53407688.

doc Page 1 of 3

March 16, 2008

$3 trillion is just a part of the cost

Long after the war ends, America will continue to pay a staggering
price
OLIVIA WARD
FOREIGN AFFAIRS REPORTER

It takes a lot to shock the United States Congress. But when Nobel laureate
economist Joseph Stiglitz tabled his calculation of the cost of the Iraq war at some $3
trillion, shock waves spread from the lawmakers to the public.
Stiglitz, and co-author Linda Bilmes, a Harvard University government finance expert,
created a perfect storm as their book, The Three Trillion Dollar War, was published
during the heaviest economic squall in years.
"People simply gasped," says Stiglitz. "Even we were incredulous. But it seems that
few people had really thought about it before."
But even that head-spinning figure – more than twice the gross national product of
Canada – is only part of the problem of U.S. military spending.
As the Iraq war limps toward its fifth anniversary this week, not only are its human
cost mounting, its financial burden is also escalating monthly.
The staggering $3 trillion sum has been called conservative by some critics, who say
the war's cost could reach $5 trillion. And even by the most lowball estimates,
America will pay more than $1 trillion in current and future costs for a war that is
driving military spending into a potential budgetary black hole.
President George W. Bush has cut taxes rather than boosting them to pay for the
increases.
So, economists say, the financial burden will be passed on to future generations for
decades to come – making it more difficult to support an aging population or vital
social programs for the poor.
With recession on the horizon, if not already in the streets, the American economy is
front and centre for most voters. But so far, no presidential hopeful has taken on that
rampaging elephant in the room.
"Nobody wants to do a top-to-bottom scrub of the military budget," says David
Isenberg, an adjunct scholar at the Washington-based Cato Institute. "It's like a cure
for cancer. You'd like to believe there is one. But when you try to apply Accounting
101, the outlook is fairly pessimistic."
Hillary Clinton, a member of the Senate Armed Services Committee, advocates
winding down the Iraq war but backs a strong military.
Barack Obama, who has pledged to stop the war in Iraq and cut billions of dollars in
"wasteful spending," comes closest to tackling the massive issue. But his plans for an
expanded troop level to fight the "war on terror" are moving in the other direction.
To Republican John McCain, military spending is a priority – and he'd do more of it.
53407688.doc Page 2 of 3

"There seems to be a political taboo about questioning levels of military spending,"

says William Hartung, director of the arms and security initiative of the Washington-
based New America Foundation.
"The Democrats, who might raise questions, fear that they'll be labelled soft on
defence. The Republicans aren't going to ask. And if the candidates don't tackle the
military budget before the election race begins, it won't get any easier."
Part of the problem is old-fashioned pork barreling. Politicians will fight cuts in their
districts' defence industries, regardless of the utility of what they are producing.
But a more serious factor is the military mentality that began long before 9/11 and
failed to subside when America walked past the ruins of its old Soviet enemy.
"The U.S. is definitely locked into a war economy," says Hartung, author of How Much
Are You Making on the War, Daddy? A Quick and Dirty Guide to War Profiteering in
the Bush Administration.
"About two weeks of the war would cost the same as what's spent on fighting global
warming. But war spending is a kind of protected portion of the economy. The world
could change dramatically, but the budget would be about the same."
In fact, military spending is flash-frozen by a prevailing belief that it should remain at
4 per cent of America's GNP.
"If the war ended tomorrow, there'd be no peace dividend," says Hartung.
The outgoing Bush administration has proposed a $515.4 billion budget for 2009
military spending – a post-World War II high when adjusted for inflation and an
increase of 5 per cent over last year for standard Pentagon and military operations,
even before billions of dollars of "supplemental" spending are rolled in.
Supplemental requests are tabled by the president to pay for the ongoing costs of
the Iraq and Afghanistan wars, as well as the worldwide "war on terror." And they
make the global military expenditures as hard to compute as to imagine.
"We don't know, and we can't know, what the costs are until the bills come in," says
Isenberg." We literally don't know what we are spending money on."
Much of the money goes to producing and delivering battlefield equipment, some of
which is a bad fit against bands of insurgents rather than Soviet-style armies.
But spending supporters argue that feeding the military machine is a proven way of
spending the country's way out of a recession, World War II style.
"That theory works as long as what we are doing at home has long-term value in
terms of investment in America," says Faiz Shakir, research director at the Center for
American Progress.
"The problem with the current war is that, for the hundreds of billions we've spent,
we haven't received any long-term investment that will last after the war. We've
created a big defence-contractor industry, but the money could be much better used
to reinvest in ways that could produce sustainable jobs. We're on a treadmill, and
we're running in place."
These days, the once-almighty dollar has the clout of the old Russian ruble, as
currency dealers and ordinary people flee to the euro.
With defence spending slated to increase, and the economy shrinking rather than
growing, international uncertainty is escalating.
53407688.doc Page 3 of 3

"It's not possible to keep going on the current path," says James Horney, director of
federal fiscal policy for the Center on Budget and Policy Priorities and former senior
official in the Congressional Budget Office. "Something's got to give."
Although the deficit problem could continue for more than 20 years without a
blowout crisis, Horney says, "sooner or later there are two ways it could end."
One is a world financial crisis if foreign investors suddenly lose confidence in the U.S.
and withdraw. The other is slower, but no less deadly.
"Accumulating big deficits is like termites eating at the foundation of the economy.
You're in a house that is falling down, but from day to day, things don't seem much
worse. Then one day, it turns to dust."