War is messy, and putting a price tag on a war that stretches over years, with consequences lasting decades longer, is a staggering task. Yet in a democratic society whose citizens expect to know what they are paying for, someone has to do it. Linda Bilmes, lecturer in public policy, began the task of toting up the fiscal outlay on the Iraq war when students in her class at the Kennedy School of Government asked about its cost and Bilmes could not find any meaningful data. “I did this because I just wanted to know,” says Bilmes, a public-finance specialist who served as assistant secretary of commerce under President Clinton. “It is very distressing that nobody came up with a good estimate. How can you weigh the benefits against costs if you don’t know what the costs are?”
Bilmes published what she found on the op-ed page of the New York Times on August 20, 2005; her article moved Joseph E. Stiglitz, University Professor at Columbia University and a 2001 Nobel laureate in economics, to ask her about expanding the analysis to include the economic effect of the war on society. Their recent paper, “The Economic Costs of the Iraq War,” presented this year at the Allied Social Science Associations meetings, concludes that projections to date vastly underestimate the extent to which the war will drain this country financially.
Before the United States invaded Iraq in 2003, Secretary of Defense Donald Rumsfeld and then-director of the Office of Management and Budget Mitchell Daniels (now governor of Indiana) put the likely costs at between $50 billion and $60 billion. Former undersecretary of defense Paul Wolfowitz (now president of the World Bank Group) claimed that increased Iraqi oil revenues would pay for the war. When President Bush’s economic adviser Lawrence Lindsey suggested that the actual costs might be closer to $100 billion or even $200 billion, the White House called those figures grossly exaggerated and swiftly fired him.
Those estimates now look Lilliputian. The Congressional Budget Office (CBO) currently projects past and future Iraq-related expenditures to surpass $500 billion, and even that figure severely underestimates the full outlay, according to Bilmes and Stiglitz, whose paper indicates that the war will eventually cost Americans in excess of $2 trillion. (A trillion is a thousand billions.) Speaking of those in Congress who agreed early on to appropriate $87 billion to finance the war, Bilmes says, “Every time someone casts a vote, they implicitly make a cost-benefit analysis. Would they have voted the same way if they knew the costs were 10 times as much as advertised?”
More at
http://www.harvardmagazine.com/on-line/050682.html
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