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'Hidden Costs' Double Price Of Two Wars, Democrats Say

By Josh White
Washington Post Staff Writer
Tuesday, November 13, 2007

The economic costs to the United States of the wars in Iraq and Afghanistan so far total approximately $1.5 trillion, according to a new study by congressional Democrats that estimates the conflicts' "hidden costs"-- including higher oil prices, the expense of treating wounded veterans and interest payments on the money borrowed to pay for the wars.

That amount is nearly double the $804 billion the White House has spent or requested to wage these wars through 2008, according to the Democratic staff of Congress's Joint Economic Committee. Its report, titled "The Hidden Costs of the Iraq War," estimates that the wars in Iraq and Afghanistan have thus far cost the average U.S. family of four more than $20,000.

"The full economic costs of the war to the American taxpayers and the overall U.S. economy go well beyond even the immense federal budget costs already reported," said the 21-page draft report, obtained yesterday by The Washington Post.

The report argues that war funding is diverting billions of dollars away from "productive investment" by American businesses in the United States. It also says that the conflicts are pulling reservists and National Guardsmen away from their jobs, resulting in economic disruptions for U.S. employers that the report estimates at $1 billion to $2 billion.

The committee, which includes House and Senate members from both parties and is chaired by Sen. Charles E. Schumer (D-N.Y.), is expected to present the report this morning on Capitol Hill. Democratic leaders plan to use the report as evidence that the wars are far costlier than most realize and that a change of course could save taxpayers billions of dollars in the coming decade.

"What this report makes crystal clear is that the cost to our country in lives lost and dollars spent is tragically unacceptable," Schumer said in a statement last night.

Brian Hart, a spokesman for Sam Brownback (Kan.), the committee's senior Republican senator, said, "The Democrats didn't bother to run this report by any of their Republican JEC colleagues or staff."

"We'll see what they come up with, but it sure seems that the Senate leadership is trying to protect their continual proclamations of defeat instead of working for bipartisan progress," Hart added.

War funding experts said that the committee's Democrats raise viable arguments but that some of the numbers should be met with skepticism. For example, it is difficult to calculate the precise impact of the Iraq war on global oil prices, and it is speculative to estimate how much the war will cost over time, as situations change daily on the battlefield.

Robert D. Hormats, vice chairman of Goldman Sachs (International) and a member of the National Security Council staff under Presidents Nixon, Ford and Carter, said he agrees that the war is far costlier than the publicly stated price tag but said some of the report's measures are problematic. He said he thinks it would be hard to show that the Iraq war has caused oil prices to skyrocket or oil producers in the Middle East to falter, and he said he does not think there has been a closing-off of U.S. investment because of the war.

Oil prices have more than tripled since the U.S.-led invasion of Iraq in March 2003, the report notes, to a peak of more than $90 per barrel. "The war in Iraq is certainly not responsible for all of this increase," the report states, but it estimates that declining Iraqi production "has likely raised oil prices in the U.S. by between $4 and $5 a barrel." The report added that "because of the many factors affecting oil markets, this should be seen as a highly approximate estimate."

Hormats said he agrees with the report's finding that the United States is dangerously increasing its reliance on foreign debt and that Americans will be paying the price for generations. Hormats, author of "The Price of Liberty: Paying for America's Wars," said that in every other major war, the United States has financed the conflict.

"The wars will cost a lot more than the appropriated sums, and it's certainly true our children will be paying for this for a long, long time," he said. "I'm very critical of the way they have financed the war, but I always hesitate to try to quantify any of these things, to make these numerical judgments."

The committee's Democrats estimated that injuries due to the wars could add more than $30 billion in future disability and medical care costs, including billions in lost earnings for veterans who cannot work because of post-traumatic stress disorder.

Although war costs have risen each year and the fiscal 2008 funding request is the highest so far, the direct and indirect costs of Iraq and Afghanistan are much lower than the costs of World War II and are just passing those of the Vietnam War. World War II is estimated to have cost $4.9 trillion in today's dollars. According to Congressional Research Service reports, the Vietnam War cost $600 billion in today's dollars and the 1991 Persian Gulf War cost $80 billion.

The economic difference is also sizable, Hormats said, as the annual cost of today's wars is less than 2 percent of the nation's gross domestic product, a fraction of the cost of World War II. The nation's economy is so large that it "disguises the costs and doesn't impose any hardship on the American people," allowing the government to sidestep normal budgeting processes, Hormats said. He said the country has borrowed all the money it has needed for the wars because taxes have been lowered and the wars have been funded largely by supplemental appropriations, with few budgetary sacrifices.

Jason H. Campbell, a researcher at the Brookings Institution who maintains the think tank's "Iraq Index," said it is clear that the costs of the Iraq war are higher than what Congress has appropriated but said they are often hard to quantify. He said he is unsure whether the costs of both wars total $1.5 trillion.

"It's much higher than other estimations I have seen," Campbell said. "A lot of it is debatable, but there are costs that will in the near future be attributable to Iraq that haven't been accounted for yet."

Staff researcher Julie Tate contributed to this report.

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