The Money

Adam Shatz

Shortly before the invasion of Iraq, George Bush’s economic adviser, Larry Lindsey, estimated that the war would cost $200 billion. ‘Baloney,’ Donald Rumsfeld fumed, offering a figure of $50-60 billion, some of which he said would be supplied by America’s friends. Andrew Natsios, the head of the Agency for International Development, told Ted Koppel on Nightline that postwar Iraq could be rebuilt for $1.7 billion. Koppel was astonished: ‘No more than that?’ ‘For the reconstruction,’ Natsios replied. ‘And then there’s $700 million in the supplemental budget for humanitarian relief, which we don’t competitively bid because it’s charities that get that money.’ According to Paul Wolfowitz, the reconstruction would be financed by increased oil revenue in Iraq. The war had nothing to do with oil, of course, but the country’s vast reserves happily ensured that postwar ‘nation-building’ would be cheap, if not free.

The Iraq war has been expensive – very expensive. In the ‘best-case’ scenario, Joseph Stiglitz and Linda Bilmes report in The Three Trillion Dollar War, it will cost over $2 trillion; their ‘realistic-moderate’ estimate rises to almost $5 trillion.[*] And that’s just the cost to the United States. Gordon Brown reserved £1 billion for the war. Britain has now spent more than £5 billion on ‘direct operating expenditures’ in Iraq, and Stiglitz and Bilmes predict that by 2010 the cost of the war will exceed £20 billion. Some of this money has come from a Special Reserve, whose funds the Ministry of Defence can ‘draw down’ in consultation with the Treasury, without parliamentary approval. This arrangement, Stiglitz and Bilmes remark, makes the British system of accounting ‘particularly opaque’.

The Three Trillion Dollar War began two years ago as a research paper. Stiglitz and Bilmes originally proposed a figure of $1-2 trillion, but now believe they were optimistic. The expenditure on direct military operations alone has been extraordinarily high – higher than in Vietnam and more than double the cost in Korea. Congress has provided the American military in Iraq with $634 billion, but this figure overlooks a number of ‘hidden’ costs. On the American side alone, 4000 soldiers have been killed, almost 70,000 have returned home wounded, injured or ill from Iraq and Afghanistan, tens of thousands have been diagnosed with post-traumatic stress disorder, some reduced to a ‘persistent vegetative state’ by ‘traumatic brain injury’, others suffering from ‘polytrauma’, a ferocious complex of symptoms usually caused by booby-trapped mines and other roadside explosive devices.

The human cost of the war also exacts a quantifiable financial toll. Take lifetime veteran benefits, which were not included in the $800 billion Congress has apportioned for Iraq and Afghanistan: that’s another $285 billion. Then there is the cost of care for those with physical and psychological injuries. According to Stiglitz and Bilmes, even if US troop levels fall to 55,000 non-combat soldiers by 2012 and injury rates drop by 50 per cent, the combined ‘medical, disability and social security disability costs’ will be roughly $400 billion. If those troops aren’t withdrawn, the price rises by $300 billion.

The US government isn’t keen on providing benefits to veterans – or, for that matter, to the families of dead soldiers. In January 2005 David Chu, under secretary of defense for personnel and readiness, told the Wall Street Journal that benefits were becoming ‘hurtful. They are taking away from the nation’s ability to defend itself.’ The US doesn’t make it easy for veterans to collect. Once they apply to the Veterans Benefits Administration, they face an intimidating amount of paperwork, the loss of their military income and an average wait of six months for their claim to be processed – from 99 days in Salt Lake City to 237 in Honolulu. (If a claim is rejected, an appeal takes two years to process.) The money that severely disabled veterans receive from the Department of Veterans Affairs and Social Security doesn’t begin to cover their care, a ‘social cost’ that someone else has to bear.

Soldiers injured in battle have also been chased by the Pentagon for ‘payment of non-existent military debts’: Stiglitz and Bilmes cite the case of an Army Reserve staff sergeant who, after returning from Iraq with his right leg cut off at the knee, was ‘forced to spend eighteen months disputing an erroneously recorded debt of $2231’. This vigilance is especially striking when you consider that the Pentagon recently failed its financial audit for the tenth year in a row – and that the US government isn’t even spending its own money on the war. As Stiglitz and Bilmes point out, the war has been ‘financed entirely by borrowing’, since Bush has refused to raise taxes and has actually reduced those on the rich. That money – almost a trillion dollars so far, a tenth of the national deficit – will have to be paid back with interest: ‘There are three amounts to consider: interest we have already paid on money we have already borrowed; interest we will have to pay in the future on what has already been borrowed; and interest payments on future borrowings.’

In addition, according to Stiglitz and Bilmes, the direct cost to the world economy of higher oil prices (from $25 a barrel to $90) is approximately $1.1 trillion – a ‘moderate estimate’ – and ‘the meter is still ticking.’ Britain may have been spared Bush’s ‘policy of fiscal profligacy’, but the increased oil bill alone will cost it more than £3 billion by 2010.

The hardest figure to establish is the cost to Iraq. It doesn’t help that the country is governed – if that is the word – by what Ed Harriman described in the LRB (6 September 2007) as ‘the most corrupt regime in the Middle East’. Nor does it help that the US refuses to count Iraqi casualties, except those who die fighting alongside Coalition troops (7697 at the end of 2007, almost twice the number of Americans killed). What we do know is that Iraq has experienced the largest forced migration in the region since 1948, and that its refugees are now adding to the budgetary strains on other governments, mostly in Arab countries like Jordan and Syria. The US has allowed only a couple of thousand of Iraqis to settle within its borders, on the grounds that the people they’ve ‘liberated’ might pose a threat to national security. Besides, they will be needed to rebuild their own country, even if it exists in name only.

[*] The Three Trillion Dollar War: The True Cost of the Iraq Conflict (Allen Lane, 311 pp., £20, February, 978 1 846 14128 7).