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The $200 Billion Question 

by Farhad Manjoo


In September 2002, Lawrence Lindsey, then the White House's chief economic advisor, was asked by the Wall Street Journal to predict the economic cost of the looming war in Iraq. Lindsey should have expected the question; the Bush administration had long been cagey on the costs of war, explaining that if it decided to invade Iraq, the decision would not come down to money but to principle. Yet Lindsey apparently didn't brush up on his talking points. Instead, he candidly told the Journal that invading Iraq would cost the United States between 1 percent and 2 percent of the nation's gross domestic product -- about $100 to $200 billion.


That wouldn't break the bank, Lindsey insisted; considering the size of the U.S. economy: "That's nothing," he said. And let's not forget Iraq's oil wealth, he reminded the newspaper. "When there is a regime change in Iraq, you could add 3 million to 5 million barrels of production to world supply" each day, he said. The added supply would reduce worldwide oil prices, and thus "the successful prosecution of the war would be good for the economy."


As the economist who blessed all of George W. Bush's major economic plans, Lawrence Lindsey clearly made many wrongheaded predictions during his years in office, and his idea that the war would boost the economy was just one more in the lineup. But Lindsey, who was dismissed from his post just a couple of months after his chat with the Journal, should be congratulated for being the only Bush administration official to get something right about Iraq. Lindsey's cost estimate, which others in the administration dismissed as wildly pessimistic, turned out to be right on target. So far, the war has cost the United States more than $140 billion, and $50 billion or more will be needed early next year, regardless of who is elected president.


While we mourn the more than 1,000 Americans killed in the war, the cost in dollars is another, less-sickening yet still illustrative measure of the disaster in Iraq. The sum we're paying for this war is high, and there is no end in sight. Indeed, Lindsey's estimate is most likely too low, as the rate of spending in Iraq appears to be increasing or at the very least holding steady, according to analysts who've been watching the war tab.


In June, the nonpartisan Congressional Budget Office released a study of three possible long-term cost scenarios for the war, ranging from best-case to worst. If everything in Iraq goes as well as possible, the bill for the war would total an additional $179 billion over the next 10 years; if it goes as badly as we fear, the 10-year cost could top $392 billion.


"Unofficially, the Pentagon expenses have been running higher than the amounts that have been calculated to date," says Gordon Adams, a defense analyst at George Washington University. "All of the services are complaining that Iraq and costs associated with Iraq are eating their lunch."


The money, furthermore, is likely to be an all-American affair for the foreseeable future; so far, few significant sums of international aid have come in to fund the military or reconstruction efforts in Iraq, and Iraq's own oil industry has proven far less capable of footing the bill than administration officials had predicted. International oil prices, meanwhile, have risen, not fallen, since the war began.





Too Good To Be True


Was it worth it -- the lives and money spent in Iraq? Responding to the news that American deaths in Iraq had surpassed 1,000, Bush administration officials have insisted that America is safer because of their sacrifice. It's beyond the scope of this piece to examine this claim from the geopolitical perspective of the "war on terror," although it's worth noting that many analysts have concluded that the Iraq war has actually made America less safe, by taking away resources that could have been used to fight terrorism in Afghanistan and elsewhere and by mobilizing Muslim and Arab rage against the U.S. But putting that issue aside, when one counts the money that has been spent in Iraq, and considers what it might have been spent on instead, one is hard pressed to see how our billions were at all well used.


Late in August, the Center for American Progress, a left-leaning think tank, compiled a list of all the security initiatives that the U.S. could have purchased with the money already spent in Iraq. The billions and billions of dollars that could have been used to secure U.S. seaports, airports, flights, roads and railways, to fund police and fire departments, to secure nuclear stockpiles around the world, to invest in Afghanistan's security and reconstruction, and to provide aid to the world's poorest people, thereby possibly improving the United States' standing in the world. Yet these needs are not being funded.


"The president says that because we've invaded Iraq, we are safer," notes P.J. Crowley, a senior fellow at the Center for American Progress and a former staffer in President Clinton's National Security Council. "Our response is, 'Not necessarily so.' It's fair to ask the question: What were the other alternatives to invading Iraq that would have had an impact in making us safer? What were the other possible choices?" Crowley answers that question, in part, by pointing out that "what we have right now is the veneer of homeland security -- we don't have genuine homeland security." There are, for instance, 140,000 American troops in Iraq, "and yet we have fewer police officers on the streets of America than we did on Sept. 11."


On March 27, 2003, in the thick of the invasion, Paul Wolfowitz, the deputy defense secretary and an architect of the war plan, testified before a House appropriations subcommittee. "We are dealing with a country that can really finance its own reconstruction, and relatively soon," Wolfowitz said of Iraq. Wolfowitz calculated that "the oil revenues of that country could bring in between $50 and $100 billion over the course of the next two or three years." Other Bush administration officials, speaking to the press before and during the initial attack, speculated that because fewer troops would be used during this war than were used in the Gulf War, the bill for the second invasion of Iraq would fall short of the price for the first. That war cost slightly less than $60 billion, of which U.S. allies paid $48 billion.


Needless to say, administration officials were way, way off in their cost predictions. Like many of their other mistakes in Iraq, the chief culprit seems to be what the president recently conceded was a "miscalculation" regarding the conditions of postwar Iraq. The Bush team had presumed that an occupied Iraq would be a peaceful, economically vibrant place -- a country that did not require a full-time occupation by hundreds of thousands of American troops.


"We totally blew our prewar assessments," says Daniel Goure, a defense analyst who is the vice president of the Lexington Institute, a conservative group that supports the war in Iraq. Goure had once agreed with the administration's estimates that a small number of troops would be needed to secure Iraq. He admits now that he and everyone else who was predicting peace in Iraq was wrong, and he foresees current troop levels staying steady in Iraq at least until next summer. Goure says he expects a reduction, in the year after that, to about 100,000 American and allied troops. For the war to be declared a success, he'd want to see the troop levels substantially reduced after that -- "perhaps down to zero within three years," he says.


Troop levels are important to any cost estimate because maintaining the force in Iraq is the most expensive piece of the battle -- far more expensive than, say, rebuilding the country. To date, the United States has pledged about $24 billion in reconstruction costs, and less than half of that money has been allocated or spent. (It's tough to build schools when you're battling car bombs.)


"The vast majority of the costs are associated with getting the troops over there, activating the reserve personnel, that sort of thing -- they're largely fixed costs determined by the size of the deployment," says Steven Kosiak, the director of budget studies at the Center for Strategic and Budgetary Assessments, a research group that monitors Defense Department spending.


This is bad news for the U.S. bottom line, because it doesn't appear possible to reduce troop levels any time soon. There are "little data points" that point to this, says GWU's Gordon Adams. "We had been as high as 190,000 called-up Reservists and Guard troops, and then for a while it tailed down into the low 150s. Now we're starting to see it go back up, and the minute you call up Guard and Reserves, you're spending more money."


Perhaps the most comprehensive picture of the current health of our mission in Iraq is provided by the Iraq Index, a chart of hundreds of statistics that measure every facet of everyday life -- for both the Americans and Iraqis -- in the country. The index, which is updated three times a week by Michael O'Hanlon, a foreign policy fellow at the Brookings Institution, functions as a map of American blunders in Iraq; you can't read through the entire 50-page document without concluding that American troops are engaged in extremely heavy fighting in the country, and that they will likely be needed in the region for a long time. Here are some of the grim statistics: For much of last year, the estimated number of insurgents throughout Iraq stood at about 5,000. The number is now 20,000. The average number of patrols conducted by coalition forces every day now stands at a near-record high -- more than 1,800, compared with 1,600 last November. Last November, there were about 700 attacks on coalition forces in the country; in August, there were 2,700. In June 2003, there were six attacks on Iraqi oil facilities; in August 2004, there were 21.





Homeland: Shortchanged


Fighting all these insurgents is expensive business. But the benefits of this fight are far from clear, while the money being spent in Iraq is almost certainly being diverted from a more pressing concern -- protecting ourselves in the United States.


To take one example, look at the security of U.S. ports. In November 2002, Bush signed the Maritime Transportation Security Act, meant to provide federal funds to upgrade security at seaports and waterways. The Coast Guard has estimated that $7.5 billion is necessary over 10 years to protect trading ports in accordance with the act -- but since 9/11, P.J. Crowley points out, Bush has allocated less than $500 million for the task. Similarly, the Coast Guard needs $4 billion to upgrade its fleet, and $2 billion is necessary for the Cargo Security Initiative, a program that would dispatch security screeners to ports around the world to inspect cargo heading for the United States. All of these initiatives have been underfunded. "We are challenging the Coast Guard to do more than they've ever done before -- we're giving them a central role in the war on terrorism," Crowley notes, adding that we're not paying for it.


Crowley's report brims with scenarios like this -- domestic agencies asked to do more but given fewer resources with which to complete their tasks. Instead of increasing funding for police, as you'd expect a government to do after an attack like 9/11, the Bush administration cut by almost $100 million the funding for Bill Clinton's 1996 crime bill, meant to put 100,000 police officers on the streets. Rather than increase funding for fire departments, Bush cut resources by $250 million for the Assistance to Firefighters Grant Program, which goes to purchase equipment for local departments.


There is precious little money, too, for visionary long-term programs meant to provide real global security -- not only plans to secure nuclear material around the globe and deactivate nuclear warheads, but also to rebuild Afghanistan, which was the real source of the last major attack.


All of these homeland security measures could have been purchased with the money spent on the war; many more projects might be funded with the money likely to be spent in Iraq during the next decade.


In theory, some people might say, the choice between securing the United States and fighting a war in Iraq shouldn't be mutually exclusive; if both were pressing matters, battles the U.S. couldn't avoid, of course we'd find a way to do both, and the United States is vast enough and rich enough that it could surely manage it. (World War II cost the U.S. $4 trillion in today's dollars.) The trouble is, says Crowley, we're not funding both the war in Iraq and efforts to secure the homeland. We're only funding the war in Iraq, and the administration has not pursued any policies to bring more funds to domestic security. "This is the first war where an administration hasn't asked the American people to sacrifice anything," Crowley notes. "The administration says we can fight this war both at home and abroad and cut taxes at the same time."


Late in 2002, Jeffrey Sachs, the economist who heads Columbia University's Earth Institute, wrote an influential article in the Economist in which he chastised the Bush administration for worrying too much about weapons of mass destruction while ignoring the potential of what he called "weapons of mass salvation." While the White House is "prepared to spend $100 billion to rid Iraq of WMD," Sachs wrote, "it has been unwilling to spend more than 0.2 percent of that sum ($200 million) this year on the Global Fund to Fight AIDS, Tuberculosis and Malaria." Sachs pointed out that such efforts could save millions of lives around the world for very, very small sums of money; and saving lives around the world might provide stability to some of the most unstable regions on the planet, a fact that would surely aid in the fight against terrorism.


A few months after the Sachs article appeared, Bush declared in his State of the Union address that the United States would launch a major new effort to fight AIDS in Africa. But with the costs of war, that plan, too, has gone underfunded.


Speaking at a conference sponsored by the World Bank in early April 2003, just before Baghdad fell, Sachs once again lamented the fact that money for war always seems available, yet money for peaceful initiatives that could yield greater benefits is always sidelined. "I was told by the Secretary of State Powell recently just how hard it is to get the money for fighting AIDS," Sachs said. "We didn't have too much trouble finding money for fighting this war, and the amount of money we're going to be spending is phenomenally large."


To put into perspective how much money the U.S. has spent in Iraq, consider this: Working with researchers at the World Health Organization, Sachs determined that for as little as $40 per person per year allocated for the world's poorest countries, you could save about 8 million lives. That's "roughly 20,000 deaths averted every day" for about $25 billion a year. The United States has currently spent eight times that amount in Iraq. "For the cost of this war, tens of millions of people could be saved if we addressed the health crises with an energy equal to that [with] which we're now invading Iraq and fighting in Iraq. Tens of millions of people around the world could be saved for the same costs of the war that we're fighting right now."


There is something rather visionary-sounding and perhaps too grand to bear about Sachs' pronouncements; it's the kind of plan that might look good on paper, but surely it can't be that easy to save tens of millions of lives, and surely the benefits from it won't accrue directly to the security of the United States. But these same criticisms might be applied to the plan in Iraq -- an idealistic, visionary plan that, even if it went as well as it could have gone, would only have contributed indirectly to America's safety.





Farhad Manjoo is a staff writer for Salon.com, where this story first appeared.





Publication date: 09/16/04
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