Iraq war cost estimates run into the trillions

New book says war will cost at least $3 trillion before it's over.

By David R. Francis | columnist

from the March 10, 2008 edition

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Next week, the Iraq war enters its sixth year. As casualties mount (about 4,000 American soldiers killed since the start of the war in March 2003), so do the bills.

"The cost is going up every month," says Linda Bilmes, an expert at Harvard University's Kennedy School of Government. She estimates the short-term, "running cost" has reached $12.5 billion a month. That's up from $4.4 billion a month in 2003. Add in long-term factors, such as the care of veterans and interest on federal debt incurred as a result of the war, and the cost piles up to $25 billion a month nowadays.

Last September in a phone interview, Ms. Bilmes estimated the war's total price tag as easily exceeding $2 trillion. In a book published last month, she and Joseph Stiglitz, a Nobel Prize-winning economist from Columbia University, New York, estimated the total long-run cost at $3 trillion in 2007 valued dollars. If you add in Afghanistan and various costs to the economy, the sum reaches $4.95 trillion.

When the book was released in London, it prompted questions in the House of Commons because it puts the cost to Britain of the Iraq war through 2010 at approximately $40 billion – twice the amount previously estimated.

Now all these numbers are inexact, especially projections into the future.

Scott Wallsten, an economist at the Georgetown Center for Business and Public Policy in Washington, figures Iraq war costs through 2015 will be close to $1 trillion. Remarkable as it may seem, Mr. Wallsten says his estimates are "not so far off" from the Bilmes-Stiglitz $3 trillion estimate. For one thing, Wallsten doesn't include in his estimate some "macro" economic costs, such as a rise of $5 to $10 per barrel of oil that Bilmes and Stiglitz blame on the war. In 2003, oil was priced in the futures market at $25 a barrel. Now it is more than $100 a barrel. But other factors, such as the huge rise in demand for petroleum in China and India, also have helped push prices up.

Further, Wallsten uses a much lower medical inflation rate for the cost of treating veterans into the future than Bilmes-Stiglitz. That makes a significant difference over time.

Whatever the complex statistical issues, the costs of the war are plainly enormous. Democratic presidential candidate Barack Obama speculates sometimes on how the money could have been better spent on domestic programs.

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