Stiglitz: Iraq war could cost over $2 trillion

[Louis Proyect <lnp3@xxxxxxxxx>]

The Guardian, Saturday January 7, 2006
Iraq war could cost US over $2 trillion, says Nobel prize-winning economist
Jamie Wilson in Washington

The real cost to the US of the Iraq war is likely to be between $1 trillion 
and $2 trillion (£1.1 trillion), up to 10 times more than previously 
thought, according to a report written by a Nobel prize-winning economist 
and a Harvard budget expert.
The study, which expanded on traditional estimates by including such costs 
as lifetime disability and healthcare for troops injured in the conflict as 
well as the impact on the American economy, concluded that the US 
government is continuing to underestimate the cost of the war.

The report came during one of the most deadly periods in Iraq since the 
invasion, with the US military yesterday revising upwards to 11 the number 
of its troops killed during a wave of insurgent attacks on Thursday. More 
than 130 civilians were also killed when suicide bombers struck Shia 
pilgrims in Karbala and a police recruiting station in Ramadi.

The paper on the real cost of the war, written by Joseph Stiglitz, a 
Columbia University professor who won the Nobel prize for economics in 
2001, and Linda Bilmes, a Harvard budget expert, is likely to add to the 
pressure on the White House on the war. It also followed the revelation 
this week that the White House had scaled back ambitions to rebuild Iraq 
and did not intend to seek funds for reconstruction.

Mr Stiglitz told the Guardian that despite the staggering costs laid out in 
their paper the economists had erred on the side of caution. "Our estimates 
are very conservative, and it could be that the final costs will be much 
higher. And it should be noted they do not include the costs of the 
conflict to either Iraq or the UK." In 2003, as US and British troops were 
massing on the Iraq border, Larry Lindsey, George Bush's economic adviser, 
suggested the costs might reach $200bn. The White House said the figure was 
far too high, and the deputy defence secretary, Paul Wolfowitz, said Iraq 
could finance its own reconstruction.

Three years later, with more than 140,000 US soldiers on the ground in 
Iraq, even the $200bn figure was very low, according to the two economists.

Congress has appropriated $251bn for military operations, and the 
Congressional budget office has now estimated that under one plausible 
scenario the Iraq war will cost over $230bn more in the next 10 years. 
According to Mr Stiglitz and Ms Bilmes, whose paper is due to be presented 
to the Allied Social Sciences Association in Boston tomorrow, there are 
substantial future costs not included in the Congressional calculations.

For instance, the latest Pentagon figures show that more than 16,000 
military personnel have been wounded in Iraq. Due to improvements in body 
armour, there has been an unusually high number of soldiers who have 
survived major wounds such as brain damage, spinal injuries and 
amputations. The economists predict the cost of lifetime care for the 
thousands of troops who have suffered brain injuries alone could run to 
$35bn. Taking in increased defence spending as a result of the war, 
veterans' disability payments and demobilisation costs, the economists 
predict the budgetary costs of the war alone could approach $1 trillion.

The paper also came amid the first indications from the Pentagon that it 
intended to scale down its costly presence in Iraq this year.

Last night, Ayman al-Zawahiri, al-Qaida's number two, said in a video that 
hints of the American withdrawal amounted to a "victory for Islam".

The unforeseen costs of the war have been blamed on poor planning and 
vision by the architects of the invasion. In a frank admission yesterday, 
Paul Bremer, the first US administrator of postwar Iraq, said the Americans 
did not anticipate the uprising that has persisted since flaring in 2004. 
"We really didn't see the insurgency coming," he told NBC television.

But the economists' costings went much further than the economic value of 
lives lost. They factored in items such as the higher oil prices which 
could partly be attributed to the war. They also calculated the effect if a 
proportion of the money spent on the Iraq war was allocated to other 
causes. These factors could add tens of billions of dollars.

Mr Stiglitz, a former World Bank chief economist, said the paper, which 
will be available on josephstiglitz.com, did not attempt to explain whether 
Americans were deliberately misled or whether the underestimate was due to 
incompetence.

But in terms of the total cost of the war "there may have been alternative 
ways of spending a fraction of that amount that would have enhanced 
America's security more, and done a better job in winning the hearts and 
minds of those in the Middle East and promoting democracy".


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