April 1, 2008 – When the United States invaded Iraq in March 2003, Americans were told Iraqi oil would cover the costs of the war and rebuilding. Defense Secretary Donald Rumsfeld scoffed at estimates of $100 billion.
Nobel Prize-winning economist Joseph Stiglitz of Columbia University and Harvard University professor Linda Bilmes raised a stir in 2006 by estimating the real cost of the war to be $1 trillion. That estimate has been tripled and the title of their new book is “The Three Trillion Dollar War.”
Write Stiglitz and Bilmes a question now. They will answer questions for McClatchy readers between April 1 and April 15.
Most Recently Answered Questions
Q: How much money could we have saved if we did not have “contractors” doing the jobs that used to be done by our military? (i.e. security, food & laundry services, construction, etc.)
Submitted by dave from anaheim, ca
A: It is hard to get a precise number. It appears that, at least in many case, using contractors at least doubles the cost. Part of the reason that it is difficult to get a precise number is explained in the book: the government appears to be financing both the insurance premia for death and disability and much of the benefits (as strange as that may seem.) There is no full accounting. The overall cost of using the contractors is, however, far greater. We have created competition for our military–contractors doing the same work as soldiers are paid far more. This is bad for morale, but it also means that when their service time is over, many leave to work for the better paying contractors. In response, the military is force to pay big re-enlistment bonuses. But the contractors have cost us in other ways: they focus on minimizing costs and maximizing profits, and those objectives are often not consistent with our broader strategic objectives, as we explain in our book.
Answered 04/09/08 19:23:19 by Joseph Stiglitz
Q: Before the war started, US polls 82% of Americans against war, 78% of British against war is this our democracy or does this constitute dictatorships.
Submitted by arloughlin from glasgow
A: We have a republican form of government, in which we delegate responsibility for most decisions to Congress and the President. If we don’t like the decisions they make–if they make decisions that are flawed, or decisions that go against the wishes of the vast majority of Americans–they will face the consequences in elections. But information is imperfect. Citizens are not fully informed of what has happened–especially when you have a President who has deliberately tried to keep key information from the American people. Special interests make large campaign contributions, and help shape public perceptions. As a result, our elected representatives are not as “accountable” as they should be.
Answered 04/09/08 19:18:19 by Joseph Stiglitz
Q: dear sirs,did u ever estimate the cost of continouus lies spoken by bush administration in the context of iraq war?
Submitted by aqeel ahmad from pakistan
A: One of the big costs of the “deceptions” (not sure what else to call them) of the Bush Administration is that it has lost its credibility. It said there were weapons of mass destruction, and there none. It was there as a connection between Iraq and 9/1l, and there wasn’t. It said the war would cost between $50 to $60 billion; now we are spending that amount up front every three to four months. It has hidden from the American people the total costs of the war, even the total number who have been injured. it has repeately told the American people that victory is just around the corner. We keep turning corners, trying new strategies, and victory–whatever that means–remains as elusive as ever, even as we have lowered our expectations. If Americans lack confidence in the most recent assertions, is it a surprise?
Answered 04/09/08 19:14:12 by Joseph Stiglitz
Q: The Iraq War has removed a significant amount of oil from the world market. How much has the absence of this oil contributed to the rise in prices? How great is the negative impact of the oil price increase on the American economy, especially now that we are in a recession.
Submitted by John Reinke from Redmond, WA
A: In response to several earlier questions, I explained how the war contributed to the rising oil prices. In our book, we attributed only $5 to $10 of the $75 to $85 rise in the price of oil to the war, but I actually think the war was responsible for a far larger part of the increase in the price of oil. As we explain in the book, the high oil prices have had a very, very negative effect ont he economy–the effects of which were covered up by the Fed. Money spent on Saudi Arabian or Kuwait oil (or oil pruchased from any other oil exporter) is money that is not available to be spent here at home. That means the economy is weaker than it otherwise would be. As I mentioned, the Fed covered up these effects through a flood of liquidity and lax regulations. It fueled a housing bubble and a consumption boom. But it can’t do it any more. So in the coming years, we’ll be feeling the bite of the high oil prices much more.
Answered 04/09/08 19:10:30 by Joseph Stiglitz
Q: The price of crude oil has increased dramatically since the Iraq invasion. How much of this price increase can be attributed to the Iraq operation and is it due primarily to speculation in commodities (“the terror premium”), demand for fuel by the US military, or inflationary effects of war spending?
Submitted by Mitch Friend from Springfield, MO
A: Before the war, the price of oil was around $25 a barrel. Now it is $100 to $110 a barrel. In our book, we attribute a mere $5 to $10 to the war. We believe that number is very conservative–and so our total number is very conservative. Futures markets predicted that the price would remain around $25 for at least the next decade. The realized that there would be increased demand from China and other emerging mrkets. But they expected supply to increase in tandem with demand–mainly increased supplies from the low cost providers, those in the middle east. The war changed that equation. Thus, the war can be given “credit” for most of the price increase. It set forth an adverse price dynamic. At the high prices, oil exporting countries didn’t need to sell as much oil to meet their budgetary needs. Indeed, with prices quadrupling, they face a big problem of knowing what to do with the money that is literally pouring in. To many, it seems the best strategy is to keep more of the oil below the ground. The US military does use up huge amounts of fuel–it is a big factor in the cost of the war. But from a global perspective, the demand is relatively small.
Answered 04/09/08 19:06:32 by Joseph Stiglitz
Q: This success of this so-called “surge” is based basically on the fact that the U.S. is throwing money at anyone who will take it. Millions and millions of dollars…now that this policy is unraveling why do you think that the main stream media has totally ignored the real reasons for the administrations false claims that the “surge” has been a success?
Submitted by William R. Waitkus from Phoenix,AZ
A: I find it difficult to understand fully media coverage of the war. Even before the war, protests marches got little coverage. The New York Times coverage of scandals are well known. I think there is a certain fear of being labelel unpatriotic. Interestingly, when our earlier paper on the cost of the war came out in early 2006, it received far more extensive coverage in Europe than in the United States. Our new book has, from most quarters, received very good coverage–but there are some glaring omissions. While on the op-ed page, there has been extensive discussion of our book, reportedly, the New York Times Book Review has decided not to review the book! The surge is clearly a complicated story. We should put the claimed success in perspective: the level of violence is still high. Such levels of violence anywhere else in the world would be viewed with alarm. We have just reduced the level of violence to the intolerable level that it was earlier. No one is sure about why the violence has been reduced, and therefore whether the lower levels will be sustained. The increased troops probably played a role; so too may have decisions in Iran about the extent and kind of support they are providing a variety of groups in Iraq. This in turn may have played a role in the unilateral truce by Sadr. What we do know is that the strategy of “buying” militia to our side is a risky one. it is similar to the strategy that the British used in the south, in Basra. Events of the past couple of weeks have shown some of the problems with that strategy.
Answered 04/09/08 19:01:02 by Joseph Stiglitz
Q: Using your format for calculation of the Iraq war’s cost, what would the cost of WWII actually be? Would it not potentially exceed the cumulative GDP of every year since 1941 in current dollars? Could your format be applied to unfunded Social Security and Medicare obligations and what would that cost be?
Submitted by Phil Brewster from Overland Park, KS
A: We believe that the kind of approach that we have taken for the Iraq war should become a matter of routine–we should do it for any future war. It would be of considerable historical interest to do it for earlier wars, but it would be an enormous amount of work. (Getting the information and analyzing it for the Iraq war was a major undertaking, and we were able to make use of a number of studies–of a kind that are not available for earlier wars.) The costs of caring for veterans of World War IIand providing disability compensation has been significant. In fact, expenditures didn’t peak until 1993, 48 years after the cessation of hostilities–an important warning that we will be paying the bills for the Iraq war for decades to come. But medicine was not as good then as it is today, so the ratio of those who survived injuries to those who died was much lower. The unfunded liability associated with Social Security and Medicare obligations are large, though the nature of the uncertainties in their magnitude are quite different. For instance, in the case of social security, the gap in funding may be relatively small if migration continues at the current rate (measured as a percentage of our work force.) Still, under standard assumptions (which assume more limited migration), the gap in finance is sufficiently small that we could put social security on sound financial footing for the next fifty to seventy five years with a fraction of what the Iraq war has cost our economy.
Answered 04/09/08 18:52:20 by Joseph Stiglitz
Q: If you assume a 90% drawdown in Iraq of U.S. combat troops and contractor support within the next two years, what kind of macro economic policy would you prescribe to address our structural deficit and the declining income prospects of a growing proportion of Americans?
Submitted by Mark Wormington from Longview, WA
A: We have to realize that the peace dividend is going to be smaller than many people believe–we will stay have to pay disability benefits and health care for the many returning veterans, and we will have to pay to restore the military to its pre-war strength. Leaving Iraq will provide us an opportunity to ask the more fundamental question: how best to provide for our security in the twenty-first century. The Cold War is over, yet much of our military strategy remains unchanged. We are investing billions of dollars in weapons that don’t work against enemies that don’t exist. We can go more security for fewer dollars, and use the remaining dollars for investments that increase the productivity–and the wages–of the growing proportion of Americans who have seen their real incomes decline in the last 8 years.
Answered 04/09/08 18:43:37 by Joseph Stiglitz
Q: Thank you for writing the book and for raising awareness of the combined financial and human costs of this tragic fiasco (I am reading my copy). What else can we do as ordinary citizens to influence our elected officials to at least abandon the “emergency” supplemental appropriations in favor of proper budgeting of the Iraq war costs, when the burn rate is now known and predictable. I have written to my Senators and Congressman about this specific concern and have had LTEs published, including in both cases references to your excellent 2006 paper (“The Economic Costs of the Iraq War”). Not surprisingly the only coherent response to this specific question has been from my Senator Durbin.
Submitted by Robert Teiken from Crystal Lake, IL
A: Keep up doing what you are doing. Go to a campaign stop of your Congressman and ask him–put him on the spot. I think there is insufficient knowledge of the problem. Figure out a good time to write a letter to the editor to your local newspaper on the topic–for instance, the next time the President again uses an emergency appropriation to get more money for the war.
Answered 04/09/08 18:40:06 by Joseph Stiglitz
Q: So why was the true cost of the war so vastly underestimated? How expensive will this war get in terms of dollars if the conflict stretches out another five years?
Submitted by Jim from Rockville, MD
A: It appears that it was underestimated initially because the Administration ignored the voices of those who raised the cost issue. You recall that Larry Lindsey, the National Economic Advisor at the time, said that the war might cost $200 bn (instead of the $50 billion that Runmsfeld and Wolforwitz promised), and Lindsey was fired for his opinion. In academia, Yale Professor William Nordhaus published a very detailed study in 2003 showing that the war costs could reach $2 trillion if the war went badly — again, the Administration seemed to expect a short, quick war and paid no attention. In addition, there were pockets of incredibly poor planning – the Dept of Veterans Affairs in 2005 and 2006 was still estimating costs based on its projections from 2001 — before the war even started. And the Pentagon -which has flunked its financial audits for the past 10 years straight and has no system of tracking expenditures — was incapable of producing a coherent long-term estimate of depreciation of equipment, munitions, etc. (Outside experts had to do this). In our book we estimate the costs through 2017 under 2 scenarios; first a fairly rapid drawdown of troops and cutting back on the mission of those remaining; and second a more slow drawdown with a continued military mission. You can read the details in the book but essentially it costs around $1 trillion more for the second scenario.
Answered 04/09/08 14:01:08 by Linda Bilmes
Q: Why don’t you show in more detail what each 12 billion dollars each month would buy? Billions. trillions of dollars, these are abstractions for the public. Talk in terms of schools built, highways fixed, healthcare provided ect. Than it will sink in and make a difference.
Submitted by K.B. from Newark, New Jersey
A: go to national priorities project .org and they provide that information
Answered 04/09/08 13:54:29 by Linda Bilmes
Q: I wonder how much of the three trillion dollar amount is from the lack of accounting oversite. The Bush administration has blocked many oversite initiatives. We need a new Truman commission to hold military contractors and suppliers accountable and liable for sanctions. Professor Stiglit’s book is horrific to any rational American..
Submitted by Michael Niebauer from Coalport PA
A: You are right. In the private sector, the Congress almost unanimously passed the Sarbanes-Oxley law which requires detail accountability for financial reports. This followed the Enron and other acccounting scandals. But there is no comparable requirement in government. The war has been funded through a series of “emergency” supplementals, which circumvent all the normal checks and balances on spending, and avoid all the normal oversight mechanisms in government. The lack of oversight has led to profiteering, overpayments to contracts, the fact that KBR has been able to evade hundreds of millions in taxes by employing people through shell companies in the Cayman Islands — etc.
Answered 04/09/08 13:53:14 by Linda Bilmes
Q: Does $3 trillion include only the Iraq War, or the cost of the larger War on Terror, including the cost of future wars, should we ever decide to confront those actually responsible for the attacks on 9/11 and the rise of Al Qaeda? http://www.asecondlookatthesaudis.com Thanks.
Submitted by Bill B. from Chicago, IL
A: The $3 trillion refers to the cash cost of the war to date, + the long-term costs of providing medical care and disability compensation to veterans, + the cost of military reset (equipment and personnel) + interest costs if you count budgetary costs or economic and social costs if you account for war costs on an economic basis.
Answered 04/09/08 13:49:50 by Linda Bilmes
Q: Americans can’t grasp the incredible cost of this War of Choice. Suggestion: United States University Economists/Professors, from several schools, host a joint meeting asap. The audience majority should include “average” Americans and your assignment is to allow them to ask questions and for your panel to answer these inquiries in common sense words. The Main Stream Media has rarely attempted to educate us about this War of Choice. With no DRAFT, most Americans read a few headlines and go about their daily lives with little understanding of just how they are being impacted on a daily basis and will be for years/generations to come. MAKE A SPLASH TO GET THE NEWS COVERAGE SO DESPERATELY NEEDED. THE MSM IS LAZY AT BEST. Inviting “average” Americans will be most helpful. Salesclerks, farmers, auto workers, office workers, cooks and servers, bus drivers, small shop owners, teachers, truckers, and on and on. Sorry but very few will buy and read your book. You need to step it up to the next level by educating us. How about it? There is little time to wait.
Submitted by Midwest Maggie from Highland Park, IL
A: I am just an ordinary professor doing research with the help of some student volunteers and 1/2 of a faculty assistant. But remember what we know from the Bible. In the loaves and fishes story — even one small boy could make a difference. In Elija (2 Kings 4:42-43) there is a similar story of loaves of barley. We can each make a difference — I urge you to go forth and try to help with this!
Answered 04/09/08 13:47:49 by Linda Bilmes
Q: What do you think the result of this expense will be on the pocketbook of the average American family? How will this effect the value of the US dollar and the cost of everyday products, food, clothing, not big screen TV’s?
Submitted by Fred Lang from Wilmington, De
A: Right now the average American household spends $100 per month to support the war (directly) and racks up another $100 in debt every month for long-term war costs (such as long-term medical care for wounded veterans). In addition, the war has contributed to the increased in oil prices. Oil cost $25 per barrel before we invaded Iraq and it now costs more than $100 per barrel. In our book we only attribute $5-$10 of this increase directly to the Iraq war but even this amount increased what we spend every month.
Answered 04/09/08 13:39:40 by Linda Bilmes
Q: One comment that has been raised is: What would have been the cost of doing nothing? How do you respond? Bill Gerling
Submitted by William Gerling from Dallas Tx
A: Remember that prior to the invasion of Iraq we were actively following a policy of containment that involved enforcing the southern and northern “no-fly” zones in Iraq. That policy, which involved flying some 30,000 sorties per year, cost some $10 billion per year. It was an effective policy since it did apparently stop Iraq from developing any weapons of mass destruction. We have substracted this amount (over $50 bn by now) from the cost of the war.
Answered 04/09/08 13:37:10 by Linda Bilmes
Q: Given that current estimates project a 3,000,000,000 pricetag for the current war, if John McCain is elected President and we maintain troops for at least another decade, what would the projected cost to our economy be? What would the personal responsibility of every individual in this country be for such an amount. I would suggest that every American considering electing John McCain be sent a bill requesting a check for their share of the total cost. Those of us opposed to this war will happily earmark our share of the burden towards helping those injured and/or in need as a result of this debacle.
Submitted by William Rothschild from Monterey, CA
A: Every American household will this year pay about $1200 for the war — $2000 if you include the long-term costs of caring for veterans and military reset. To date we are just borrowing this money and none of the candidates has addressed the issue of how we pay for the ongoing cost.
Answered 04/09/08 13:34:42 by Linda Bilmes
Q: What will be the cost of taking care (Physically & Mentally) of our troops once they come bk from Iraq?
Submitted by Patrick Hall from Orlando, FL
A: The overall long-term cost of providing medical care and disability compensation to veterans from Iraq and Afghanistan, over the course of their lives, is some $500-$700 billion in today’s dollars.
Answered 04/09/08 13:32:54 by Linda Bilmes
Q: what sort of a world class transportation system could we have built in the U.S. wth 3 trillion? and how many people would have been put to work doing this.
Submitted by rob trerotoli from fort lauderdale fl
A: There are so many big problems that could have been fixed with the $600bn we have already spent — making Social Security solvent for 50 years, or providing health insurance for children, or re-investing in our infrastructure, which would have stumulated the economy for decades to come. The opportunity cost of the war — which we have not quantified in our book – is staggering.
Answered 04/09/08 13:31:37 by Linda Bilmes
Q: Why does the media consistantly let the Bush administration (and much of Congress) get away with ignoring costs of war like debt service and long-term health care ?
Submitted by Erik from Billings, Montana
A: There has been some excellent reporting in the media — including reports by Stella Hopkins (Charlotte Observer), Charles Sennott (Boston Globe) Dana Priest (Washington Post), Nick Kristof and Bob Herbert (NY Times), David Francis (Christian Science Monitor), Linda Robinson (US News& World Repor), Dan Ephron (Newsweek), Mark Benjamin (Salon), and many others. Despite this — overall the media has been reluctant to delve into the details of the war costs and to really understand and report them.
Answered 04/09/08 13:29:57 by Linda Bilmes
Q: How do you measure success anyway? Is winning the war in Iraq more important than the economy?
Submitted by Danel from Boston, ma
A: Our book simply lays out the full cost of the war in Iraq, so that the public can decide whether or not it is worth it. What is unacceptable is to make that decision without understanding the full cost of waging the war, in terms of the financial cost, the strain on our military, and the economic impact. Secondly, the war has until now been financed entirely by borrowing, largely from abroad. This is the first time in US history that we have paid for a war this way. If the war is worth fighting, then we should have a discussion on how best to pay for the war. President Johnson raised taxes to pay for Vietnam, President Reagan raised taxes to pay for the military build-up in the Cold War, but President Bush has cut taxes during this war — adding some $800 bn to the national debt.
Answered 04/09/08 13:26:36 by Linda Bilmes
Q: Many people – myself included – feel that the Iraq war was a distraction from our much more justified and relevant efforts in Afghanistan to topple the Taliban and establish security in that region. Even assuming we withdraw from Iraq in the future and thus no longer pay the upfront $12 billion a month costs you have mentioned for the war, we still will be faced with that $3 trillion enormous burden of debt accrued. Considering the current war was financed with money we didn’t really have, and you suggest the necessity of tax hikes and spending cuts to deal with the costs of the Iraq war, is it really feasible – as many hope – that resources in the form of money or additional troops would be freed up to help with the situation in Afghanistan? Simply put, at this point, can we really afford to be fighting any wars?
Submitted by Lucas Adams from San Diego, CA
A: we do agree that one of the costs of the war in Iraq has been to divert attention and resources from Afghanistan. The long-term costs of the war in Iraq will be felt for decades in terms of payments to veterans, funding for military reset and interest payments on the debt. Afghanistan is a different set of political decisions but it is an equally if not more expensive war, because the cost of transporting equipment, fuel, food, contract support and other needs to remote areas is extremely high. One difference of course is that NATO contributes a large percentage of the troops so we are not the only ones footing the bill.
Answered 04/09/08 13:22:02 by Linda Bilmes
Q: With the war costing so much money, the Rupblicans under Bush have borrowed so much money from China and when Americans talk about any government and generation paying for their debts I do not see the present Administration doing that. They do not even want to ask Iraq to pay for their reconstruction. The government is the first that I know that gave tax cuts to the rich in times of a war without end only to indebt the future of America. How do you think America can lead the world when they cannot face Abuses of Human rights perpetrated by China in Tibet and Dafur because America is so financially dependent in the name of loans from China. To me what I see as the consequence of this Iraq War is that America has become a “Toothless Bulldog” to the extent that they cannot even face a small militia of Alqueda in the small mountains of Afghanistan but will camouflage in an endless failing war in Iraq.
Submitted by Venatius from Laurel, MD
A: This is the first time in US history that we have borrowed all the money to wage a war, and the second time we have borrowed from abroad to fund a war. (The first time was when the colonies borrowed from France to fight England). We are also paying world oil prices of over $3 gallon for fuel instead of insisting on subsidized Iraqi oil.
Answered 04/09/08 12:48:02 by Linda Bilmes
Q: Who has the responsibility for naming the subcontractors, who apparently represent cheaper labor from countries outside Iraq instead of Iraqi firms which might provide employment for needy Iraqis. If it is the primary contractors, shouldn’t our government attempt to influence this selection in order to help bring more employment to Iraq?
Submitted by Audrey Jaffa from Worcester, PA
A: The prime contractors have the responsibility and I agree with you that the government could intervene much more forcefully in the guidelines for selections of subcontractors. Most federal agencies do require that primes hit certain benchmarks for things like percentage of subcontractors that are drawn from small business, minority-owned businesses, etc. But in this case we have not required that the primes hire local Iraqis, even though it is clearly in the US interest that they do so. Why? Basically because many Iraqis become security targets if they work for US companies, and therefore they are less reliable than say, imported Philipino workers housed in a compound. The US has not found a way around this problem.
Answered 04/09/08 12:45:45 by Linda Bilmes
Q: Is our economy salvageable?
Submitted by Mike Kendall from Lakeland, FL
A: The US is a wealthy country and the war is not going to ruin the US economy. But the war has weakened our economy in several ways. First, the money spent (which largely pays for foreign subcontractors in Iraq to do transportation, cooking, laundry, repairs, and of course fuel costs) does not stimulate the US economy. Second, the war has contributed to the increase in oil prices. Third, we have borrowed the money for the war, thus increasing deficits and adding to the national debt. Fourth, we have less ability to stimulate the economy in this downturn because we are already in deficit (unlike in 2001 when we had a surplus so the recession was mild). Even if the US income levels were to fall 10%, we would still be a rich country compared to most, and we could recover. But it is a mistake to think that we can have a war for free — which is what the Administration is implying.
Answered 04/09/08 12:42:27 by Linda Bilmes
Q: Do you think that Bush will go down in history as the biggest rip off artist of the middle class? Im 77 years old and have never lived under a worst administration and that includes Nixon and Hoover. I am also a Korean War veteran. By the way what took place at that secret meeting Cheny had with his rich oil tycoon friends early on in the Bush administration????
Submitted by Roy from Coram,NY
A: I wrote an article in Vanity Fair last fall asking the question, from the perspective of economics, who will go down in history as America’s worst president, Herbert Hoover or George Bush. I conclude that, in terms of long term damage, George Bush is likely to win that dubious honor. The problems with the American economy that have come out into the open in the last few months have bolstered Bush’s claim as victor in that contest.
Answered 04/07/08 12:33:11 by Joseph Stiglitz
Q: Considering that this Economic Blood Fest was instigated from the Halls & Think Tanks of Ivy League Academia, besides Profit for the authors what is the point of this Intellectual Monday morning quarterbacking? It sure as Hell doesn’t matter to all the Dead nor is it going to bring the Instigators to Justice.
Submitted by Clarke Davis from Santa Rosa,Ca.
A: We have to make a decision about when and how to leave, and this kind of analysis–which should have been done before we went to war–is essential if we are to make an intelligent decision. We continue to underfund our veterans, and it is important for Americans to know this. It is a national disgrace. Finally, while we may not be able to prevent these kinds of errors in the future, we can reduce the likelihood of their occuring. It is important to understand where we went wrong. We need to learn from our mistakes.
Answered 04/07/08 11:55:57 by Joseph Stiglitz
Q: Where do we go from here?
Submitted by Bob from Portsmouth Va
A: In our book, we talk about a framework for exiting. Everyone (or almost everyone) believes we should leave, at some time. The question is only when. We try to put forward a way of thinking about that. If we leave now, there may be chaos, or things might actually get better. (Most Iraqis think things will get better.) If we leave in four years time, theremay be chaos, or things might get better. The questions we need to ask are: If there is chaos, how much less chaos will there be in four years time? If things are better when we leave, how much better will they be in four years time than now? But in either case, is the difference worth the extra money that we will have to spend between now and then–at current rates of expenditure, $12 billion a month up front, perhaps $25 billion in total, is it worth the extra $1.2 trillion or so? If not, we should withdraw as soon as possible. We should remember: staying the course is going to cost more money. The armed forces are stretched. To maintain an effective fighting force, and keep the same number of troops in Iraq, will require monthly spending that is greater than the amounts we are now spending.
Answered 04/07/08 11:53:21 by Joseph Stiglitz
Q: Many National Guardsmen sent to Iraq left behind jobs either left vacant or filled by temporary substitutes who are probably less capable than the missing Guardsmen. Is it possible to estimate the economic cost of the withdrawal of the Guardsman from the civilian labor force?
Submitted by Craig Busse from Califon, NJ
A: A standard approach taken by economists is the following: the wage (or more broadly, the total employer’s compensatin, which includes benefits, including employer social security contributions) represents the value of their economic contribution (in economics jargon,it measures the value of their marginal product). If a job is left vacant, then this full compensation measures the loss in national output. In our study, we noted this loss, but did not include this number, mainly because we could not get accurate numbers. It is another reason we believe our estimates are conservative.
Answered 04/07/08 11:47:08 by Joseph Stiglitz
Q: How many years will it take for the US to pay down the cost of the war?
Submitted by Mark from Boston, MA
A: (See answer to similar question earlier) We will be passing on this debt to the next generation. At this point, there is no foreseeable date at which we will even begin to repay the debt.
Answered 04/06/08 10:23:50 by Joseph Stiglitz
Q: How many ‘contractors’ are in Iraq and how many have been killed so far?
Submitted by Maddie from Baltimore, MD
A: On the first question, see the answer to the previous question. More than a thousand contractors have already been killed. This provides a hint of the important role that contractors have been playing. This is the first war that we have gone so far in privatization. We explain the book why privatization makes no sense–it not only costs more, but can undermine the accomplishment of our mission. Contractors focus on minimzing costs; they do not focus on our broader goals. In the beginning of the war, for instance, it was improtant to win the hearts and minds of the Iraqi’s. With 60% unemployment, we had to create jobs. The Contractors brought in Nepalese and other workers because they were cheaper. Unemplloyed young men–with guns–is an explosive mixture, and it exploded.
Answered 04/06/08 10:22:44 by Joseph Stiglitz
Q: How many ‘contractors’ are in Iraq and how many have been killed so far? Also, how much would it have cost if the contractors were replaced with US military personnel?
Submitted by Maddie from Baltimore, MD
A: This is another example of how the US government is trying to keep information away from the American people. There is no complete accoutning of the number of contractors in Iraq. (A full accounting would, of course, have to include contractors in, say, Kuwait servicing trooops in Iraq.And one should probably include those in the U.S. who are helping to administer the contractors in Iraq) There are at least 100,000, probably considerably more, perhaps numbers almost equivalent to the numbers of troops. We estimate that using a contractor roughly doubles the cost.
Answered 04/06/08 10:19:08 by Joseph Stiglitz
Q: Can anyone tell us what is actually happening to the Iraqi oil money.
Submitted by Gary from Tallahassee
A: The Iraqi oil money is, I believe, going to the Iraqi government. Some of it is going to maintain what little security they have. It is not going to repay the U.S. Little of it is going to rebuild the country, where infrastructure remains devastated. Electricity and water are still not back to pre-war levels–with devastating consequences for the people.
Answered 04/06/08 10:15:30 by Joseph Stiglitz
Q: If the importance of oil flowing into the industrial nations is worth the cost of a Three trillion dollar “WAR” investment, the benefit must exceed the investment. In dollar value to an average american, what is the amount gained to each of our citizens. Eliminateing politics and right or wrong arguments, was value achieved for the citizens in the short term, or long term. This is a terrible question when first asked, but I must ask it. Status quo of oil use and consumption is to be tested and changed as supplies dwindle, but the investment dollars of “WAR” in the region has made Oil availablity within reach. This is the reason for the Investment, as callous as it sounds, but has it been a profitable investment for the average american.
Submitted by Randall F. Silkey Sr from Victoria, Texas
A: The relationship between the war and oil is one of the issues we discuss in our book. Some have argued we went to war to ensure a supply of oil. If that was its objective, it failed: it was an investment with a negative return. We could have increased the supply of oil far more easily simply by expanding (and improving) the oil-for-food program in Iraq. Since the war, the price of oil has increased from $25 a barrel to $100 a barrel. Futures markets had expected the price to remain aroudn $25 a barrel for the forseeable future. they foresaw increases in demand from china and elsewhere; but they anticipated increases in supply, mainly from low cost providers in the middle east. the war changed that equation. Even if the war had gone well, in the 21st century, the winner of the war does not get the “spoils” of owning the consequered coutry’s resources. It would have been Iraqi oil; and their citizens would have demanded that they get the full value of their oil. Iraqi exports are just now returning to the pre-war level.
Answered 04/06/08 10:13:04 by Joseph Stiglitz
Q: What effect will the financial turbulence have on the phenomenon of wealth concentration? Will the fat-cat Optimates absorb a disproportionate share of the unwinding, or will they manage to dodge the damage? If the latter, whom should the popluares rise up and slay?
Submitted by Patrick from Fountain Hills, AZ
A: Almost everyone, from the top to the bottom, will be affected by the turbulence. The people at the bottom will be particularly hurt–millions of Americans will lose their homes, and with it their life savings. In dollar terms, their losses will be smaller–they have very little wealth compared to those at the top. But in percentage terms, they will lose the most. The government has been bailing out those at the top. To be sure, shareholders in Bear Stearns lost a lot. But they still walked away with more than a billion dollars. And the governmemtn has been left holding considerable risk–without receiving any “insurance premium” in return. Now the Fed has extended its “lender of last resort” facility to investment banks–again without charging them a thing, and without even regulating them adequately. (There is talk of regulating them more in the future, but so far, it is mostly talk.) It is amazing to me that the Bush Administration continues to worry about “moral hazard” in doing something about poor people about to lose their homes, and yet almost ignores moral hazard when it comes to bailing out those at the top. Part of the problem lies in the so-called independent Fed. The Fed has reflected the views of the financial markets. The Fed Governor said, not to worry; if there is a bubble, and it breaks, we can manage it. There was a party, and their friends were enjoying it. He was obviously wrong about their ability to mjanage it. What he didn’t say was–if it breaks, taxpayer money would be at risk. It was a heads we win, tails you lose gamble.
Answered 04/06/08 10:08:21 by Joseph Stiglitz
Q: Everyone knows about the Halliburton no bid contracts and how the price of oil per barrel has been escalated by the war in Iraq. Have you estimated the cost to taxpayers for all the “no-bid” costs of the war, not just Haliburton; and how much more Americans have paid for the war in post-invasion gasoline prices?
Submitted by Marc Walls from Oklahoma City, OK
A: We have not estimated how much extra Americans have had to pay because of the sole-sourcing no bid contracts, but it clearly has been substantial. These excessive expenditures are, of course, on top of the fact that even with competitive bidding, contractors are expensive–far more expensive for performing the same task than the government (military), with all of its alleged inefficiency. We estimate that hiring a contractor roughly doubles the cost. One of the aspects of “dishonest” accoutning that we report in the book is, on different accounts, the governmetn pays the death and disability insurance–but even though the premia are high, exlcusioins in the insurance policy for deaths and disability due to hostile action mean that the government picks up the tab for the benefits. Even with competitive bidding, some of the contracts are cost plus. So the contractors just pass on any costs to the government. there is no incentive for efficiency–on the contrary, the more they spend, the more they make. Yet, in spite of these perverse incentives (hardly the market incentives that the Bush administration talks about), the numbmer of auditors overseeing these contracts has been reduced. In short, we know that the use of contractors has cost American citizens plenty; it will take a while–probably a careful audit in the next Administratoin–to find out how much. In our book, we do estimate how much the war has cost America in additoinal spending on oil. Oil prices have increased from around $25 a barrel to more than $100 a barrel; these increases in oil prices get translated, of course, into higher gasoline prices. If only $5 of that increase is attributed to the war, then the annual cost to America is $25 billion. Obviously, if more realistic numbers are used, the costs increase proportinately. (If a third of the increase is attributedf to the war, then the annual cost is $125 billion) But the costs to American consumers are even higher. We only look at the extra spending for imported oil. American oil companies have been doing well–at the expense of American consumers.
Answered 04/06/08 09:59:44 by Joseph Stiglitz
Q: If a Democrat is elected and they begin pulling troops out of Iraq, and we finally have only minimal forces deployed there, how long do you estimate it will take us to recover from the costs of the war? How long will it take to pay off the money we borrowed for it?
Submitted by Sue Britton from Casper, WY
A: To be frank, I am very pessimistic. The problem is that even before the war we had a deficit–in part caused by tax cuts for upper income Americans that we could not afford. We had developed what economists call a structural deficit–even if the economy were to reach full employment, there would still be a deficit. But now, our economy is going into recession. In addition to the structural deficit, we have a cyclical deficit. Our deficit this year is likely to be an all time record. Making matters worse, we also have an infrastructure deficit, and other problems–most notably in our health care system. All of this costs money. The war has created a huge unfunded entitlement–paying disability compensation and health care costs for our returning veterans. Even if we were to leave tomorrow, we would have bills to pay for decades to come. Eight years of President Bush will have increased our national debt by $3 trillion dollars. If interest rates return to their more normal level of, say, 5%, paying interest on this additoinal debt will cost $150 billion a year. In short, even if we repeal the tax cuts for upper income Americans, I see no prospect of our paying off the money we borrowed for it in the foreseeable future. More likely, these are debts we will pass on to future generations.
Answered 04/06/08 09:49:23 by Joseph Stiglitz
Q: It is my understanding that most, if not all, of the appropriations for funding the Iraq War have been “off book”; i.e., they weren’t included in the normal DoD budget. Can you provide a comparison for what has been expended through special appropriations and what has been expended through the normal budgetary process?
Submitted by Bo Alawine from Ocean Springs, MS
A: As you say, almost all of the spending has been through emergency appropriations, not subject to the kind of intense scrutiny that ordinary appropriates must undergo. There are two further problems. DoD accounts do not allow us to tell precisely how much of their ordinary expenditures are going towards the war. And their ordinary expenditures have themselves not passed the auditors’ scrutiny. there are billions of dollars of spending this is unaccounted for. We know that defense expenditures–beyond the iraq and afghanistan wars–has gone up more than a half trillion dollars cumulatively in the last five years. We know that at least some of this increasaed spending is war related. In our book we estimate that a quarter of it is. We have to pay more, for instance, to recruit soldiers. We have to replace more equipment. Almost surely, our number represents an underestimate.
Answered 04/06/08 09:42:58 by Joseph Stiglitz
Q: We know that military spending in the late 1930’s and 1940’s helped bring the nation out of the great depression. Why hasn’t the current tremendous spending on Iraq had an equivalent effect on our economy? It seems like there’s no war-spending bump at all.
Submitted by Thomas Owen from Crescent City
A: Unlike WWI, the Iraq was has had a net negative effect on the economy. This is for several reasons. First, the money that we spend every month goes largely to operational costs (fuel, laundry, cooking, transportation, repairs ) much of which is performed by sub-contractors from the Phillipines, Nepal and other countries. So in effect, the dollars spent do not have any positive return for the US economy. Second, because we have borrowed all the money to fight the war, largely from abroad, we have added to the deficit and to the national debt, which means we have to pay more interest and adds a burden onto the economy. Third, the war has contributed to the increase in oil prices, which of course take money out of the hands of consumers, and lower business margins, and transfer it to the oil producers.
Answered 04/04/08 12:59:08 by Linda Bilmes
Q: who should get the blame for this?
Submitted by jim franck from gleneden beach or
A: There are three major mistakes that have been made. First, the decision to invade Iraq in the first place. The Administration bears the responsibility for that decision. Second is the way we have chosen to pay for the war — entirely by borrowing the money in “emergency” supplemental approproiations, that permit little oversight, and choosing not to pay by cutting spending, raising taxes, selling war bonds, etc. For this, we are probably all to blame — the Congress and the Administration has done it together, and we the public have not spoken out sufficiently strongly in protest. Third, there is the manner in which the war has been waged, including the strain on our troops, the use of involuntary extensions such as “stop-loss”, the appalling treatment of many of our returning veterans, the failure to provide adequate body armor and MRAP vehicles for troops, the over-reliance on contractors, National Guards and reservists, the scanty Congressional oversight on how the war is being waged. There is plenty of blame to go around for this….
Answered 04/04/08 12:54:18 by Linda Bilmes
Q: How does the United States eventually pay off the debt, and at the same time maintain world leadership with a reasonable standare of living in the future?
Submitted by Dick Golob from Sunnyside, Wa 98944
A: This is a good question. Recently we have not been paying off our debt –simply borrowing more to pay off the interest. This is the equivalent of taking out a second credit card to pay off the minimum payment on the first one, and so forth. People feel that they have enjoyed a “tax cut” in recent years, but really we have just taken out a loan that we’ve been spending. Personally I believe that if our leaders had levelled with the public at the outset — and explained that we had a choice of a “tax cut” paid for by borrowing money from China or a lower deficit and no “tax cut” — I think the outcome would have been different. At this juncture, we will be forced to eventually raise taxes, fees, cut spending, restructure the defense budget and reduce entitlement benefits. Our children will bear much of the burden.
Answered 04/04/08 12:47:31 by Linda Bilmes
Q: Does the 3 trillion include the estimated interest, alone with the declining value of the US Dollar?
Submitted by Denis E Coughlin from Jensen Beach, FL
A: We have estimated the total costs both with and without interest. From a budgetary standpoint, the cost includes interest and reaches $3 trillion. From an economics perspective, the cost does not include interest (because there is an element of double-counting) but it does include the macroeconomic costs. In this method is also totals at least $3 trillion.
Answered 04/03/08 22:39:42 by Linda Bilmes
Q: Are your estimates based on a termination date for the occupation? Also, do your estimates include costs for long term treatment of casualties? Do your estimates include the construction and operation of the bases in Iraq? Are there any allowances for payments to the Iraqi people or government?
Submitted by jimmy cooper from san martin hidalgo, jalisco Mexico
A: If you read the book, you will see we have 2 scenarios in terms of the length and scale of US troop deployments. We include the cost of long-term treatment of casualties, and the costs (to the extent they can be determined) of base construction and operation. We have a chapter devoted to the costs to Iraq and other countries but it is not included in our $3 Trillion estimate.
Answered 04/03/08 22:37:04 by Linda Bilmes
Q: Question: Given that PTSD sometimes takes decades before the veterans admit to themselves they have “issues” with it as the recent past with former Senator Max Cleland waiting more than three decades before he asked the VA for mental health help in dealing with his symptoms of PTSD, unlike him I to waited intil Nov 2002 to admit I had a problem with PTSD, the stressor happened in February 1975, so 27 years later my coping mechanisms finally quit working, the VA could not get me into see a doctor until Jan almost 3 months later and in May after 4 months of interview they finally deteremined after tests and a 3 doctor panel that I was not trying to commit fraud but rather I had a classic case of severe chronic PTSD, they first awarded me a 50% award for PTSD, I even had a DAV service officer tell me I should be happy with 50% and not appeal it, needless to say since I was not capapble of working, I didn’t follow his advice and appealed, a year later after review the VARO rated me 100% P&T effective Dec 2003, not from the time I sought treatment in Nov 2002, or even Jan 2003 when I first saw the doctor, the effective date was the day I finally officially filed a compensation claim nearly a year later, the government is doing everything they can to nickle and dime the veterans to death, is there any way to make Congress correct the behavior of the [VA]? Thank you
Submitted by Mike Bailey from Columbia SC
A: The VA places the burden on the veteran to demonstrate that there is a problem — this is different from many countries, including Britain, Australia, and New Zealand, where the veteran is presumed to be correct. We have argued in the book that the process, the culture, and the philosophy we have in treating veterans needs to be reformed. However in the case of PTSD, part of the work needs to be from veterans like you, and the active VSOs, helping veterans and their families to recognize symptoms and to seek help sooner rather than later.
Answered 04/03/08 22:33:09 by Linda Bilmes
Q: Can you please provide an itemized list of the actual appropriations through 2008 (including supplementals) that have been passed by congress for the Iraq war? The hard (known-known) amount of money spent, and when? It gets reported in the media in drips and drabs, and there is never context, so it’s very hard to keep track and put into perspective as “x percent” of the federal budget, or of GDP. Please also say what the US defense budge is, including and excluding the war spending. Is it not true that the War is almost entirely off-budget, for calculating the budget deficit (almost like ‘core inflation’, it seems, defining away the problem). Thanks.
Submitted by David from Washington, DC
A: you need the buy the book! its all in there.
Answered 04/03/08 22:29:01 by Linda Bilmes
Q: Most economist (at least those whose opinions I have read) do not think that the Iraq war had anything to do with the US financial crisis or the recession it now faces. However, press reports indicate that you think otherwise, that this war triggered these events. Could you please elaborate on your thinking here and what you think others are missing? Thank you.
Submitted by David from Gaithersburg, MD
A: We do not think that the war triggered the economic crisis. What we have pointed out is that the war has weakened the economy, and thereby contributed to the economic slowdown. This is because the war has vastly increased our deficits, it has put upward pressure on oil prices, and it has not stimulated the economy — because much of the operational spending goes to things like fuel and contractor costs in Iraq that has no benefit in the US. Moreover, now that we are in a recession or close to it, we have much less rom to maneuver because the economy is weak and we have a huge deficit. By contrast, when we went into a recession in 2001, the budget had a huge surplus, which enabled us to soften the effects and to recovwer more quickly.
Answered 04/03/08 22:28:29 by Linda Bilmes
Q: why are not the american people in the streets in protest/?
Submitted by Jack Tuten from Pelahatchie Ms
A: Hard to know for sure, but one reason is that the sacrifice in this wra is not widely shared. The average person in America is not paying higher txes for the war (because we borrowed all the money to pay for the war), and is not at risk of sending their loved ones to fight (because there is no draft).
Answered 04/03/08 22:24:21 by Linda Bilmes
Q: The 600 Billion is the amount of money spent through the use of emergency supplementals. The budget includes the normal costs of the military, such as salaries, administration, and routine supplies. Since many of these budgeted costs are being used to support the Iraqi war, shouldn’t the up-front figure already be nearly 1 trillion? Shouldn’t we consider the total military costs (both budgeted and supplemental) when looking at costs?
Submitted by Gene Smith from Chambersburg, PA
A: In ourt book, one of the costs we count is the hidden cost of money in the regular defense budget that has been directly or indirectly spent as a result of the Iraq war. The total regular defense budget has increased by $500 billion, cumulatively, since 2001 and we estimate that 1/4 of that is due to Iraq and Afghanistan. Examples include the increased cost of recruiting, enlistment bonuses, re-enlistment bonuses, increased combat pay,pay increases beyond the expected increases, and increases in military medical coss for reservists and National Guards. But We do not include the cost of the regular pay for the military because we would be paying that anyway, regardless of war or peacetime.
Answered 04/03/08 22:22:26 by Linda Bilmes
Q: how much cash has gone to the profiteers, blackwater, halliburton, etc. bush’s uncle reportedly cleared 450 million profit on defense stock sales right at the beginning of the war. any way to sort that out?
Submitted by jim from austin texas
A: Very hard to estimate how much money has been lost to war profiteering. There is at least $3-7 billion over which the Pentagon has “lost visibility” and cannot be traced, though difficult to track down where that money has ended up.
Answered 04/03/08 22:19:04 by Linda Bilmes
Q: I believe you have looked closely at the probable costs for the care of wounded Iraq vets. Can you give some examples of the typical costs for some of the more prevalent treatments, especially the ones which require lifetime treatment. (Fro example, I have a friend who lost a leg in Vietnam, and he has to go periodically to the VA to have adjustments made on his prosthesis.)
Submitted by Bob Gaines from Santa Fe NM
A: We have estimated based on the average costs per veteran per year, for the estimated humber of veterans who are likely to seek treatment. It is difficult to estimate the costs for a specific injury, though for an amputation one can predict costs associated with surgery, rehabilitation, orthopedics, prothetics, physiotherapy, and ongoing diagnostic testing and pain medication, as well as remodelling of household stairs and configuration, and possible vocational rehabilitation/retraining.
Answered 04/03/08 22:16:52 by Linda Bilmes
Q: What happened to all the Iraqi oil money that was supposed to help defer the costs of this war?
Submitted by Jennifer from Wilmington, NC
A: This is a good question. Since the war, Iraqi oil production declined for quite a while and it is now finally reaching pre-war levels. However the country is earning more revenue for the same amount of production due to the increase in oil prices. Despite this, the US has to pay full market prices for all the oil we use in Iraq for fuel (apart from a certain amount that is subsidized by Kuwait). It is unclear where the current proceeds of the Irai oil production are ending up.
Answered 04/03/08 22:13:39 by Linda Bilmes
Q: Who are these the largest profiteers from these war costs.
Submitted by Oscuramento from St.Hilaire de Brethmas
A: The biggest winners are the oil companies and the large defense contractors. Clearly the firm that has benefitted the most, in terms of the increase in its stock price, is Halliburton. It has also been able to avoid paying hundreds of millions of dollars of US taxes each year by employing its workers through shell companies in the Cayman Islands.
Answered 04/03/08 22:11:06 by Linda Bilmes
Q: I’ve seen all sorts of figures bandied about as to how much the war has cost. Can you provide an estimate of the cost of the Iraq war from it’s inception to this point.
Submitted by Mel Wolfson from Brooklyn, NY
A: There is actually relatively little disagreement about the costs of the war. What is clear is that the costs are much, much larger than the Administration said at the beginning–they said it would cost $50 to $60 billion. We are now spending that amount, up front, every 3 months. The differences in estimates mainly arise because the numbers are changing daily: we are spending more than $12 billion a month. That means that every day that passes, the number has grown. These are, however, only the up front costs, and the costs that the government publicly admits to. Any full cost accounting, for instance, has to include deferred compensation–what our troops will receive in the future (any business firm would include such costs in its accounts, but the government hasn’t been doing this.) Especially significant are the costs for compensating and caring for the disabled. Approximately 40% of the 1.65 million troops that are already there are likely to have some disability–and many will have very, very serious disabilities. Equipment has been wearing out far faster than it has been replaced. This is called deferred maintenance, and again, it is a cost that any business would include. Our book goes beyond these costs to include the costs to the economy–not just the budgetary costs to the federal governmetn. For instance, the government’s future budgetary costs only includes the costs it pays for caring for the soldiers and their disability pay. But in one of five families with somebody who is seriously injured, someone will have to drop out of the labor force to care for the returning soldier. All told, these additional costs more than double the $600 billion “offical” price tag of the war so far.
Answered 04/02/08 11:28:38 by Joseph Stiglitz
Q: Does anyone have any good ideas as to how to pay for this war. Granted it will cost trillions, but since we cannot ask for a refund, how do we go about closing the books on it?
Submitted by bill liedel from Royal Oak, MI
A: There are but two ways: cut other expenditures or increase taxes. The problem is that many areas (other than defense) have been cut to the bone. America has been underinvesting in public infrastructure and research, and this is hurting our productivity. We will have to raise taxes on upper income Americans. But these individuals have done so well over the past 25 years that they can well afford it–they can pay higher taxes and still be much better off than they were say eight years ago. By contrast, those in the middle are actually worse off today (adjusted for inflation) than they were eight years ago. We are entering a new recession even before they have recovered from thelast one. In these circumstances, it will be hard to impose new taxes on them. The biggest area for cutting expenditures is defense. We are now spending close to 50% of what the entire world spends on defense. There is a growing consensus that we are wasting much of this money. We are spending money on weapons that don’t work against enemies that don’t exist. By restructuring our defense expenditures, we could actually have more security at lower costs.
Answered 04/02/08 11:20:52 by Joseph Stiglitz
Q: After the Vietnam War we were beset with almost uncontrollable inflation. Will this happen, likewise, with the Iraq war?
Submitted by Ardent hollingsworth from Atlanta
A: Probably not, though there is a point in common: in both wars, there was an attempt to hide from the American people the true cost of the war. In both cases, there was an attempt to persuade