The most important things in life -- like life itself -- are priceless. But that doesn't mean that issues involving the preservation of life (or a way of life), like defense, should not be subjected to cool, hard economic analysis.
Shortly before the current Iraq war, when Bush administration economist Larry Lindsey suggested that the costs might range between US$100 billion and US$200 billion, other officials quickly demurred. For example, Office of Management and Budget Director Mitch Daniels put the number at US$60 billion. It now appears that Lindsey's numbers were a gross underestimate.
Concerned that the Bush administration might be misleading everyone about the Iraq war's costs, just as it had about Iraq's weapons of mass destruction and connection with al-Qaeda, I teamed up with Linda Bilmes, a budget expert at Harvard, to examine the issue. Even we, as opponents of the war, were staggered by what we found, with conservative to moderate estimates ranging from slightly less than a trillion dollars to more than US$2 trillion.
Our analysis starts with the US$500 billion that the Congressional Budget Office openly talks about, which is still ten times higher than what the administration said the war would cost. Its estimate falls so far short because the reported numbers do not even include the full budgetary costs to the government. And the budgetary costs are but a fraction of the costs to the economy as a whole.
For example, the Bush administration has been doing everything it can to hide the huge number of returning veterans who are severely wounded -- 16,000 so far, including roughly 20 percent with serious brain and head injuries. So it is no surprise that its figure of US$500 billion ignores the lifetime disability and healthcare costs that the government will have to pay for years to come.
Nor does the administration want to face up to the military's recruiting and retention problems. The result is large re-enlistment bonuses, improved benefits, and higher recruiting costs -- up 20 percent just from 2003 to last year. Moreover, the war is extremely wearing on equipment, some of which will have to be replaced.
These budgetary costs (exclusive of interest) amount to US$652 billion in our conservative estimate and US$799 billion in our moderate estimate. Arguably, since the government has not reined in other expenditures or increased taxes, the expenditures have been debt financed, and the interest costs on this debt add another US$98 billion (conservative) to US$385 billion (moderate) to the budgetary costs.
Of course, the brunt of the costs of injury and death is borne by soldiers and their families. But the military pays disability benefits that are markedly lower than the value of lost earnings. Similarly, payments for those who are killed amount to only US$500,000, which is far less than standard estimates of the lifetime economic cost of a death, sometimes referred to as the statistical value of a life (US$6.1 million to US$6.5 million).
But the costs don't stop there. The Bush administration once claimed that the Iraq war would be good for the economy, with one spokesperson even suggesting that it was the best way to ensure low oil prices. As in so many other ways, things have turned out differently: the oil companies are the big winners, while the American and global economies are losers.
At the same time, money spent on the war could have been spent elsewhere. We estimate that if a proportion of that money had been allocated to domestic investment in roads, schools, and research, the US economy would have been stimulated more in the short run, and its growth would have been enhanced in the long run.
There are a number of other costs, some potentially quite large, although quantifying them is problematic. For instance, Americans pay some US$300 billion annually for the "option value" of military preparedness -- being able to fight wherever needed. That Americans are willing to pay this suggests that the option value exceeds the costs. But there is little doubt that the option value has been greatly impaired and will likely remain so for several years.
In short, even our "moderate" estimate may significantly underestimate the cost of the US' involvement in Iraq. And our estimate does not include any of the costs implied by the enormous loss of life and property in Iraq itself.
We do not attempt to explain whether the US people were deliberately misled regarding the war's costs, or whether the Bush administration's gross underestimate should be attributed to incompetence, as it vehemently argues is true in the case of weapons of mass destruction.
Nor do we attempt to assess whether there were more cost-effective ways of waging the war. Recent evidence that deaths and injuries would have been greatly reduced had better body armor been provided to troops suggests how short-run frugality can lead to long-run costs. Certainly, when a war's timing is a matter of choice, as in this case, inadequate preparation is even less justifiable.
But such considerations appear to be beyond the Bush administration's reckoning. Elaborate cost-benefit analyses of major projects have been standard practice in the defense department and elsewhere in government for almost a half-century. The Iraq war was an immense "project," yet it now appears that the analysis of its benefits was greatly flawed and that of its costs virtually absent.
One cannot help but wonder: whether there were alternative ways of spending a fraction of the war's US$1 trillion to US$2 trillion in costs that would have better strengthened security, boosted prosperity, and help to to further promote democracy?
Joseph Stiglitz, a Nobel laureate in economics, is professor of economics at Columbia University and was chairman of the Council of Economic Advisers to president Bill Clinton and chief economist and senior vice president at the World Bank.
Copyright: Project Syndicate
When US budget carrier Southwest Airlines last week announced a new partnership with China Airlines, Southwest’s social media were filled with comments from travelers excited by the new opportunity to visit China. Of course, China Airlines is not based in China, but in Taiwan, and the new partnership connects Taiwan Taoyuan International Airport with 30 cities across the US. At a time when China is increasing efforts on all fronts to falsely label Taiwan as “China” in all arenas, Taiwan does itself no favors by having its flagship carrier named China Airlines. The Ministry of Foreign Affairs is eager to jump at
The muting of the line “I’m from Taiwan” (我台灣來欸), sung in Hoklo (commonly known as Taiwanese), during a performance at the closing ceremony of the World Masters Games in New Taipei City on May 31 has sparked a public outcry. The lyric from the well-known song All Eyes on Me (世界都看見) — originally written and performed by Taiwanese hip-hop group Nine One One (玖壹壹) — was muted twice, while the subtitles on the screen showed an alternate line, “we come here together” (阮作伙來欸), which was not sung. The song, performed at the ceremony by a cheerleading group, was the theme
Secretary of State Marco Rubio raised eyebrows recently when he declared the era of American unipolarity over. He described America’s unrivaled dominance of the international system as an anomaly that was created by the collapse of the Soviet Union at the end of the Cold War. Now, he observed, the United States was returning to a more multipolar world where there are great powers in different parts of the planet. He pointed to China and Russia, as well as “rogue states like Iran and North Korea” as examples of countries the United States must contend with. This all begs the question:
Liberals have wasted no time in pointing to Karol Nawrocki’s lack of qualifications for his new job as president of Poland. He has never previously held political office. He won by the narrowest of margins, with 50.9 percent of the vote. However, Nawrocki possesses the one qualification that many national populists value above all other: a taste for physical strength laced with violence. Nawrocki is a former boxer who still likes to go a few rounds. He is also such an enthusiastic soccer supporter that he reportedly got the logos of his two favorite teams — Chelsea and Lechia Gdansk —
RSS