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Five Years In, Cost of Iraq War Far Exceeds Early Estimates

March 26, 2008 at 6:20 PM EST
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In a follow-up report to a series on the cost of war, Paul Solman examines the new estimates for short- and long-term expenditures related to the ongoing conflict in Iraq -- including military recruitment, equipment and medical treatment for those injured.
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JUDY WOODRUFF: Next, a second Iraq story, the cost of the conflict. Ten months ago, as Congress was debating war funding, our economics correspondent Paul Solman tallied the costs. Now, at the fifth anniversary of the war, Paul updates his report.

PAUL SOLMAN: 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, Anchor, “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 $500 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 cost of the war.

PAUL SOLMAN: With Nobel Laureate economist and former Bill Clinton adviser Joe Stiglitz, Bilmes did a cost study in 2006 that got 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: And now, Bilmes and Stiglitz have a new book that pushes the grand total even higher.

LINDA BILMES: We now expect, having re-estimated on a very conservative basis, that the total cost of the war will be in the range of $3 trillion.

Paying years into the future

Linda Blimes
Harvard University
In the Iraq war... if you add in all of those who are injured or fall ill who require medical evacuation, there are 15 injuries for every one fatality. That's one of the major cost drivers in the war.

PAUL SOLMAN: But how do you get from $500 billion to as much as $3 trillion? For starters, there are the future operational costs for a war that has become more and more expensive to run.

LINDA BILMES: In the past year, we've added more troops; we're spending more money on construction of military bases; more money on contractors; more money on training Iraqi troops; more money for moving people around.

And all of those things have led to an increase in the monthly amount that we're spending from $4 billion a month a few years ago to $12 billion a month in Iraq now.

PAUL SOLMAN: Including future operating costs adds $521 billion to the total, the authors estimate, if, best case, the U.S. withdraws all combat troops by 2012; $669 billion if the war drags on until 2017.

Then, there are all the not-so-obvious costs. 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 we call 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.

PAUL SOLMAN: Putting together resetting and recruiting costs adds another $125 billion to the total. A similar sort of addition comes from medical costs, present and, more importantly, future.

LINDA BILMES: In the Iraq war, there were seven injuries in combat alone for every fatality. And if you add in all of those who are injured or fall ill who require medical evacuation, there are 15 injuries for every one fatality. That's one of the major cost drivers in the war.

Caring for wounded veterans

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: 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.

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 $120 billion to $285 billion, 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 700,000 Americans who fought filed disability claims. Meanwhile, 1,650,000 Americans have served in this Iraq war, more than a third of them more than once, in grueling deployments of a year or more.

LINDA BILMES: Already nearly 250,000 returning troops have filed for disability compensation. The average number of separate disabling conditions on these claims is five. And more than 50,000 troops have filed for eight or more disabling conditions; that means eight or more serious medical problems for the same person.

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 Iraq Veteran: 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.

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 $276 billion and $340 billion, in which case the total cost of the war would rise to a range of about $1.5 trillion to $2 trillion.

But even $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 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?

BRUCE MCELHANEY: 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: $400,000.

PAUL SOLMAN: In addition to the $100,000?

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

PAUL SOLMAN: A lost life, therefore, costs the U.S. government a few hundred thousand dollars at most. With about 4,000 U.S. military deaths in Iraq so far, that would amount to a couple of billion.

Stiglitz, however, puts the real cost at nearly $30 billion. That's because economic research shows that Americans themselves value a life at more than $6.5 million.

JOSEPH STIGLITZ: We know how much people require to compensate them to go into a riskier occupation where there is 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, The Progress and Freedom Foundation: It sounds callous, but there are a few things to keep in mind.

PAUL SOLMAN: Economist 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's, 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, The 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.

Impact on average Americans

Scott Wallsten
Economist
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... These numbers are so enormous that they warp our sense of perspective.

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 $75 a barrel since the war began, costing Americans out-of-pocket, the money flowing to other economies instead of ours. Describing as little as $5 to $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 $3 trillion: almost $30,000 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 started thinking about the number of lives who've 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.

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.

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.

Alternative spending options

Projected Cost of War

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 a few 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 than we used to be, even in recession, that Iraq represents a smaller portion of the economy than any major conflict to date.

On the other hand, while it's costing some of us far less than others, the Iraq war is costing all of us more than we may have thought.

JUDY WOODRUFF: And a footnote: The original version of Paul's report received an Emmy award for Outstanding Business Reporting.