This paper attempts to provide a more complete reckoning of the costs of the Iraq
War, using standard economic and accounting/ budgetary frameworks. As of December
30, 2005, total spending for combat and support operations in Iraq is $251bn, and
the CBO's estimates put the projected total direct costs at around $500bn. These
figures, however, greatly underestimate the War's true costs. The authors estimate
a range of present and future costs, by including expenditures not in the $500bn
CBO projection, such as lifetime healthcare and disability payments to returning
veterans, replenishment of military hardware, and increased recruitment costs. They
then make adjustments to reflect the social costs of the resources deployed, (e.g.
reserve pay is less than the opportunity wage and disability pay is less than forgone
earnings). Finally, they estimate the effects of the war on the overall performance
of the economy. Even taking a conservative approach and assuming all US troops return
by 2010, the authors believe the true costs exceed a trillion dollars. Using the
CBO's projection of maintaining troops in Iraq through 2015, the true costs may exceed
$2 trillion. In either case, the cost is much larger than the administration's original
estimate of $50-$60bn. The costs estimated do not include those borne by other countries,
either directly (military expenditures) or indirectly (the increased price of oil).
Most importantly, they have not included the costs to Iraq, either in terms of destruction
of infrastructure or the loss of lives. These would all clearly raise the costs significantly.