Cost to US of Iraq and Afghan wars could hit $6 trillion
By: Peter Foster
The fresh calculation – which includes the cost of spiralling veterans’ care bills and the future interest on war loans – paints a grim picture of how America’s future at home and abroad has been mortgaged to the two conflicts entered into by George W Bush in 2001 and 2003.
“There will be no peace dividend,” is the stark conclusion from the 22-page report from the Kennedy School of Government, “and the legacy of Iraq and Afghanistan wars will be costs that persist for decades.”
The report comes as the US prepares for a final withdrawal from Afghanistan, a move that Barack Obama trumpeted in his State of the Union address as a sign that America was finally moving forward after a sapping decade of war.
However the working paper by Professor Linda J. Bilmes makes clear that the true legacy the two conflicts – which have cost $2 trillion in actual outlays so far – have not yet even begun to be appreciated.
“There’s a sense that we are turning the corner, but unfortunately, the legacy of these wars, because of decision about the way we fought and funded these wars, means we will be paying the costs for a long time to come,” Prof Bilmes said in an interview with The Daily Telegraph. “We may be mentally turning the page, but we are certainly not from a budgetary and financial perspective.”
The report, which builds on estimates in 2010 by Prof Bilmes and the Nobel laureate Joseph E. Stiglitz, highlights the stunning rise in long-term cost of treating veterans who both survive in greater numbers and seek treatment for a wider selection of ailments from back pain to post-traumatic stress disorders.
“More than half of the 1.56 million troops who have been discharged to date have received medical treatment at VA [Dept of Veteran Affairs] facilities and been granted benefits for the rest of their lives,” the report said, adding that the real bills will be incurred for decades to come.
“The peak year for paying disability compensation to World War I veterans was in 1969 – more than 50 years after Armistice. The largest expenditures for World War II veterans were in the late 1980s. Payments to Vietnam and first Gulf War veterans are still climbing,” it said.
The second major hidden cost of the two conflicts will be servicing the debts incurred as a result of the “unprecedented” decision to pay for the wars entirely from debt while cutting taxes during wartime – as the Bush administration did in 2001 and 2003.
The decision to finance the war through borrowing has already added $2 trillion to the US national debt – or about 20 per cent of the total national debt added between 2001 and 2012.
“The immediate budgetary cost has been $260 billion in interest paid for borrowings to date,” the report said, but warned that accrued interest on existing borrowings, and the cost of future borrowings would see the eventual bill “reaches into the trillions”.
The estimates dwarf the initial projections of the war costs. In 2002 Lawrence Lindsey, then President Bush’s chief economic adviser, estimated that the “upper-bound” costs of war against Iraq would be $200 billion, but added that the “successful prosecution” of the war would be good for the economy.
That notion is severely challenged by the report which warns that cost of the wars is already affecting investment in education, infrastructure and scientific research, and that a large proportion of the money spent did not help to grow the wider US economy.
The ‘baked in’ costs of higher wages and benefits for service personnel and better care for veterans is also likely to constrain the ability of the US Department of Defence to invest in maintaining and upgrading fighting forces.
“The war debt has been especially unhelpful. Large amounts have been spent on things that clearly did not benefit the United States – for example, $87 billion in reconstruction funding for Afghanistan, and $61 billion in Iraq, much of which has been squandered,” it said, citing official government reports.
“As a consequence of these wartime spending choices, the United States will face constraints in funding investments in personnel and diplomacy, research and development and new military initiatives.
“The legacy of decisions taken during the Iraq and Afghanistan wars will dominate future federal budgets for decades to come.”