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Iraq war cost estimates run into the trillions

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

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To make the numbers a bit more real to citizens, Wallsten and graduate student Katrina Kosec have compared the cost of the war to the US Treasury of $415 billion in the years 2003-07 with approximate amounts spent on other federal agencies over that same period: Education, $370 billion; Transportation, $310 billion; State Department $64 billion; Corps of Engineers, $35 billion.

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The war's cost, of course, is far larger than the $100 billion to $200 billion "upper bound" estimate by presidential economic adviser Lawrence Lindsey prior to the war, an estimate that got him into hot water in the White House. Then Defense Secretary Donald Rumsfeld talked of "something under $50 billion."

Wallsten notes that Yale economist William Nordhaus in 2002 reckoned the war would cost anywhere from $100 billion to $1.9 trillion, far closer to reality. And Wallsten says this demonstrates the value of making serious cost-benefit analysis when government leaders make major policy decisions. In his original study, Professor Nordhaus noted: "The historical record is littered with failed forecasts about the economic, political, and military outcomes of wars."

Iraq gives him another example of such a failure.

Like Wallsten, University of Chicago economist Steven Davis holds more analysis and planning is needed before launching a war. But this was "actively resisted" by the Defense Department before the war. "Quite unfortunate," he says.

Professor Davis and some colleagues did publish in 2006 a look at the cost of continuing the prewar containment policy involving economic sanctions on Iraq, disarmament requirements, weapons inspections, northern and southern no-fly zones within Iraq, and maritime interdiction to enforce trade restrictions. The cost, they calculate, would have run in the range of $350 billion to $700 billion. "It is difficult to gauge whether the Iraq intervention is more costly than containment," they wrote.

But Bilmes-Stiglitz war-cost estimates are much higher. And it is unclear whether more Iraqis would have died prematurely if Saddam Hussein had remained in power than have already been killed during the war and the subsequent occupation.

In any case, the next president will be faced with the difficult issue of what to do next about the war. Bilmes figures a Democratic president would make a faster drawdown of troops than a Republican president, but "not as rapid as one might hope."