The $2 Trillion Dollar War

When America invaded Iraq in 2003, the Bush administration predicted that the war would turn a profit, paying for itself with increased oil revenues. So far, though, Congress has spent more than $350 billion on the conflict, including the $50 billion appropriated for 2007.

But according to one of the world's leading economists, that is just a fraction of what Iraq will actually wind up costing American taxpayers. Joseph Stiglitz, winner of the Nobel Prize for economics, estimates the true cost of the war at$2.267 trillion. That includes the government's past and future spending for the war itself ($725 billion), health care and disability benefits for veterans ($127 billion), and hidden increases in defense spending ($160 billion). It also includes losses the economy will suffer from injured vets ($355 billion) and higher oil prices ($450 billion).

Stiglitz, a professor of economics at Columbia University, is just the guy to size up the war's financial consequences. He served as chief economist at the World Bank and chairman of the Council of Economic Advisors under President Clinton, and his book Globalization and Its Discontents has sold more than a million copies. Stiglitz sat down with Rolling Stone in New York to discuss the costs of Bush's misadventure in Iraq.

What's wrong with dropping a lot of money on the Iraq War? Didn't World War II pull America out of the Great Depression?
War is a lousy form of economic stimulus. The bang you get for the buck is very low. If we hadn't had to fight during the Depression, we would have become a much richer country by investing the money we spent on the war. Think of the Nepalese contractors doing work in Iraq. They spend their money in Iraq or Nepal -- not in America.

Because the war drove up oil prices, we are also giving more money to Saudi Arabia, Iran and Venezuela. It follows that we are not investing that money. And instead of spending the money we have left on things that will make us wealthier, we are spending it in ways that have just the opposite effect. I don't want to reduce this to cold, hard economics, but when you educate young people for twelve to eighteen years, you're investing a lot of money in them. If you then have them killed, maimed and debilitated, you destroy capital.

How did you arrive at the $2 trillion figure?
There were three parts to the calculations that I made with Linda Bilmes, a professor of public finance at Harvard. The first part is based on actual expenditures -- the impact on the federal budget. But the budget doesn't include a lot of expenditures we will be making in the future as a result of the war today, like paying for the health care and disability benefits of all the people who have been injured. These are lifetime expenditures, but they aren't included in the $600 million a year the Defense Department expects to spend on Iraq. They're just talking about the hardware of war.

The second part of our calculations estimates future expenditures to replace what we lose in the war. The budget includes spending for new ammunition, but not the wear and tear on weapons systems. Eventually the weapons must be replaced, but the administration doesn't count that as part of the projected cost of the war.