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The Three Trillion Dollar War « Previous | |Next »
March 11, 2008

Some time in 2005, Joseph Stiglitz and Linda Bilmes, noted that the official Congressional Budget Office estimate for the cost of the war so far was of the order of $500bn. The figure was so low, they didn't believe it, and decided to investigate. The paper they wrote together, and published in January 2006, revised the figure sharply upwards, to between $1 and $2 trillion.

Stiglitz and Bilmes dug deeper and discovered that Bush's Iraqi adventure will cost America - just America - a conservatively estimated $3 trillion. The rest of the world, including Britain, will probably account for about the same amount again. That is what is argued by Joseph Stiglitz and Linda Bilmes in their Three Trillion Dollar War book.

They argue that the Bush administration actively obfuscated actual costs, and circumvented Congressional scrutiny by the continued use of emergency powers.The core of this book's argument is that the cash accounting process the administration uses is a cheat: it counts what's being spent now, but keeps promissory notes off the books.

What have been the benefits for the five years of war? Are there any? Was the war the best way of obtaining national security? Focusing on weapons of mass destruction that did not exist in Iraq? Is this money spent intelligently?

Remember that Iraq war - whatever you think about the political casus belli - was presented to the American public as a free lunch. Bush's economic adviser Larry Lindsey said the war could cost $200 billion and "would be good for the economy". Donald Rumsfeld dismissed this as "baloney" and estimated $50 to $60 billion. Andrew Natsios of the Agency for International Development promised the construction of a democratic Iraq would at most cost the US taxpayer $1.7 billion. Paul Wolfowitz thought the whole shebang would pay for itself.

In economics there is no such thing as a free lunch. The Bush Administration was wrong about the benefits of the war and it was wrong about the costs of the war. The president and his advisers expected a quick, inexpensive conflict. Instead, we have a war that is costing more than anyone could have imagined.

In this interview at Democracy Now Stiglitz says that the American economy

is almost surely heading into a recession. I was at the American Economic Association meetings. In the past, the probability of going into recession was fifty-fifty. The general consensus is now 75 percent probability of going into recession. But whether we go into recession or not, the real fact is that it is a major slowdown. It’s going to be one of the—I think clearly the deepest downturn in the last quarter-century. The loss of output, the difference between the actual output and our potential output, will be at least one-and-a-half trillion dollars, and that’s not money we’re talking about in this Three Trillion Dollar War. This is a serious problem. And I think at the core of this is the war. You know, in the election campaign, people said there are two big issues: the economy and the war. I think there’s one big issue, and that’s the war, because the war has been directly and indirectly having a very negative effect on the economy.

There was the enormous borrowing that occurred to finance the war at the same time that the President Bush put through tax cuts and the deficits are being financed by borrowing from abroad. The war is being run on the never never, and there is a transferring of hundreds of billions of dollars from American consumers, businesses, to the oil exporters in the Middle East, where pools of wealth are being created.

| Posted by Gary Sauer-Thompson at 6:47 AM | | Comments (7)
Comments

Comments

Gary,
in the above interview Juan Gonalez says:

the history of the United States wars have been the means by which certain sectors of the American economy actually get government financing to develop their technology that they then turn into profit once the war ends? And, you know, for instance, when I see Boeing creating the virtual fence along the border, where did they get that technology from, if not from back in the Persian Gulf War and previous wars that they developed, so that it’s almost like the arms manufacturer is looking for government subsidy for their new technological development?

Peter,
Stiglitz and Bilmes show that the right-wingers still defending the war are acting against bedrock conservative principles--it has been financed with budgets beyond the government's resources.

When it comes to the necessity and probable value of the Iraq war, the American right wing cannot decide whether it wants to be Pollyanna, putting a happy face on this mismanaged fiasco, or Emperor Hirohito, insisting on myths of endurance and national might as our resources dwindle.

With the numbers of homeless beggers in the U.S growing it is clear that the money for the War on Terror needs to be diverted to the War on Hunger.

While this figure is of course mind-boggling - as are the examples of the opportunity costs - I tend to look at it as the US being the first society to be quite upfront (well actually that has not been quite true with THIS particular war), that war is just economics by other means. It always has been.

Except this war will probably prove to be the most boneheaded 'investment' ever made by an American.

More extraordinary insights are revealed in this interview Aida Edemariam has with Joseph Stiglitz:

http://www.guardian.co.uk/world/2008/feb/28/iraq.afghanistan

John,
I do not think that the neocons would agree with your analysis. They fought the war on natural security grounds--to make America safe from the terrorists who hate what America stands for --freedom and democracy.

Thanks for the Guardian link Kez.This paragraph stands out--re the Republican response to the cost of the war:

So what did the Republicans say? "They had two reactions," Stiglitz says wearily. "One was Bush saying, 'We don't go to war on the calculations of green eye-shaded accountants or economists.' And our response was, 'No, you don't decide to fight a response to Pearl Harbour on the basis of that, but when there's a war of choice, you at least use it to make sure your timing is right, that you've done the preparation. And you really ought to do the calculations to see if there are alternative ways that are more effective at getting your objectives. The second criticism - which we admit - was that we only look at the costs, not the benefits. Now, we couldn't see any benefits. From our point of view we weren't sure what those were."

Stiglitz says that the mode of governance of the Bush administration is characterised by thoroughgoing intellectual inconsistency. The general approach, he says, has been a:
"pastiche of corporate bail-outs, corporate welfare, and free-market economics that is not based on any consistent set of ideas. And this particular kind of pastiche actually contributed to the failures in Iraq.

Sounds like the former Howard Government.