The staggering financial costs of the Iraq war continue to rise even a decade later. Initially justified as a war that would cost about $50 to $60 billion, today experts estimate that the true financial cost is between $4 and $6 trillion. In order to understand the war’s rising price tag, Linda J. Bilmes, author of the 2008 book The Three Trillion Dollar War co-authored with Joseph Stiglitz, explained how her research team arrived at these numbers, and how since the publishing of her book she discovered that there would be at least $2 trillion more to the $3 trillion figure when taking into account rising disability benefits and claims by returning veterans.

Findings

Bilmes updated her research team’s findings on the cost of the Iraq war a decade later. Below is a summary of her findings and conclusions:

  • Costly Legacy: The decision to go to war with Iraq has cost the United States trillions of dollars despite estimates before the war that the invasion would be “quick and cheap,” Bilmes said. She argued that future national security policymakers must cope with the legacy of the cost of the Iraq war. That legacy is the long-term commitment made to veterans in medical care, education, and other benefits. Historically the bills for war costs comes decades after they took place; however, the costs of the Iraq war will be higher and come sooner due to high survival rates, generous veteran benefits, and more expensive medical treatments.
     
  • Veteran Affairs: Since 2011 the Veteran Affairs (VA) budget has climbed from $61 to $140 billion per year, Bilmes said. In the past eleven years, nearly 2.5 million troops were deployed, of which 1.65 million have returned home and become eligible for veteran care and benefits. It was predicted that by 2013, 45 percent of new veterans would be receiving medical care and 40 percent would be on disability. In reality, the VA is currently treating more than 56 percent of returning troops and more than 50 percent have applied for permanent disability benefits. Ninety-eight percent of these claims are approved. Bilmes concluded that when taking into account money already spent on veteran benefits by the VA, the cost of taking care of veterans is $134 billion. However, another $836 billion has already accrued in disability, medical, and social security benefits to be paid out over the next 40 years, and this is not counting costs after retirement.
     
  • The Pentagon: Bilmes explained that since the war, one third of the total Department of Defense  budget is now dedicated to personnel and healthcare costs. She explained how the department had increased its personnel benefits and salaries to attract more recruits after the war and how the repercussions of that decision have put a strain on its spending ability today. For example, spending for the TRICARE system that treats troops in active duty service and their families has risen from $18 billion in 2001 to $56 billion. The health companies that make up TRICARE are some of the biggest beneficiaries of the war in terms of profits, Bilmes added. She also pointed to the department’s higher pay scale indexing after the war, which further strains the budget. She concluded that the United States will not enjoy a peace dividend due to its need to replace a generation of deprecated military equipment and its military security agreement with Afghanistan that would cost approximately another $700 billion.
     
  • Unpredictable Costs: Bilmes argued that the costs of war are not only high but unpredictable and can set off a chain of events with far-reaching economic consequences. She pointed to her colleague Joseph Stiglitz’s argument that oil prices led to the Federal Reserve’s decision to increase liquidity credit, which played a role in bursting the housing bubble, leading to the financial crisis. Bilmes also explained that the way in which the war was paid for was unprecedented: the United States has borrowed all the money spent in Iraq and the decision to cut taxes and pay out of debt has added another $2 trillion to the national debt over the past decade. She concluded that the Iraq war deficit endangers the future by continuously adding to the national debt.

A System in Disarray

  • Bad Accounting Matters: The United States lacks any system that tracks war costs, Bilmes said. She explained that the United States owes nearly $1 trillion in deferred compensation to the troops; however, this liability does not appear on the national balance sheet. Furthermore, the government is not accounting for the value of the 6,658 troops lost in Iraq and Afghanistan beyond a small amount of life insurance money.
     
  • War Debt: Bilmes explained that the United States does not keep track of its war debt and lacks the basic accounting systems to track it. Over the last decade the military budget increased by $1.5 trillion, not including money appropriated to war spending related to personnel and medical care costs. She explained that the Pentagon’s accounting system is so flawed that a proper audit cannot be performed. This has resulted in a legacy of rampant waste, cost overruns, war profiteering, and comingling of war and non-war related funds, she concluded.
     
  • Lack of Oversight: Bilmes highlighted the shortcomings of the congressional system of appropriation to military spending. She explained that Congress can appropriate vast sums of money and circumvent the entire budget accountability system by labeling them emergency funds, when in fact emergency funds appropriations were designed for actual emergency disasters like earthquakes. The United States has spent trillions of dollars through these emergency funds with little accountability, she said.
     
  • Lessons Learned: The lesson of Iraq is that the government’s underestimating, ignoring, and refusing to think about how to pay for the war made it easier for the cost to grow and allowed for poor choices, Bilmes concluded. She explained that the government has spent at least $2 trillion in out-of-pocket money and has committed at least $2 trillion in veteran, social security, and defense spending. By factoring in other macro and micro costs caused, for example, by the impact of high oil prices, the cost estimate for the war reaches $5 trillion. When Afghanistan’s costs are factored in, the estimate reaches $6 trillion and counting.