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Draft 6/13/11

Economic and Budgetary Costs of the Wars in Afghanistan, Iraq and Pakistan to
the United States: A Summary

Neta C. Crawford and Catherine Lutz

How much have the wars in Afghanistan, Iraq, and Pakistan since 9/11 cost the United
States? The budgetary and economic costs of the post-9/11 wars are direct and indirect,
past, present and future, tallied, ongoing, and projected.

According to President Obama the cost for the war in Iraq has been under $1 trillion:
"Thanks to the extraordinary sacrifices of our troops and the determination of our
diplomats, we are hopeful about Iraqs future. But regime change there took eight years,
thousands of American and Iraqi lives, and nearly a trillion dollars." This figure is not
close to the actual costs of the war in Iraq, much less the costs of the wars in Afghanistan
or Pakistan.

What has the Pentagon been allocated directly to fight these wars? Congress allocated
$1,208 billion in nominal dollars. But in today's $2011, the Pentagon has been allocated
$1,313 billion for the wars.

But the wars cost more than these appropriations for the Pentagon.

What has the State Department spent in foreign aid through the International Affairs
authorization (not spent by the Pentagon)? The State Department and U.S. AID spending
that can be considered war related to Iraq, Afghanistan, and Pakistan, totals $67 billion in
current dollars.

How much has the U.S. spent to date on veterans care? $31.3 billion and counting; as of
December 2010, the U.S. had already spent 13.2 billion on VA medical care and 18.1 on
VA disability.

What has Homeland Security cost since 2001? The U.S. has spent $649 billion in current
dollars. Some of that money would have been spent in any case. The spending that can
be understood as the cost of reacting to 9/11 is $401 billion in constant $2011.

Are there costs that we should be counting that we don't generally include in summaries
of what the U.S. has spent to date?

The international assistance to Uzbekistan for help in the Afghanistan war totals about
$.5 billion.

The Pentagon budget received a substantial boost, $667 billion over ten years in constant
$2011 dollars over what was projected before September 2001 to be the budget over the
next ten years. We could very reasonably attribute all of that "bonus" allocation to the
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wars. If we attribute only half of that allocation over the base projected for spending
through 2011, the Pentagon received an additional $334 billion the Bush administration
had not planned to spend.

The war has been financed almost entirely by borrowing. How much has that cost the
U.S. to date in interest payments? Estimates depend on several assumptions but it is not
unreasonable to say that the U.S. has spent at least $202 billion to pay for only the
Pentagon spending on war, estimated through FY2011 (assuming for e.g. interest rates on
10 year Treasury notes, and using BEA 2005 deflators) If we include some of the other
spending (e.g. veterans care, incremental additions to spending on homeland security,
defense, and foreign aid) and assume that nearly all the money was borrowed, the
estimate for total interest paid through FY2011 is more than $400 billion in current
dollars.

What is the total cost?

Expenditures from 2001 to the Present: These budgetary costs include the bombs, bullets,
and fuel that go into making war (found in the Department of Defense and classified CIA
budgets), troop pay, veterans' benefits, war related foreign assistance, homeland security
and interest already paid on war related debt. Assuming we stopped fighting now, the
already incurred costs of the three wars is conservatively estimated at $2.3 trillion (Figure
1). If we add more of the costs of war, beyond simply Pentagon spending, to the total
basis on which we calculate interest payments, and assume that nearly all the Pentagon
spending over the base 2001 projection is attributable to the war, our moderate estimate,
is $2.8 trillion, is broken down in Figure 2 below. We do not make a higher estimate.





















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Figure 1.





















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Figure 2.




But even if we stopped fighting this month, we would still have to keep paying for the
war into the future.

Future Direct Expenditures: These are those costs that the U.S. must pay because it has
incurred certain obligations by fighting a war, the largest likely being the obligations to
pay veterans medical and disability expenses.

The U.S. is obliged to pay veterans disability and medical care costs for the more than
1.25 million veterans who have already returned, through 2010 from the wars. Those are
estimated to be between $118 and $168 billion for medical costs and between $228 and
$301 billion for disability.

What will veterans care cost in the future? More than 2.2 service members have served in
Iraq and Afghanistan. They will become veterans in the future and thus require VA
medical and disability that we are obliged to pay. The costs for this care will peak in
about 40 years. The costs will range between $589 billion and $934 billion depending on
the length and intensity of the conflict.

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If we add those costs, the total over the next forty years will be at least $2.9 trillion
(figure 3) and perhaps closer to $3.8 trillion (figure 4).

Figure 3.




Figure 4.


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But those are simply the direct costs now and in the future that we must pay.

There were substantial indirect economic effects, such as the consequences of greater
Federal Debt debt. There are some stimulative effects of greater spending. So taking the
costs and benefits of higher, albeit deficit spending into account, what could the economy
look like if we had not spent that money on war?

One of the most important consequences of financing the war almost entirely through
deficit spending is of course greater debt. That debt has many consequences, not least a
.31% higher interest rate. This is reflected in higher interest rates charged to consumers.

Our research indicates that employment would be much higher if the U.S. had spent the
money otherwise (for example on hiring teachers, or investing in weatherization, mass
transit or green energy).

And there are still more costs that we have already incurred or will pay in the future.

Some of what we haven't counted:
* We have not counted the future payments for interest on the debt from 2011 forward.
* We are unable to calculate the unfunded costs that American paid to care for their war
wounded family member (one in five of the cases of serious wounding has this effect)
* We did not calculate the future costs veterans medical care beyond age 67 including
TRICARE for Life; nor did we include payments for disability beyond age 67 for
veterans
* We uiu not calculate the costs that aie paiu by state anu local goveinments foi
auuitional veteians benefits
* We have not included the of euucation benefits fiom new uI bill
* We uiu not incluue a total foi the Statistical value of Buman Life foi each tioop anu
contiactoi who uies
* We were unable to include the costs of the CIA Predator and Reaper drone surveillance
and strike program in Afghanistan. This "black" budget item, which included the costs of
the drones, the operators, fuel, and weapons, is not known publicly. CIA spending for
drone strikes and covert operations in Pakistan
* We have not counted the promised money, yet to be paid, for reconstruction in
Afghanistan and Iraq