April 16, 2008 – Harvard scholar Linda Bilmes speaks about the book on the Iraq war’s costs that she wrote with Joseph Stiglitz. The two former Truthdiggers of the Week have been working hard to uncover even more hidden expenses for the war, which they estimate will cost the taxpayers and their children trillions of dollars.
Transcript:
James Harris: This is Truthdig. James Harris here with Linda Bilmes. She is the co-author of the new book, “The Three Trillion Dollar War.” She’s also a Harvard economist, and she did serve in the Department of Commerce during the Clinton administration. As we watch the sensational news coverage of the governor of New York’s resignation, “The Three Trillion Dollar War” reminds us that nearly 4,000 American soldiers and more than half a million Iraqis have been killed in this war. And that spending will total more than $3 trillion. Linda, why is it important that we take this war, and our spending, more seriously?
Linda Bilmes: Well, I think if you look at what happened throughout this war, we have essentially translated the human cost into a financial cost, and then we’ve deferred that cost to the next generation. So what I mean is, we are fighting the war with a volunteer Army, with soldiers and Marines who we pay, and with another army of contractors who we pay, but all of that money has … been borrowed. So, in effect, the average American has not felt the cost of the war, either in blood or in treasure, and that accounts for the fact that although I think people feel very badly about it, it is not as immediately gripping as some of the scandals in the news.
Harris: You’d mentioned off-air that you’re not a very popular person at the White House right now. In a nutshell, they’re saying it’s easy to go in a room, write a book and point fingers about how much this war costs. The White House’s position to this point is, pretty much, “What’s the cost of doing nothing? What is the cost of not bringing democracy to Iraq?” How do you respond?
Bilmes: Well, you know, and actually, first of all, it is very challenging to write a book like this because the numbers are simply not there. The way the government keeps its accounts is very misleading, and government accounting is very poor. So they don’t actually produce any materials that would enable the average person who doesn’t spend two years working on it and uses the Freedom of Information Act—without doing that, you really cannot tabulate all of the costs of the war that are hidden and all the long-term costs. And so when the president says that he does not go to war, as he said, “on the basis of green-eye-shaded accountants,” I think we should all consider whether it is correct to go to war with no idea of what it’s going to cost. And you know the president and his advisers said that this war would cost us $50 or $60 billion. At the time Larry Lindsey, who was the economics adviser, said that it might cost $200 billion, and he was fired for that moment of honesty. And now we have a situation where even the Congressional Budget Office is saying that this war will cost $1.7 to $2.7 trillion, we have our estimate of $3 trillion at least. The Joint Economic Committee says it will cost $3.5 trillion. So there is a general consensus that the cost is so large that it is of very considerable concern and that it is having a major impact on our economy. So I don’t see how one can ignore this any longer.
Harris: Why is it that there is no accountability for the spending that has taken place over the last five years?
Bilmes: Well, that is a very good question. There is no accountability for the spending that has taken place. And, unlike any other war, in this war, the United States cut taxes and raised spending at the same time it was going to war. And, unlike any other war—apart from the Revolutionary War—we borrowed something close to 40 percent of the money for this war from overseas. You know, in the Revolutionary War, the colonies borrowed from France. So we have financed this war with debt, and if you look at how the money for the war has been appropriated in Congress, it is simply … it is simply unbelievable. But all of the money has been appropriated through a series of what are called “Emergency Supplementals.” And what these are is a vehicle that exists in order to circumvent the normal checks and balances on budget spending. And it exists because, in certain circumstances, in genuine emergencies, such as Katrina, you want to get the money to the field very, very quickly without going through the normal budgetary process. But here we are, five years, 25 supplemental appropriations later, still funding the war on a bipartisan basis through this emergency mechanism which denies both Democratic and Republican budget experts in the Congress and in the Budget Office and other places the chance to actually look at how much it costs to get anything done. And under these circumstances, it is inevitable that we will see the kind of shenanigans that we have seen in terms of profiteering and corruption and cost overruns and overpayments to Halliburton, and money on which, as the Pentagon puts it, we have “lost visibility.”
Harris: So 25 times over the last five years we’ve used this discretionary funding, these Emergency Supplemental Funds. And you said this is done to circumvent the normal budgetary process. That sounds like a short way of saying, “We can get this by them if we do it this way.” Have any laws been broken?
Bilmes: Well, you know, here you have a situation where, I mean, laws have not been broken because there’s no law that would have anticipated that anyone would have done something like this. The reason for having this Emergency Supplemental concept in the first place is so that, if Congress enacts something new during the year or if there was a genuine emergency, that there is a way to get money quickly to a new program or to an emergency area. And what has happened here is that you had an administration and a Congress that has not wanted to face, or to vote on the full cost of the war. So instead you’ve had a series of dribs and drabs that have been appropriated outside the regular budgetary caps. And we as taxpayers have all seen this: $25 billion here, $72 billion here, $52 billion here. It’s gone on and on and on, to the point that people are almost, I think, hardly notice. And this is, I think, one of the things we have criticized heavily. But, in addition, what’s important about the money that is being appropriated is that this is simply the tip of the iceberg in terms of the total cost of the war. Because the money that has been appropriated to date, the $800 billion that will have been appropriated for the wars through 2008, that is only paying for the combat operations. That’s the monthly—annual burn rate of the operations going on in the field right now. And that ignores the cost of taking care of our veterans when they come home, providing disability compensation for our veterans, of replenishing all the military equipment that’s been used up, of resetting the military forces to their prewar strength, and of paying interest on all the money we’ve borrowed to pay for the war. So if you add all of those up, you essentially double or triple the amount of money that we are spending every month.
Harris: One of the more telling lines from your book discusses veteran payouts from the first Gulf War. You write, “The United States still spends over $4.3 billion each year paying compensation, pension, disability benefits to more than 200,000 veterans of the Gulf War.” What do you think veterans’ benefits and health care will cost us 20 years from now for this war?
Bilmes: Well, it’s a very good question because the important thing to note about veterans’ disability benefits is that they grow over time and they peak many, many years after the war. For example, in the Spanish American War, the peak year for paying disability benefits was 50 years after the end of the war. In World War II, these benefits peaked in 1993. In the Vietnam War we are currently paying out some $20 billion a year in disability benefits. And even in the first Gulf War, which was a one-month war, we are spending $4.3 billion a year in paying disability benefits. So, in this war we’ve had a very, very high rate of casualties. We have had 1.65 million troops deployed, over 70,000 of them wounded in combat or injured in accidents or contracting serious diseases that required them to be medically airlifted out of the country. There have been another 250,000 who have been treated for other things at veterans hospitals and clinics and, of those, 68,000 have been diagnosed with post traumatic stress disorder. There have been near-epidemic problems with hearing. Hearing loss, vision problems, joint problems. And the long-term cost of caring for our servicemen and -women will be felt by the next generation. We expect that, overall, if you include medical care and disability benefits, the cost of taking care of our veterans will cost around $600 billion, depending on—in today’s money.
Harris: I was always taught—when I was spending a significant amount of money—to think about the consequence of that spending. Not so much how much money I lost, but what else that money could have been spent on. So when you say just a portion of this war has cost us upwards of $600 billion, what are some other things that we could have spent this money on?
Bilmes: Well, the opportunity costs are really staggering. For the amount of money we’ve spent so far, we could have made Social Security solvent for the next 75 years. We could have provided universal health care to children. We could have paid for a significant investment in our infrastructure here at home in paying for our own roads and bridges and tunnels and electrical grids instead of essentially spending that money on repairs and construction in Iraq, much of which has been bombed and attacked and had to be reconstructed again and again. And I think that the amount of money is so large that it’s almost hard to conceive what a large amount of money this is. For example, I was reading a report that the Centers for Disease Control issued last week. This is their long-awaited report on autism. And the Centers for Disease Control say that one in every 150 American children is now being diagnosed with an autism spectrum disorder, which is a huge number. And we spend, in the Federal Government, $108 million a year on autism research, which is the equivalent of four hours of the Iraq war in cash costs, not even counting all the veterans and other costs. So once you start thinking about it in that way, and there’s almost a new method of measurement now, in Washington, of how many hours, how many days of the Iraq war would it cost to pay for this or that. And certainly in many communities throughout the country there are very serious problems which require investments—infrastructure problems, problems with homelessness, problems for the elderly—which would require … the amounts of money required are minutes or hours of the cost of fighting in Iraq.
Harris: Linda, there’s a growing sentiment that we are spending too much money on the war in Iraq. How would you reallocate funds in a way that … puts us on a path to recovery? How would you reform this process?
Bilmes: Well, we have, in our book, a chapter on exiting Iraq, in which we lay out the fundamental question about whether it is worth spending another $600 to $900 billion to stay in Iraq, in the way that we are, for the next two or three years. We also lay out in another chapter a number of recommendations that would make, hopefully, it less likely for us to get embroiled in this kind of quagmire again. Some of those recommendations have to do with transparency of financial reporting, of better control and oversight over where our money is going, of better checks and balances between the Congress and the executive. And a very important thing which we have not touched on yet is improvements in the way our veterans are being treated. And if I can just say one point about that: We wrote the book for two reasons. Partly because we believe that the public has a right to know how much the war is costing and, secondly, to call attention to the fact that our veterans are being shortchanged. And we discovered this, essentially by accident, as we were doing our research. We discovered that many veterans are encountering an enormously difficult bureaucratic battlefield when they come home, just trying to get their disability benefits and get access to doctors for their disabilities that they have suffered. And this is something which is particularly painful because it’s a fixable problem. There are some parts of the Iraq situation that are very, very difficult and complicated. But doing right by our veterans should not be impossible to fix. And we’ve laid out, in our book, a series of steps that would improve substantially the situation for returning veterans.
Harris: I actually do mean to harp on this because I agree with you that it is important to respect the veterans. After all, they are doing a service that we’ve asked them to. Can you share with us some of the stories, some of the accounts from veterans returned from Iraq, veterans who had trouble accessing their benefits?
Bilmes: We had, during the course of our research—and we had written two papers previously, one specifically on veterans—we had hundreds of veterans and current military servicemen write to us with their concerns. But I think a typical story is a story of a 19-year-old soldier. His name is Patrick. He’s from Texas. His aunt wrote to us because Patrick had been seriously wounded in Iraq. He had been in four hospitals, he had been, miraculously, after nine months, in Walter Reed and so forth, he had recovered. He had been visited by President Bush in the hospital. He received a Purple Heart, and so forth. But when he got back to Sugar Land, Texas, he was, for 18 months, unable to receive a single penny in disability compensation or any money that would have enabled him to take some online training courses and other training that he wanted. So, he couldn’t do his previous job as a mechanic again because he couldn’t stand up, but he wanted to try and acquire some training in another field. And it was only after his aunt contacted us and we looked into this story and we contacted Newsweek magazine, that decided to put him on the cover, or threatened to put him on the cover, that all of a sudden, remarkably, all of his benefits were paid retroactively for 18 months, from the veterans organizations.
Harris: Sure.
Bilmes: But, I mean, there are hundreds of stories. We tell some of them in the book. But the fundamental issue is that the system for transitioning troops from the military to veteran status is not working. There is no seamless transition. And what we should be doing is we should be automatically providing disability benefits to our returning veterans who are wounded. Instead, when they come back, even if they are in a wheelchair, we are forcing them to prepare the equivalent of a graduate school application with dozens of different forms and pieces of paperwork that they have to fill in correctly before they can even begin the process of securing disability benefits. And on the medical side there are fantastic doctors and very dedicated nurses in many veterans hospitals and facilities, but there simply is not enough of them, and particularly if it’s a nationwide network, there are many veterans who are coming back, particularly needing mental health care, who simply do not have access to these facilities.
Harris: And you mentioned, minutes ago, that we will spend hundreds of billions of dollars over the course of the next 20 years alone on these types of care initiatives, helping veterans who’ve returned. Do you get the sense that a majority of the soldiers that return will be treated properly or do you get the sense that they will be stiffed?
Bilmes: Well, you know, that’s a good question. I think that there are many excellent advocates in the veterans service organizations who are working very, very hard on behalf of veterans. I think there is a bipartisan desire to do right by our veterans. On the other hand, when you look at some of the stories that have surfaced, it is hard not to feel depressed. We discovered, for example, that veterans who are enlisting and taking signing bonuses, if they are wounded, have been asked to repay their signing bonuses because they didn’t serve out their contract. We have found—and the GAO has chronicled hundreds of veterans who are being chased and hounded for small amounts of money that they allegedly owe the government, in most cases related to pieces of equipment that they lost because they were wounded or their vehicle exploded. So some of these stories are deeply disturbing, but I do believe this is an area where the American public feels very strongly that they want to fix the problem. And I just hope that we can change the mentality, change the culture of the Veterans Affairs Department to one which basically, instead of trying to sort of pre-audit every veteran before we give them the benefit, we should give them the benefit when they come home, and then we can audit a subset of them later, which is what the IRS does. We don’t all have our taxes audited, but we audit all of the veterans.
Harris: You and Joseph Stiglitz have done this remarkable evaluation of the way that money is being spent over there. Due respect, neither of you is in a position to change the policy on this. Do you get the sense that the policy that governs spending during times of war will actually be changed? What’s your gut tell you?
Bilmes: Well, I think that, in terms of veterans, we do see some encouraging signs. There are currently 18 pieces of legislation pending which are based, in some form, on our recommendations. There is a strong, bipartisan desire to improve the situation for veterans. And some of the recommendations of the Dole-Shalala commission, which were sensible, have also been enacted. So I think there is some reason for optimism there. On the other hand, I do not see any progress in trying to bring greater transparency and greater financial accountability to the Pentagon. We’ve had a situation there where the Pentagon has flunked its financial audit every year for the past 10 years, where they have thousands of material weaknesses throughout their balance sheet and they are essentially unauditable. Whereas pretty much the entire rest of government has been able to figure out ways to track where its money goes. And I think until we get really serious about making financial accountability for money important in the Pentagon—important and required—essentially what we did for the private sector with the Sarbanes-Oxley bill—until we do something similar in the Pentagon, I am not optimistic that we will have a better understanding of how our taxes are spent with regards to the military.
Harris: You said earlier that it appears that no crimes have been committed or no laws have been broken. Policy aside and politics aside, I think crimes have been committed; both American and Iraqi citizens have been wronged on a scale much larger than we will ever be able to imagine, and that there seems to be nothing tangible that we can reach out and say, “OK but at least that’s going to happen,” or “At least she’s going to make a change.” I don’t see that, and it’s quite disheartening as you mentioned earlier. This could be depressing.
Bilmes: Well, it could be, and I think one of the things that we found in writing the book was that, every single week, we kept coming across another incredible, unbelievable finding. I mean, it was to the point where whoever—Joe or I—found it, we were saying, “No, this can’t be.” But it was. “No, this can’t be.” But it was. Just last week, another one emerged when it was discovered that the major contractor in Iraq, which is the Halliburton subsidiary KBR—and this really is an incredible one—has been employing its workers using a shell company in the Cayman Islands, thereby evading hundreds of millions of dollars of U.S. taxes. Now, this is not right. Now, it was not breaking a law because there was no law saying you couldn’t do that because no one imagined it would be done. But here we have a situation where sort of official, our official contractor, who is deeply embedded in every aspect of the war, is evading paying U.S. taxes for its employees. And we will feel the pinch about this because eventually those employees will need Medicare and Social Security and they will have never paid into the system and this only exacerbates our already looming health care and Social Security crisis.
Harris: One of the things that this text, “The Three-Trillion-Dollar War,” does extremely well is outline a plan that prevents this from happening again. It also speaks to some of the insufficiencies of the Constitution. Can you tell me a little bit more about that?
Bilmes: It certainly speaks to a series of limitations. We do go through, in our book, a whole chapter of changes, legal and regulatory changes that we think should be enacted to prevent this kind of thing from happening again because we have certainly seen that it has been possible for this war to be conducted in a way that, I think, very few Americans—whether they were in favor of the war initially or not—very few Americans would have wanted to see the war conducted in the manner in which it has been.
Harris: At a time when our nation appears desperately in need of a recipe for change, here comes this book, “The Three-Trillion-Dollar War.” This should be required reading for every American citizen and every American politician, most certainly. Linda Bilmes, thank you for joining us.
Bilmes: Thank you.
Harris: For Linda Bilmes, this is James Harris, and this is Truthdig.
