I am grateful to Douglas Meade, and the participants in the Macroeconomics and Defense session at the Western Economic Association International meeting, June 2007. 

          The Department of Defense (DoD) has been spending most of the funds allocated for the Global War on Terror (GWOT), fought mainly in Iraq and Afghanistan.  The DoD budgetary costs of fighting the GWOT have been systematically underrepresented.  Supplemental Appropriations (SAs) were used for only the initial stages of the other post- World War II wars, and within 5 years the Regular Appropriations ramped up and replaced the SAs   .  Not so with GWOT.  Funding for GWOT was not part of the DoD budget until FY07, and even since then the bulk of GWOT funding has been through SAs.  The first two rows of Table 1 represent DoD spending in the President’s Budget (PB) without the SAs, in current year and constant dollars.  This funding has come through the rigorous DoD budget process.  The third and fourth rows of Table 1 represent the SAs, as requested and enacted (identical each year). 
            The SA requests are always in current year dollars, and in their justifications are compared across years in current dollars.  This is very unlike the DoD budget process:  the Office of the Comptroller, which publishes the regular appropriations, has about 50 pages of deflators in the National Defense Budget Estimates (Green Book) each year.  Yet the authors of the Requests for Supplemental Appropriations do not bother with deflating dollars so that all the dollars in a graph or a table are commensurate.  An example is  the GWOT Funding graph (labeled Figure 1), in both FY2007 and both FY08 SA requests.  The figure is a bar graph of Base Budget (the President’s Budget, PB) and Supplemental Requests, in current year dollars. The bars are taller each successive year, and each increment would be greater still were constant dollars graphed. 
            Table 1 displays the DoD Outlay (actual expenditures) funding in the PB, which has gone through the arduous budget process, and the SA GWOT budget requests.  The fifth row shows that, from FY01 to FY08, Supplemental funding has increased as a portion of PB Outlays by about a magnitude, whereas constant dollar PB Outlays have not even doubled. 
            The texts of the four FY07 and FY08 Supplemental Requests are almost identical, and the requested supplemental appropriations increase with time.  Figure 2 in the SA requests shows that GWOT is a smaller percent of DoD Outlays and Federal Spending than during WW2, and the Korean, Vietnam, and Gulf Wars.  The figure is titled Defense Spending in Context, it does show that each successive war is a smaller percentage of GDP and Federal Spending, but does not say why this is important.  Each of these wars has been marketed to Americans as a must win.  If a war really is a must win, cost is not the primary concern (witness the Allies in WW2).  Yet the emphasis for GWOT has often been how inexpensive it is and, curiously, hardly any funding is part of the PB, even as the GWOT is being fought during the defense budget process.  Table 1 shows that the SAs have increased during the GWOT, both in absolute dollars and as a proportion of total DoD funding. 
            Tables 2 and 3 display GWOT funding relative to GDP and PB Federal Outlays, as represented in Figure 2 in the SA requests.  Over time,  Supplemental Appropriations are increasing portions of GDP and Federal Outlays, and the discrepancies from excluding the SAs are in billions of dollars. 

Some Background
            On September 11, 1991, Osama bin Laden masterminded the Al Qaeda hijacking of four commercial American jetliners  Two crashed spectacularly into the twin towers of the World Trade Center in New York City.  The third crashed into the Pentagon, and the passengers in the fourth managed to fight back and foil some of the terrorists plans.  Almost 3000 Americans died:  the aircraft passengers, emergency workers, and people who worked in and were visiting the World Trade Center.   Later in the day, President Bush “ordered that the full resources of the federal government . . . conduct a full-scale investigation to hunt down and to find those folks who committed this act.” .  The next month, Congress passed P.L. 107-38, the Emergency Supplemental Appropriations Act for Recovery from and Response to Terrorist Attacks on the United States, FY 2001, the first of nine requests and Amendments for SAs. 

Should We be Surprised?
            No.  The persistent aura in the SA requests is that the GWOT will not be costly, as evidenced by the recurring FY07 and FY08 graph depicting that GWOT funding is only a tiny portion of Federal Spending and the GDP.  Yet back in August 2001, we learned that the fight might be long:  the FY2002 Supplemental Request relates that the President said that the global war on terrorism would more than likely go on for years.  The annual appropriations, which have gone on for years, have only been increasing. 

Extensions
            I do not predict the future course of the GWOT.  I am concerned only with the budgetary costs of the war, especially the extensive use of Supplemental Appropriations.  Predicting the total cost of the war requires many assumptions, which may be very realistic and probable, but are still assumptions.  This investigation of the actual budgetary costs of the war is based on what has unassailably already occurred, and readers can draw their own conclusions on future appropriations.  Another reason I stick only with budgetary appropriations is that gigantic numbers of all the costs are mind boggling, and often all that is readily understand is that all the numbers are very, very huge; differences between gigantic numbers become meaningless..  Nonetheless, others have estimated the total cost of the GWOT.  In September 2005, Wallensten and Kosec wrote “The Economic Costs of the War in Iraq,” and estimated that the global expected net present value of direct costs through 2015 to be about $1 trillion.  In September 2007, the Joint Economic Committee reported that President Bush had requested appropriations for GWOT that are over ten times his original pre-war cost estimate .  The Committee estimated that the costs for the GWOT through FY08 will exceed $1.6 trillion, over $20,000 for a family of four.  Bilmes and Stiglitz (2006, 2008) concluded that “the total costs of the war, including the budgetary, social and macroeconomic costs, are likely to exceed $2 trillion.”

Conclusion
            Predicting the future is always dangerous, but the trend is for ever larger supplemental appropriations, which are ever larger proportions of the Department of Defense PB Outlays (Table 1).  On  April 8, 2008, military and civilian DoD employees appeared before the Senate and requested a Supplemental Appropriation for GWOT in FY2009.  

References

“9/11 by the Numbers,” New York Magazine. 2002.  http://nymag.com/news/articles/wtc/1year/numbers.htm, retrieved April 7, 2008. 

Bilmes, Linda, and Joseph Stiglitz.  Iraq War Will Cost More-than-$2-Trillion.  Milken Institute Review, November 3, 2006. 

Edelman, Susan A.  “Emergency Supplemental Funding for the Global War on Terror (GWOT),” as a discussion for a paper at the Macroeconomics and Defense session at the Western Economic Association International meeting, June 2007.  

FY 2002 Supplemental Request To Continue the Global War on Terrorism.  Department of Defense.  March 2002.

Department of Defense FY 2004 Supplemental Request To Continue Operation Iraqi Freedom (OIF), Operation Enduring Freedom (OEF), and Operation Noble Eagle (ONE).  September 2003. 

Department of Defense FY 2005 Supplemental Request For Operation Iraqi Freedom (OIF), Operation Enduring Freedom (OEF), and Operation Unified Assistance.  February 2005. 

Department of Defense FY 2006 Supplemental Request For Operation Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF).  February 2006. 

FY 2007 Emergency Supplemental Request for the Global War on Terror.  Department of Defense.  February 2007. 

Amendment to FY 2007 Emergency Supplemental Request for the Global War On Terror.  Department of Defense.  March 2007. 

FY08 Global War on Terror Request.  Department of Defense.  February 2007. 

Amendment to FY 2008 Global War on Terror.  Department of Defense.  October 2007. 

Joint Economic Committee Majority Staff.  Chairman, Senator Charles E. Schumer, Vice Chair, Rep. Carolyn B. Maloney. “War at Any Price?  The Total Economic Costs of the War Beyond the Federal Budget.”  November 2007. 

National Defense Budget Estimates for FY 2001.  Department of Defense, Office of the Under Secretary of Defense (Comptroller).  March 2000.

National Defense Budget Estimates for FY 2002.  .  Department of Defense, Office of the Under Secretary of Defense (Comptroller).  August 2001.

National Defense Budget Estimates for FY 2003.  Department of Defense, Office of the Under Secretary of Defense (Comptroller).  March 2002.

National Defense Budget Estimates for FY.  Department of Defense, Office of the Under Secretary of Defense (Comptroller).  March 2003.

National Defense Budget Estimates for FY 2005.  Department of Defense, Office of the Under Secretary of Defense (Comptroller).  March 2004.

National Defense Budget Estimates for FY 2006.  Department of Defense, Office of the Under Secretary of Defense (Comptroller).  April 2005.

National Defense Budget Estimates for FY 2007.  Department of Defense, Office of the Under Secretary of Defense (Comptroller).  March 2006.

National Defense Budget Estimates for FY 2008.  Department of Defense, Office of the Under Secretary of Defense (Comptroller).  March 2006.

NPR Broadcast.  April 8, 2008. 

Remarks by the President After Two Planes Crash Into World Trade Center.  Emma Booker Elementary School, Sarasota, Florida.  Office of the Press Secretary, September 11, 2001, 9:30 A.M. EDT.  http://www.whitehouse.gov/news/releases/2001/09/20010911.html, retrieved March 31, 2008. 

Stiglitz, Joseph E., and Linda J. Bilmes.  The Three Billion Dollar War:  The True Cost of the Iraq Conflict.  New York:  W. W. Norton & Company, 2008. 

Wallsten, Scott and  Katrina Kosec.  “The Economic Costs of the War in Iraq.”  Working Paper 05-19, AEI-Brookings Joint Center for Regulatory Studies.  September 2005.