Study: Iraq war to cost 2 trillion dollars

The Iraq war will likely cost the United States between one and two trillion dollars, despite earlier assurances by the White House that these expenses would be manageable, according to a new study co-authored by a Nobel Prize-winning economist.

The research made public Monday by Joseph Stiglitz of Columbia University, former chief economist at the World Bank, and economy professor Linda Bilmes of Harvard University, argues current official assessments of the war cost fail to consider key expenses likely to dog the US budget for years to come.

They include rising medical expenses to treat more than 16,000 wounded soldiers, accelerated depreciation of military hardware on the battlefield and the ripple effect on higher oil prices on the US economy, which in part can be blamed on the military venture.

"Even taking a conservative approach, we have been surprised at how large they are," Stiglitz and Bilmes wrote of the costs of the war. "We can state, with some degree of confidence, that they exceed a trillion dollars."

Government pays interest on loans

Lawrence Lindsey, a former chief White House economist, suggested in the run-up to the war that its costs could probably reach 200 billion dollars. However, the number was immediately dismissed by other administration officials as a gross overestimation.

Throughout the study, the authors provide "conservative" and "moderate" estimates of expenses incurred by American society since the start of the war in March 2003.

According to a "conservative" assessment, the war will cost Americans at least 1.026 trillion dollars. Under a "moderate" assessment, the expenses will top 1.854 trillion.

The United States has already spent 251 billion dollars in cash on combat operations in Iraq since the invasion was launched, and continues to fund operations there at about six billion dollars a month, according to congressional officials.

However, argue the economists, these figures fail to take into consideration disability payments to veterans over the course of their lifetime, the cost of replacing military equipment and munitions.

In addition, the cost of recruiting new soldiers has gone up dramatically, with the Pentagon paying recruitment bonuses of up to 40,000 dollars for new enlistees and special bonuses and other benefits of up to 150,000 dollars for current troops who re-enlist.

"Another cost to the government is the interest on the money that it has borrowed to finance the war," the authors point out.

Direct and indirect costs

They estimate that direct budgetary costs of the Iraq war to the U.S. taxpayer will be in the range of 750 billion dollars to 1.1 trillion dollars, assuming that the administration of President George W. Bush begins to withdraw troops in 2006 and maintains a diminishing presence in Iraq for the next five years.

But there are also economic costs likely to stretch out for years, the study warns.

For example, to date, more than 3,200 US soldiers have suffered head or brain injuries that require lifetime care at a cost range of 600,000 to five million dollars per person.

The economists calculate that over a 20 year-period this group alone will cost the United States 14 billion dollars in healthcare expenses and lost productivity.

The study points to the hidden costs of plucking reservists from their jobs and sending them overseas, rising costs of homeland security spurred by fears of new terrorist attacks, and multiple other factors.

And they insist that higher oil prices, that went from 25 dollars a barrel before the conflict to around 50 dollars a barrel today and are affecting every facet of American life, can be partly blamed on the war.

A "conservative" calculation provided by the study says 20 percent of the increase was due to the Iraq war. The "moderate" puts it at 25 percent.