A Review of
as presented to AlJazeera English TV
by Lucy Law Webster
On November 13, 2007, the Joint Economic Committee of the US Congress
released a new report, based in part on testimony by Linda Bilmes, entitled, “War
at Any Price? The Total Economic Costs of the War Beyond (sic) the Federal
Budget.” This report predicted
that the total cost of the war could be as much as 3.5 trillion dollars over
the next ten years. The following day,
ranking Republican members of the committee called for the retraction of the
report, citing both factual and logical errors.
In an effort to
sort the facts from the propaganda, AlJazeera English TV contacted me to
comment on the cost of the Iraq war as understood by US economists. I was able
to answer their questions based on a paper I had written earlier in the year which
reviewed various estimates of the costs of the war, from the early low numbers
to the latest reports by Linda Bilmes, Joseph Stiglitz and others. The following article outlines what I told
Cicly Scott, the AlJazeera English TV reporter, during the interview.
The main point at
issue was the idea of full economic costs.
The November 13 JEC Report makes this clear; its press release refers to
“high hidden costs to US economy of borrowing funds to pay for war, foregone investments,
veterans’ post-war care, and oil market disruptions.”
In my literature
review, completed in July 2007, I had looked briefly at early studies of the
costs of the war and actively at three major studies, which had covered some or
all of the full economic costs. A tabulation of studies published prior to
March 2003 showed:
|
DATE AND SOURCE OF ESTIMATE (in chronological order) |
COST ESTIMATES (in billions $US) |
DURATION |
|
Sept. 16, 2002 Cited by Nordhaus in his Oct. 29
paper |
100 to 200 |
No duration specified |
|
Sept. 23, 2002 Democratic Caucus of the House Budget
Committee |
100 to 200 |
2003 to 2012 |
|
Sept. 30, 2002 Congressional Budget Office |
9 to 13 to deploy + 6 to 8/mo to prosecute |
Duration important, but not known |
|
Oct. 29, 2002 William D. Nordhaus |
120 to 1,600 as per duration and difficulty |
2003 to 2012 |
|
Dec 31, 2002 White House OMB Mitchell E. Daniels, Jr., OMB Director in a NYT
article of December 31,2002 |
50 to 60 |
No duration specified |
A later set of studies that came out during the campaigns preceding the 2004 US election also focused on relatively low costs, which were primarily direct appropriation costs as opposed to full economic costs:
|
PUBLICATION DATE AND SOURCE (in chronological order) |
COST ESTIMATE (in billions $US) |
OTHER INFORMATION |
|
May 13, 2004 USA
Today by Susan Page |
152 through 2005 |
Cites analysts |
|
June 24, 2004 Institute for Policy
Studies |
151 through 2004 |
Cites non-budget costs |
|
Sept. 13, 2004 FactCheck.org |
Says 200 is wrong |
Debates Kerry campaign |
The article in USA
Today by Susan Page drew attention to other reports published at the time. One
by Andrew Krepinevich, a former Pentagon aide who was then executive director
of the Center for Strategic and Budgetary Assessments, said the unrest in Iraq
“is going to extend the time horizon over which we’ll need to be involved in
stabilizing Iraq.” The article also cited a comment by Anthony Cordesman, a
former Defense Department official at the Center for Strategic and International
Studies who said officials were “decoupled from reality” when they made their
early predictions about the war in Iraq.
The June 2004 study by the Institute for Policy Studies
presented an array of non-budgetary costs from the war in Iraq. Costs to the
United States were classified as Human Costs, Security Costs, Economic Costs
and Social Costs. The economic costs included the budget appropriations of
$151.1 billion, and the predicted long-term impact on the US economy (with Doug
Henwood cited as saying that the bill would average at least $3,415 for every US
household, and James Galbraith predicting that while the war spending might
boost the economy initially, over the long term it would be likely to bring a
decade of economic troubles). The report also predicted high gas prices and
rising crude oil prices, which the study said would lead to a decline in the US
GDP of $50 billion if gas stayed at around $40 per barrel for a year. The security costs predicted for the United
States included increased recruitment of terrorists, which they reported had
already led to more suicide attacks around the world in 2003 than in any
previous year, plus 390 deaths and 1,892 injuries as documented by a former CIA
analyst and State Department official as being due to terrorist attacks in
2003.
Did Lack of Focus on Full Economic Costs Affect the 2004 Election?
The debate about the costs of the war sparked by the Kerry
campaign led to a public airing of the idea that the costs were some $152
billion and not the $200 billion cited in the Kerry campaign commercials. The
lower number was the one being used by most analysts who added up the
congressional appropriations, and the Kerry campaign responded to the criticism
from FactCheck.org and others by pointing to the various appropriations that
could be added in different ways to reach the higher totals they had cited.
The important point is that there was no effective effort to
undertake and communicate a more comprehensive accounting for the total economic
costs to the nation or to assess the longer term costs likely to arise from the
war. If the difference between budgeted appropriations and full economic costs
had been much more fully and widely understood at the time, it might have
changed the outcome of the election.
The main body of my review paper considered three academic studies
that focused on full economic costs. The 2002 study by William Nordhaus
concluded that the cost of a short, successful war would be about $120 billion
while a longer, less successful war with urban warfare would range from $140
billion to $600 billion for the United States, including peacekeeping and
occupation, and that macroeconomic impacts would be up to $500 billion and
above. The length of any oil shocks of more than a year or two would determine
the size of these effects and bring the total to at least 1.3 trillion. Nordhaus
explained that the cost of a short war “is likely to be surprisingly small
because most of the costs are already paid for in the defense budget.” In
contrast, a difficult war would have many economic and macroeconomic effects
especially if the war, occupation, and nation-building were costly and destroyed
significant Iraqi oil infrastructure. Also a widespread adverse emotional
reaction to the conflict could bring costs to about $1.6 trillion, most from
sources outside the direct military costs, and, including costs to countries
other than the United States and possible outcomes following the use of
chemical or biological weapons by Iraq or from extreme reactions “against
perceived American disregard for the lives and property of others,” would lead
to even higher costs.
A working paper from September, 2005 by Scott Wallsten and Katrina Kosec for the American Enterprise Institute and the Brookings Institution was the only study of the three examined c