January 12, 2006


Iraq war could cost US over $2 trillion, says Nobel prize-winning economist (Jamie Wilson, January 7, 2006, The Guardian)

The real cost to the US of the Iraq war is likely to be between $1 trillion and $2 trillion (£1.1 trillion), up to 10 times more than previously thought, according to a report written by a Nobel prize-winning economist and a Harvard budget expert.

So taking out the 7th biggest (or whatever) military in the world and the most brutal dictator extant -- and providing democracy to 26 million people -- cost almost no American lives and just one sixth of one year's GDP? It gets harder and harder to justify not taking out Castro, Kim Jong-Il, Assad and Mugabe.

U.S. creates 'managers' for Iran and North Korea (Douglas Jehl, 1/12/06, The New York Times)

The director of national intelligence, John Negroponte, has created new "mission managers" for Iran and North Korea, adding those two countries to a short list of top-priority challenges for American intelligence agencies.

Iran and North Korea join counterterrorism and nuclear counterproliferation as areas of focus for senior management posts that were recommended last year by a high-level presidential commission.

The new managers for Iran and North Korea will be responsible, among other things, for identifying and filling gaps in intelligence on those two countries, Negroponte's office said Wednesday in announcing the appointments. Joseph DeTrani, who has served most recently as the American special envoy to the six-party talks on North Korea, has been given the rank of ambassador and is taking on the North Korea portfolio; S. Leslie Ireland, a career intelligence officer and Middle East specialist, is to become mission manager for Iran.

Lesson one from Iraq: start standing up transitional governments now.

Posted by Orrin Judd at January 12, 2006 10:41 PM

I agree. After all, if in 60 years the world could totally forgive Japan, Italy, and Germany for WWII (actually, it probably took less than 20), how mad could they possibly be at us for North Korea, Iran, and Iraq after 2025 or, worst case, 2065?

Posted by: HT at January 12, 2006 11:19 PM

How much did WWII cost after adjusting for inflation?

Posted by: Pepys at January 12, 2006 11:20 PM

Near as I can tell, Pepys, WWII cost the U.S. around $3.85 trillion in 2005 dollars. (CPI was roughly 18 in 1945, 198 in 2005; war cost $350 billion in current dollars.)

Posted by: ghostcat at January 13, 2006 12:00 AM

Ghostcat's and Stiglitz's numbers don't look equivalent to me. There's no way this war is 25-50% as expensive as WWII. WWII had to have been hugely more expensive, by 10 or 50 times.

Posted by: PapayaSF at January 13, 2006 12:22 AM

We talked about this over at Rantburg a couple days back: if you read the article carefully, the cost is amortized for things such as medical care for injured soldiers over the next 20 years, etc.

In other words, it isn't that the cost is 1/6 of one year's GDP, it's less than 1% of the next 20 years GDP combined. For that kind of spending, let's whack Kimmie, Castro, Zim-Bob, etc -- say one a year.

Posted by: Steve White at January 13, 2006 12:33 AM

Also, my numbers do not include reconstruction. Don't know if the Iraq numbers do.

Posted by: ghostcat at January 13, 2006 12:47 AM

This is our job. We will be paid for it.

The transitional government of North Korea is sitting in South Korea. They have an elected government. NK will be like East Germany. Just roll the formerly communist territory into the capitalist structure.

Iran is even easier. Abolish the Council of Guardians. hold new elections. Without Iraq's ethnic problems, it should only take a few weeks.

Posted by: Robert Schwartz at January 13, 2006 1:47 AM

As I understand, the biggest "costs" of the war in Stiglitz's estimate are due to (1) he expects that terrorism will be tripled due to the Iraq war - a lefty talking point - and therefore that the cost of the war on terror will be greatly increased; and (2) he expects the price of oil to be increased for a long period of term as a result of the war, thereby raising energy costs.

In fact, Iraq reduces the terrorist threat and reduces the price of oil because Iraq will soon be producing more than Saddam could under sanctions. Plugging those facts into Stiglitz's formula makes the Iraq war highly profitable.

Posted by: pj at January 13, 2006 3:29 AM

ghostcat - By Stiglitz's model, we've barely begun to pay for WWII. We won't be done defeating the Nazi regimes that were created by the war against Hitler until 2073.

Posted by: pj at January 13, 2006 3:34 AM

So when he calculates the cost of WWII does he take into account the more than tripling of Communism's reach?

Posted by: oj at January 13, 2006 7:31 AM

There were 292,000 American deaths in WWII compared to 2,000 in Iraq--how much does he count each death as costing?

Posted by: oj at January 13, 2006 7:53 AM

I just love these folks who deliberately confuse/conflate/fudge the difference between one-time and recurring costs.

I would venture to say that the cost of replacing equipment, either at the end of a lifespan or blown up, is a recurring cost. As is the veteran's care cost. Those are part of a yearly budget.

Posted by: Brad S at January 13, 2006 10:50 AM


Indeed, all those numbers, even if true, silently assume there was a free alternative.

Posted by: Mike Earl at January 13, 2006 11:06 AM

Well, I read the article and it's about what you'd expect it to be: political criticism masquerading as accounting. My favorite part is when he discounts future costs by 4% annually and then assumes that all the costs of the war will be borrowed -- at 4% annually. I have an idea -- let's assume that our taxes pay for the core functions of government, like national defense, and that we're borrowing for the fripperies.

Posted by: David Cohen at January 13, 2006 2:12 PM

The real point is OJ's. Stiglitz' $2 trillion estimate is over the next 55 years (I think, he's a little unclear). Along with the last two years, that's 57 years of GDP or, in today's dollars and assuming no real growth for more than two generations, $660 trillion or .3%. Clearly, we need at least two more so we can at least get to 1% of GDP.

Posted by: David Cohen at January 13, 2006 2:16 PM

If 20th century history is any guide, the '60 U.S. GNP, in today's dollars, will be at least $ 45 trillion, possibly as much as $ 75 trillion.

That would mean that over the next 55 years, the U.S. will see a cumulative total of between $ 1,500 - $ 4,500 trillion worth of economic activity, measured in 2005 dollars.

For various reasons, the higher total is much more likely than the lower total, and as an interesting point of trivia, in 2060 the richest person in the world has a good shot at being worth a staggering one trillion 2005 dollars, and will certainly be worth $ 250 billion, if American history over the past three hundred years is a good guide.

Also, by 2060 the gap between America's "rich" and "poor", as measured by quintile, will have become a gulf measured in lightyears, although being "poor" will be even more subjective than it is now, since the average "poor" American in 2060 would be considered "rich" in any previous century - including the 20th.

Posted by: Michael Herdegen [TypeKey Profile Page] at January 14, 2006 5:34 AM