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Wars may end but spending on them doesn’t

COMMENTARY | November 13, 2009

There are fundamental flaws in the way the press deals with the costs of war, says Linda Bilmes. She, along with her colleague Joseph Stiglitz, put the cost of Iraq and Afghanistan at more than $3 trillion — an enormous drag on the economy — in addition to the personal loss to families and communities of injured and dead troops.

(Part of our series on "Reporting the Economic Collapse")

By John Hanrahan

“There is no free lunch, and there are no free wars. In one way or another, we will pay these bills,” wrote Nobel laureate Joseph E. Stiglitz and Harvard Professor Linda J. Bilmes in their 2008 book, “The Three Trillion Dollar War,” about the current and long-term costs of the U.S. wars in Iraq and Afghanistan.

Despite this sobering assessment, most politicians, war advocates, policymakers and the mainstream press studiously avoid talking about the economic costs and policy implications of going to war and then paying for those wars for decades into the future. Newspaper editorials, Sunday talk-show guests and those “deficit hawks” who opposed even the economic stimulus program, regularly warn that the government needs to control deficits and rein in the public debt. Yet these warnings invariably focus on entitlement programs without even mentioning deficits caused by the nation’s seemingly perpetual 21st century wars.

But as Stiglitz and Bilmes have convincingly demonstrated, even when wars end the spending on those wars does not end. Stiglitz, a professor at ColumbiaUniversity, received the Nobel prize in economics in 2001. Bilmes, considered a leading expert in U.S. budgeting and public finance, is a professor at Harvard’s Kennedy School of Government

“There are very fundamental flaws in the way most people and the news media look at the cost of wars,” Bilmes said in an interview with Nieman Watchdog. “For the press, these are still uncharted waters. The press doesn’t always do a good job in connecting the dots. Their stories might be adequate in reporting what different people are saying about a particular issue, but often they don’t deal with what might be the economic consequences of doing something or not doing something,” as with the costs of going to war.

An October 24, 2009, Washington Post editorial is indicative of how the mainstream press generally seems to believe that war costs end when a war ends, and that questions of war debt can be finessed. That editorial (titled “A critical question: Why fund war with debt but insist that health-care reform be deficit-neutral?”) was written in response to a reader’s question as to why the Post, in supporting General Stanley A. McChrystal’s request for 40,000 more troops in Afghanistan, held the apparently contradictory opinion that it is “okay to finance wars with debt...but not to pay for health care that way.”

The editorial writer responded, “In principle, all wars should be paid for, just like all other federal spending,” but argued that there was a difference between war spending and universal health care spending: “Wars end, and the spending for them tapers off; entitlement programs must be funded in perpetuity. Wars compel decisions, like the one now at hand; new entitlement programs can be phased in or delayed.”

Citing President Obama’s quote in his recent address to the Veterans of Foreign Wars that Afghanistan is “a war of necessity” and “fundamental to the defense of our people,” the Post editorial went on to make this highly debatable point: “Universal health care, however desirable, is not ‘fundamental to the defense of our people.’ Nor is it a ‘necessity’ that it be adopted this year.”

The National Priorities Project, which traces war costs and their effect on U.S. spending priorities, reports that the total operating costs of the nation’s ongoing dual wars reached $915.1 billion at the end of just-concluded fiscal year 2009, with $130 billion more expected to be spent in fiscal year 2010 – sending these costs to well over $1 trillion for more than eight years of war. To put that spent $915 billion in perspective, the NPP calculated that for the same amount of money the nation could build 7,057,801 affordable housing units.

In the interview with Nieman Watchdog, Bilmes pointed out that the $1 trillion-plus costs are just the tip of the iceberg. This figure does not include the wars’ additional hidden and long-term costs, which she and Stiglitz calculate at $2 trillion-plus, meaning that the actual overall cost figures for Iraq and Afghanistan now “stand significantly above $3 trillion.”

That additional $2 trillion-plus includes, among other things, lifetime disability benefits and health care for veterans, replacement costs of military weapons and equipment, interest on an increased public debt, a drag on the economy, higher oil prices, as well as other direct and indirect costs to taxpayers – including the personal and economic loss to families and communities of the injured and dead troops.

The $3 trillion figure that Bilmes and Stiglitz cited in their book was based on what have turned out to be conservative estimates, she said. The possible 40,000 troop increase for Afghanistan would send their overall estimated long-term costs even higher, Bilmes added.

These huge current and future costs of the wars, coupled with other massive defense spending, squeeze out or scale down other important programs and thereby skew our national priorities year in and year out. As Stiglitz and Bilmes wrote in their book, the consequences of so much spending on war could include “...higher taxes...public and private investments that will have to be curtailed...social programs that will have to be cut back.”

“We don’t think about the long-term costs of sending a soldier to war,” Bilmes said in the interview with Nieman Watchdog. “Any kind of injury, trauma or disease that affects that soldier may produce costs for years and years to come. Often the biggest medical costs don’t show up until 30 years down the line, or longer.

“For example, the [1991] Gulf War. People generally look at it as a war that didn’t cost us much because U.S. allies paid for most of the operating costs and the U.S. share of coalition war costs was just $7 billion.”

Yet, even though the Gulf War lasted for less than two months, with 148 U.S. troops killed and 467 injured in direct combat,“we are still paying out $4 billion a year for compensation, pension and disability benefits for 200,000 veterans of that war.” And those costs will continue to increase as time passes because, as veterans age, they will develop other problems and, as the historical data show, they will need costlier treatments in the last years of their lives.

The medical care costs for veterans of the Vietnam war still haven’t reached their peak, Bilmes noted, more than three decades after that war ended. For World War II veterans, the biggest total dollar figure for claims paid out to veterans didn’t come until 1996 -- more than 50 years after that war ended.

In the current Iraq and Afghanistan wars, the survival rate for wounded soldiers is much higher than in previous wars, which means proportionally greater costs today and in decades to come for disabilities payments and health care than was the case for veterans of previous wars. In Vietnam, for example, for every troop killed there were three wounded.

For troops in the current two wars, for which the total death toll stands at more than 5,100 (with 4,100 of those killed by enemy fighters), the ratio is eight wounded for every death. Including the troops who are injured or diseased in non-hostile situations (e.g., vehicle and construction accidents, friendly fire incidents, mental health crises, rare diseases such as leishmaniasis), the ratio rises to nearly fifteen wounded for every one fatality, Bilmes said.

So when you have this level of injuries, “you have an enormously expensive tail” that will produce war-related expenses for decades to come, she said. But most of these future costs are pretty much invisible in the nation’s political discourse.

One problem, Bilmes said, is a flaw in the Congressional Budget Office’s system for estimating future costs of programs. The CBO bases its cost forecasts on 10-year periods – which means major costs of disabilities payments and health care costs for veterans beyond those 10 years are not officially factored in as costs of the wars.

“We do a poor job of accounting for long-term costs,” Bilmes said. “Because the CBO scores things over 10 years, that tends to bias the government’s decision-making in favor of things where the upfront costs are low and the biggest costs are far into the future.”

At the time their book was published, Iraq was the center of U.S. combat operations, but since then the fighting and U.S. troop numbers in Afghanistan have increased, pushing up the costs of that war. Bilmes noted that because of various logistical and supply problems, “it’s much more expensive per individual soldier in Afghanistan than it is in Iraq.” Consequently, the cost of sending 40,000 additional troops to Afghanistan would have a greater fiscal impact than sending a like number to Iraq.

The budget for conducting the war in Afghanistan is currently $3 billion a month, Bilmes said, but if President Obama decides to send the 40,000 additional troops requested by McChrystal, that amount would rise to perhaps $5 billion or $6 billion a month – a figure that, of course, does not cover long-term future costs.

Since the publication of their book, Bilmes and Stiglitz have continued to track war costs and have determined that their original cost estimates – which were conservative to begin with – are even more conservative than they thought at the time they were writing the book.

“The amount we forecasted for every single item [for Iraq and Afghanistan] turned out to be low,” Bilmes said in the interview. “For example, we had estimated that 25 percent of military personnel would serve two or more tours of duty, but it’s now more than one-third. We had forecasted that by now 31 percent of veterans would have applied for disability compensation, yet the actual figure is over 40 percent. We had forecasted that by now 39 to 41 percent of veterans would have gone to the Department of Veterans Affairs for medical treatment, and the figure is actually 44 percent. We had forecasted that by now 10 to 15 percent of veterans would have sought treatment for PTSD [post traumatic stress disorder], yet the figure is close to one-third.”

Likewise, she said, their earlier estimates on equipment usage and depreciation have turned out to be too low.

“For example, we had estimated that light trucks [in the war zones] would be used up four times faster than their normal life span,” she said. “Instead, we have found that they are being used up six to nine times faster than their normal life span.”  This, of course, means more and earlier replacements of vehicles and, consequently, higher depreciation costs.

With Iraq and Afghanistan as “the first wars in U.S. history since the Revolutionary War that we have had to finance through borrowing,” the two wars do indeed add to the nation’s debt – regardless of how much that fact is ignored by politicians and the news media.

Any credible press discussion of budgets, deficits and the economy needs to examine the true costs of these wars and their impact on the nation’s current economic predicament, spending priorities and future well-being. In addition to examining the national security and moral implications of going to war (or expanding a war), the news media should pay greater attention to the actual monetary costs as well as the negative impact of the wars on the economy.

(Click here for a 2006 Nieman Watchdog article by Linda Bilmes on the hidden costs of the Iraq War.)

Next: More on the economics of war, and how money spent on armaments is money down the drain.

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