Faculty ResearcherLinda Bilmes,
Lecturer in Public Policy,
Harvard Kennedy SchoolPaper TitleThe Financial Legacy
of Iraq and Afghanistan:
How Wartime Spending
National Security Budgets
The United States has already spent close to $2 trillion on the conflicts in Iraq and Afghanistan. But those expenditures — on combat operations, reconstruction, and other direct costs of war — are only a fraction of what the wars will eventually cost the country, according to research by Linda Bilmes, Moynihan Senior Lecturer in Public Policy. The final figure, Bilmes calculates, will be $4 trillion.
In The Three Trillion Dollar War: The True Cost of the Iraq Conflict, a book Bilmes coauthored with the Nobel Prize–winning economist Joseph Stiglitz, Bilmes helped unveil the future costs of the conflict, such as disability compensation to veterans. In her new paper, “The Financial Legacy of Iraq and Afghanistan: How Wartime Spending Decisions Will Constrain Future National Security Budgets,” Bilmes updates her past research and focuses more closely on areas such as the ballooning costs of caring for veterans and members of the armed services.
Those costs already promised to be staggeringly high. About 2.5 million men and women have served in Iraq and Afghanistan, and just over 1.5 million had left active duty by September 2012. Of those, more than half were receiving government medical care, and one out of every two veterans had already applied for permanent disability benefits.
Those costs, already more than $134 billion, will continue to climb for years, eventually totaling an additional $836 billion. As Bilmes reports in her paper, the largest payments for World War II veterans were in the 1980s, and payments to Vietnam and first Gulf War veterans are still rising today.
The conflicts of the past decade will be especially costly, because although the official number of troops wounded in action is about 50,000, that number refers only to those directly hit by enemy fire. More than 600,000 have been harmed in some way, including 253,000 who suffered traumatic brain injury, often as a result of being in close proximity to explosions. “Research from previous wars,” Bilmes writes, “has shown that these veterans are at a higher risk for lifelong medical problems, such as seizures, decline in neurocognitive functioning, dementia, and chronic diseases.”
Medical and personnel costs at the Pentagon have skyrocketed as well — in large part, Bilmes argues, because of greater economic inducements designed to help recruit an all-volunteer military force. For example, spending on the TRICARE health insurance system, available to members of the armed services, rose from $18 billion in 2001 to $56 billion in 2013, outpacing the growth rate of other federal health-care programs such as Medicaid and Medicare. With the sequester in place, Pentagon medical spending could rise to 18 percent of the total defense budget by 2017, up from its current 8 percent. Similar increases in pay and retirement benefits also contribute to a Pentagon base budget that has cumulatively grown by more than $1.3 trillion since 2001.
Bilmes focuses as well on the costs of borrowing money to pay for the wars. “The U.S. has already borrowed some $2 trillion to finance the Afghanistan and Iraq wars and the associated defense build-up — a major component of the $9 trillion U.S. debt accrued since 2001,” she writes. Any accounting of other macroeconomic costs associated with the wars, such as the impact of higher oil prices on aggregate demand, would easily bring the total to $6 trillion.
Bilmes is witheringly critical of both the total costs and the way those costs were budgeted, claiming that they will have a dangerous impact on national security. “Assuming this pattern continues,” she concludes, “there will be a much smaller amount of an already-shrinking defense budget available for core military functions.”
— by Robert O'Neill