Iraq war could cost US over $2 trillion, says Nobel prize-winning economist

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Sat, 7 Jan 2006 18:51:05 -0500

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http://www.guardian.co.uk/international/story/0,,1681078,00.html

 

Iraq war could cost US over $2 trillion, says Nobel prize-winning

economist

 

· Economists say official estimates are far too low

· New calculation takes in dead and injured soldiers

 

Jamie Wilson in Washington

Saturday January 7, 2006

The Guardian

 

The real cost to the US of the Iraq war is likely to be between $1

trillion and $2 trillion (£1.1 trillion), up to 10 times more than

previously thought, according to a report written by a Nobel

prize-winning economist and a Harvard budget expert.

 

The study, which expanded on traditional estimates by including such

costs as lifetime disability and healthcare for troops injured in the

conflict as well as the impact on the American economy, concluded that

the US government is continuing to underestimate the cost of the war.

 

Article continues

The report came during one of the most deadly periods in Iraq since

the invasion, with the US military yesterday revising upwards to 11

the number of its troops killed during a wave of insurgent attacks on

Thursday. More than 130 civilians were also killed when suicide

bombers struck Shia pilgrims in Karbala and a police recruiting

station in Ramadi.

 

The paper on the real cost of the war, written by Joseph Stiglitz, a

Columbia University professor who won the Nobel prize for economics in

2001, and Linda Bilmes, a Harvard budget expert, is likely to add to

the pressure on the White House on the war. It also followed the

revelation this week that the White House had scaled back ambitions to

rebuild Iraq and did not intend to seek funds for reconstruction.

 

Mr Stiglitz told the Guardian that despite the staggering costs laid

out in their paper the economists had erred on the side of caution.

" Our estimates are very conservative, and it could be that the final

costs will be much higher. And it should be noted they do not include

the costs of the conflict to either Iraq or the UK. " In 2003, as US

and British troops were massing on the Iraq border, Larry Lindsey,

George Bush's economic adviser, suggested the costs might reach

$200bn. The White House said the figure was far too high, and the

deputy defence secretary, Paul Wolfowitz, said Iraq could finance its

own reconstruction.

 

Three years later, with more than 140,000 US soldiers on the ground in

Iraq, even the $200bn figure was very low, according to the two

economists.

 

Congress has appropriated $251bn for military operations, and the

Congressional budget office has now estimated that under one plausible

scenario the Iraq war will cost over $230bn more in the next 10 years.

According to Mr Stiglitz and Ms Bilmes, whose paper is due to be

presented to the Allied Social Sciences Association in Boston

tomorrow, there are substantial future costs not included in the

Congressional calculations.

 

For instance, the latest Pentagon figures show that more than 16,000

military personnel have been wounded in Iraq. Due to improvements in

body armour, there has been an unusually high number of soldiers who

have survived major wounds such as brain damage, spinal injuries and

amputations. The economists predict the cost of lifetime care for the

thousands of troops who have suffered brain injuries alone could run

to $35bn. Taking in increased defence spending as a result of the war,

veterans' disability payments and demobilisation costs, the economists

predict the budgetary costs of the war alone could approach $1 trillion.

 

The paper also came amid the first indications from the Pentagon that

it intended to scale down its costly presence in Iraq this year.

 

Last night, Ayman al-Zawahiri, al-Qaida's number two, said in a video

that hints of the American withdrawal amounted to a " victory for Islam " .

 

The unforeseen costs of the war have been blamed on poor planning and

vision by the architects of the invasion. In a frank admission

yesterday, Paul Bremer, the first US administrator of postwar Iraq,

said the Americans did not anticipate the uprising that has persisted

since flaring in 2004. " We really didn't see the insurgency coming, "

he told NBC television.

 

But the economists' costings went much further than the economic value

of lives lost. They factored in items such as the higher oil prices

which could partly be attributed to the war. They also calculated the

effect if a proportion of the money spent on the Iraq war was

allocated to other causes. These factors could add tens of billions of

dollars.

 

Mr Stiglitz, a former World Bank chief economist, said the paper,

which will be available on josephstiglitz.com, did not attempt to

explain whether Americans were deliberately misled or whether the

underestimate was due to incompetence.

 

But in terms of the total cost of the war " there may have been

alternative ways of spending a fraction of that amount that would have

enhanced America's security more, and done a better job in winning the

hearts and minds of those in the Middle East and promoting democracy " .