Unfunded Liabilities: A Cost Profile of the Iraq War

Joseph E. Stiglitz (Columbia University) and Linda J. Bilmes (Harvard University) wrote in 2008, "The Three Trillion Dollar War."  It was an attempt to examine and describe the full costs of the Iraq war to the general public and contextualize the implications of the American public's decision to allow the Bush junta unfettered war making authority.  Although the original figures were met with usual hostility from cultural managers and propagandists on the right,  additional studies completed by the Joint Economic Committee of Congress and the non-partisan Congressional Budget Office, concluded that the war would cost American taxpayers at least $3.5 trillion or between $1.4 and $2.2 trillion respectively.

Today they update the assumptions and cost profile of the cost of the Iraq war in a Washington Post opinion piece labelled, "The true cost of the Iraq war: $3 trillion and beyond." They briefly expand on four areas that have developed over the past two years: Afghanistan, the Oil market, the Federal debt, and the financial crisis. I've highlighted the most illuminating sections of the article below.

Afghanistan

The Iraq invasion diverted our attention from the Afghan war, now entering its 10th year... It is hard to believe that we would be embroiled in a bloody conflict in Afghanistan today if we had devoted the resources there that we instead deployed in Iraq. A troop surge in 2003 -- before the warlords and the Taliban reestablished control -- would have been much more effective than a surge in 2010.

Oil

We now believe that a more realistic (if still conservative) estimate of the war's impact on prices works out to at least $10 per barrel. That would add at least $250 billion in direct costs to our original assessment of the war's price tag. But the cost of this increase doesn't stop there: Higher oil prices had a devastating effect on the economy.

Federal Debt

There is no question that the Iraq war added substantially to the federal debt. This was the first time in American history that the government cut taxes as it went to war. The result: a war completely funded by borrowing. U.S. debt soared from $6.4 trillion in March 2003 to $10 trillion in 2008 (before the financial crisis); at least a quarter of that increase is directly attributable to the war. And that doesn't include future health care and disability payments for veterans, which will add another half-trillion dollars to the debt.

Financial Crisis

Saying what might have been is always difficult, especially with something as complex as the global financial crisis, which had many contributing factors. Perhaps the crisis would have happened in any case. But almost surely, with more spending at home, and without the need for such low interest rates and such soft regulation to keep the economy going in its absence, the bubble would have been smaller, and the consequences of its breaking therefore less severe. To put it more bluntly: The war contributed indirectly to disastrous monetary policy and regulations.