets $30,000 for a family of five. But multiply even these modest amounts by the number of soldiers maimed, times their life expectancy, and Bilmes and Stiglitz get a long-term disability number between $70 billion and $150 billion, in which case the total cost of the war would rise to a range of about $850 billion to $1.2 trillion.

But even $1.2 trillion doesn't capture the real cost to Americans, Joe Stiglitz argues, the social cost.

JOSEPH STIGLITZ: If somebody gets disabled, the U.S. government pays him disability for the rest of his life. But these disability payments are typically just a fraction of what this individual would have earned. It certainly doesn't compensate him.

If you asked him, "Would you rather have an arm or get that disability payment?" there would be no question. He'd say, "Give me my arm back." So the disability payments vastly underestimate the cost to the individual, to his family, to our society.

PAUL SOLMAN: How much money would you spend, borrow, steal, maybe, to be able to buy your son out of that whole experience so that your son would be the guy he was before he went to Ramadi?

REX COLLIER: There really isn't a price you can put on it. Whatever was asked to avoid that, I would have given that much and found a way to find it, to come up with it.

PAUL SOLMAN: And speaking of priceless, what about life itself?

REX COLLIER: There's no number. If my child was missing in combat, I would do absolutely anything.

PAUL SOLMAN: Anything at all, says insurance agent Bruce McElhaney, who does volunteer work for Iraq veterans and families of the deceased. One way to reckon the value of a life lost: what the family actually gets in life insurance -- at least $100,000 -- plus, if the fallen soldier bought the maximum insurance policy...

BRUCE MCELHANEY, Veterans Volunteer: ... $400,000.

BRUCE MCELHANEY: There are also some survivorship benefits for the spouse and the children.

Calculating the value of life

PAUL SOLMAN: A lost life, therefore, costs the U.S. government a few hundred thousand dollars at most. With about 3,400 U.S. military deaths in Iraq so far, that would amount to a few billion.

Stiglitz, however, puts the real cost at upwards of $20 billion. That's because economic research shows that Americans themselves value a life at $6.5 million.

JOSEPH STIGLITZ: We know how much people require to compensate them to go into a riskier occupation where there's a higher probability of injury or a death. And it's on the basis of that that this $6 million is calculated and is used throughout the government and academia.

SCOTT WALLSTEN, Progress and Freedom Foundation: It sounds callous, but there are a few things to keep in mind.

PAUL SOLMAN: Economists Scott Wallsten and Steven Davis are the authors of two other studies on the costs of the Iraq war. While their totals are lower that Bilmes and Stiglitz, they agree that military insurance vastly underestimates the value of a human life.

SCOTT WALLSTEN: The commission that compensated survivors of 9/11 victims based their estimates on the net present value of the victims' future earning streams.

STEVEN DAVIS, University of Chicago: I don't think there's any way to get around treating lives as something that have implicit economic value.

PAUL SOLMAN: Do you feel a little crass putting a number on a life like that?

JOSEPH STIGLITZ: I do feel crass, but, on the other hand, I think it's even worse not to think about it.

PAUL SOLMAN: Meanwhile, we're not quite finished with the Bilmes-Stiglitz tally. Unlike the other two studies, they include presumed costs to the economy as a whole. The rise in the price of oil, for example, up about $40 a barrel since the war began, costing Americans out-of-pocket, the money flowing to other economies instead of ours.

Ascribing between $5 and $10 of the increase to the war, Stiglitz and Bilmes come up with another range of numbers, huge numbers. And that's how they get to $2 trillion, almost $20,000 for every single American household.

And you could go even higher than they do, including a cost like the absence of the National Guard during disasters, Hurricane Katrina or the Kansas tornado. Nor do any of the estimates include the interest on all the extra debt we've taken on to pay for the war.

And how do you reckon the cost to Iraqis of a protracted war on their turf?

JOSEPH STIGLITZ: If you start thinking about the number of lives who have been killed in Iraq, numbers that have been estimated anywhere from 100,000 to 500,000...

PAUL SOLMAN: And $6 million per person...

JOSEPH STIGLITZ: ... we didn't do that, because it would be mind-boggling.

Comparison to containment policy

PAUL SOLMAN: Now, remember, Bilmes-Stiglitz is the high estimate. Their rival authors think their health care and disability estimates are too high, dismiss the macroeconomic effects by saying the link to the war is too iffy, and, after all, the economy's been doing fine.

They also highlight costs that should be subtracted from the total, the cost of continued murders by Saddam Hussein, for example, had we continued our policy of containment, the cost of the whole policy of containment.

STEVEN DAVIS: We had been pursuing a policy of containment for about a dozen years that was endorsed by the United Nations Security Council. That was also a costly policy. So the alternative to the war wasn't to do nothing or to spend nothing; it was to either continue the containment policy or adopt some other policy which would have also had costs.

PAUL SOLMAN: But though their estimates are therefore lower -- $700 billion for Steven Davis; $1 trillion for Scott Wallsten, on whose study much of Bilmes-Stiglitz was based...

SCOTT WALLSTEN: What strikes me is just the enormity of the resources that we're using for this war and how they're being allocated without critical, rigorous thought as to what we're doing with them. These numbers are so enormous that they warp our sense of perspective.

PAUL SOLMAN: This leads to one last point. The way that economists gain perspective on any course of action is to look at what's called the opportunity cost -- that is, what could America have done with the same amount of money?

GREG SPEETER: We could have built 3.7 million housing units over the period of the war.

PAUL SOLMAN: The National Priorities Project's Greg Speeter.

GREG SPEETER: Every half-second, we could be providing a child with health care.

PAUL SOLMAN: We could have rebuilt the nation's schools, all of them, for about what we've spent each year in Iraq.

JOSEPH STIGLITZ: We could have fixed the Social Security problem for the next 75 years.

PAUL SOLMAN: Finally, if you're more worried about homeland security, think of $1 trillion or $2 trillion more spent on that.

In the end, though, this is a nearly $14 trillion-a-year economy. The Iraq war may now be the second most expensive in American history in direct cost, but we're so much richer it represents a smaller portion of the economy than any major conflict to date.

Small wonder many Americans haven't noticed the cost. But some certainly have: the Americans who disproportionately bear the cost of the Iraq war. In our next report, we'll look at who they are.

JIM LEHRER: To view the studies Paul cited in his report and to see the war cost calculator featured in this segment, visit our Web site at PBS.org.