April 14, 2008 – Washington, DC — With long-term estimates of the cost of the Iraq war ranging from $1 trillion to $3 trillion or more, the question naturally arises of what else the country could have done with the money.
The issue occasionally crops up on the campaign trail and in public debate. Senator Barack Obama, Democrat of Illinois, told voters in West Virginia last month that the war was costing each American household $100 a month. “Just think about what battles we could be fighting instead of fighting this misguided war,” Mr. Obama said.
Senator Hillary Rodham Clinton said in Indiana recently that the war was costing $12 billion a month and was crowding out urgent national needs. “We’ve got to begin not only to withdraw our troops,” said Mrs. Clinton, Democrat of New York, “but bring that money back home.”
On the other hand, Senator John McCain of Arizona, the likely Republican nominee, says repeatedly that success in Iraq justifies any cost and that overspending in other areas is causing the strain on the federal budget. He says the government can afford whatever the war costs as well as a big corporate tax cut if it reins in wasteful federal spending.
President Bush addressed the cost more directly than before in remarks on Thursday at the White House. Mr. Bush acknowledged that the human and material costs had been high and would demand continued sacrifices from all Americans. But he said that relative to the cold war, the war in Iraq had consumed a “modest fraction” of the country’s wealth.
Even if the country can afford the wars in Iraq and Afghanistan or, as Mr. Bush and Mr. McCain assert, cannot afford not to fight them, the amounts being spent on the conflict are of a scale that war critics say would allow the country to address what they see as more compelling problems.
At the low end of estimates of the cost of the war — $120 billion a year — the money would cover the projected cost of Mrs. Clinton’s universal health care plan. It could pay for Mr. Obama’s less inclusive health care plan and his proposal to bail out homeowners with troubled mortgages. Or for development of new renewable energy sources and a nationwide public works program. Or pay toward a long-term fix for Social Security. Or the unpaid part of the Medicare drug benefit.
The American public, by an overwhelming margin, believes that the cost of the war is worsening domestic economic problems. In a New York Times/CBS News poll completed on April 2, 67 percent of respondents said the war had contributed “a lot” to American economic problems, and 22 percent said it was contributing “some.” Only 10 percent said “not much” or “not at all.”
Mr. Bush said in his speech on Thursday that the Defense Department budget today represented slightly more than 4 percent of gross domestic product, compared with more than 6 percent in some years of the Reagan administration and as much as 13 percent in 1952-3, when the United States was engaged in the war in Korea.
But the war in Iraq is largely being paid for off the books, with emergency and supplemental spending rather than from the Pentagon’s operating budget, so Mr. Bush’s figures are a low estimate of the relative cost of the war, analysts have observed. And growing entitlement costs today make such comparisons with previous eras questionable.
“Even if you assume the war costs will phase down, either quickly or slowly, we are still on an unsustainable track under current budget policy,” said James R. Horney, director of federal fiscal policy at the Center on Budget and Policy Priorities in Washington, a liberal research group. “Before the war started and without any of the new ideas of the candidates, we’re in a situation where we have to reduce spending and reduce the rate of growth of Medicare and Medicaid and, to a lesser extent, Social Security. So the costs of the war have to be seen in that context.”
Douglas Holtz-Eakin, Mr. McCain’s chief economic adviser and a former director of the Congressional Budget Office, said the benefits of success in Iraq dwarfed the $150 billion annual cost. He also said that if the war and the personal and corporate tax cuts that Mr. McCain advocated added to the federal deficit and debt, so be it.
“I would like the next president not to talk about deficit reduction,” Mr. Holtz-Eakin said at a symposium sponsored by the Committee for a Responsible Federal Budget. “The next president should talk about what’s good for American families — education, health care at reasonable costs, pensions that are secure, opening our borders to trade. If we can take care of that, we can take care of the budget.”
Mr. McCain has said he plans to pay for tax cuts and modernizing the military by eliminating earmarks and wasteful spending from the federal budget. Both Senators Clinton and Obama would allow the Bush administration’s personal income tax cuts to expire in 2011 and are proposing new levies on wealthy individuals, oil companies and other businesses to help pay for expansive and expensive new government programs.
While both promise to remove troops from Iraq, Mrs. Clinton does not expect any big savings that could be used to finance her domestic initiatives. Mr. Obama does expect the winding down of the Iraq war to ultimately produce a “peace dividend” that can be used for other things.
Austan D. Goolsbee, a University of Chicago professor who is advising Mr. Obama on economic matters, said that any such dividend would emerge slowly, and he did not fix a dollar figure on it.
Dr. Goolsbee said Mr. Obama’s programs would be financed from a variety of sources, including elimination of the Bush tax cuts and anticipated federal spending reductions. “They will more than pay for everything Senator Obama has proposed,” he said.
An economic adviser to Mrs. Clinton, who was not authorized to speak on the record, said she proposed to pay for all of her domestic programs, including universal health insurance, without taking money from the Pentagon that would be needed to redeploy troops now in Iraq and to pay for their health care costs.
“Everything is paid for,” the adviser said. “We have been very careful and clear in all our domestic initiatives to show how we’d pay for them.”
All three candidates may be living in a fiscal fantasyland, some neutral observers believe. “With or without the war, we can’t afford the current policy,” said Mr. Horney of the Center on Budget and Policy Priorities. “What the war has done is bring us a little closer to the day of reckoning, because we will have squandered the opportunity to address these long-term problems.”