By Peter Katel
Two major events in American life intersected in March 2008. A major Wall Street investment bank collapsed. And the country marked the five-year anniversary of the U.S.-led invasion of
The demise of Bear Stearns came amid a national mortgage crisis that has helped precipitate an economic slowdown and rising joblessness. And the war’s anniversary prompted a grim accounting: more than 4,000 Americans killed, tens of thousands wounded (plus millions of Iraqis killed or forced to flee their homes) and some $700 billion in taxpayer money spent so far.
Experts differ on the eventual total cost of the conflict, but several projections approach or exceed $2 trillion.
As both parties gear up for the November presidential election, foes of the George W. Bush administration are insisting on a direct linkage between the big issues of the political season. “There are not two concerns in this coming election. There is one,” says economist Joseph E. Stiglitz of
In a best-selling new book, Stiglitz, winner of the 2001 Nobel Prize in economics, lays out the most detailed and sustained economic case against the Iraq intervention, which he and co-author Linda J. Bilmes calculate will cost the United States upwards of $3 trillion.
President Bush summarily rejects the war-economy link. “I think the economy is down because we’ve built too many houses,” he told the NBC “Today Show.”
Even some Bush administration critics share that opinion. The war “didn’t have much effect on the housing market or on the willingness or unwillingness of banks or others to provide credit,” says Robert D. Hormats, vice chairman of Goldman, Sachs (International), a Wall Street firm.
Still, the Democratic contenders for the presidential nomination, New York Sen. Hillary Rodham Clinton and Illinois Sen. Barack Obama, are starting to echo some of the Stiglitz-Bilmes critique. And some of their fellow lawmakers, Republicans included, are taking up the simpler argument that the
“Isn’t it time for the Iraqis to start bearing more of those expenses, particularly in light of the windfall in revenues due to the high price of oil?” Sen. Susan Collins, R-Maine, asked Ambassador Ryan Crocker, the
“Senator, it is,” Crocker replied. He and Gen. David H. Petraeus, the top military commander in
The presumptive Republican presidential nominee, Sen. John McCain, R-Ariz., a vocal supporter of the
President Bush had already signaled a shift toward insisting that the Iraqi government lessen financial dependence on the
“The Iraqi government is stepping up on reconstruction projects,” Bush said in a March 27 speech at the
But Stiglitz and Bilmes calculate that the
None of these estimates are easily compared with one another because the underlying calculations were based on different methodologies and time horizons; some also do not account for oil-price fluctuations, debt interest payments and the effects of inflation. Some of these contrasts are apparent in projections on the costs of veterans’ care.
In any event, however much the
The administration’s projections “presupposed a relatively short conflict that would have had us out of there in a matter of months,” says Dov Zakheim, who was assistant secretary of Defense and the Pentagon’s budget chief in 2001-2004. Instead, “The war became a lot more intense than people anticipated, and the thing has gone on a lot longer than people anticipated.” Zakheim is now a vice president of Booz Allen Hamilton, a McLean, Va.-based consulting firm.
Cost figures and economic theories notwithstanding, the Iraq-costs debate ultimately turns on issues of national security policy.
“We’re supporting a vital national interest, which is a stable
In an interview later, Stiglitz says, “We’ve obviously hit a raw nerve.” He adds that he and Bilmes make clear they oppose the war. But they began laying out their thesis in a 2006 paper published by the National Bureau of Economic Research, a nonpartisan, nonprofit forum. “It was open for people to give us comments, which is in the nature of an academic process. We were very careful in responding to issues that were raised in open debate. The remarkable thing, from the Heritage Foundation or from the administration, is that they won’t come up with their own numbers.”
White House press secretary Dana Perino said in March, when asked about Stiglitz’s calculations: “I’m not going to dispute his estimates. . . . But it’s very hard to anticipate, depending on conditions on the ground and circumstances, how much the war is going to cost.”
In any case, war critics aren’t the only economists studying
“The cost of the war is certainly far in excess of the baseline cost that we estimated for containment,” the study’s leader, Steven J. Davis, concedes. But Davis, a professor at the
A military-spending specialist agrees decisions on going to war can’t be reduced entirely to dollars and cents. “It’s not like investing in real estate,” says Steven M. Kosiak, vice president for budget studies at the Center for Strategic and Budgetary Assessments, a nonpartisan think tank. “You have to take into account all kinds of things that are not budgetary or economic; there may be times when it is worth going to war even if there is a high budgetary cost.”
Still, President Bush has not been relying on that argument alone in recent comments about the costs and economic effects of the war. “I think, actually, the spending on the war might help with jobs, because we’re buying equipment and people are working,” he told the NBC “Today Show.”
But the classic World War II argument that military spending benefits the entire economy is finding little resonance among lawmakers managing a $239 billion federal budget deficit, whose constituents fear recent economic developments and hear that no plans exist to end the war.
As Hormats points out, “War spending is a highly inefficient way of boosting U.S. jobs and growth; spending on roads, bridges, energy research and education at home would have a far more beneficial and enduring effect on the economy than artillery and tanks.”
“We must ask ourselves,” said Sen. Charles Schumer, D-N.Y., said at a February hearing of the Joint Economic Committee, “is it worth spending trillions of dollars on such an uncertain and unpredictable outcome?”
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