SocialismToday           Socialist Party magazine

Socialism Today 121 - September 2008

Iraq: a high price to pay

When George W Bush and the US neo-cons launched the invasion of Iraq they expected an easy victory and cheap oil. The US, as the largest economy and only superpower, would enforce its neo-liberal policies on the world. Five years on, there’s no end in sight to the fighting – or the costs. MANNY THAIN reviews a book detailing the funding of the Iraq war, and the unravelling of a neo-con plan.

The Three Trillion Dollar War: The True Cost of the Iraq Conflict

By Joseph Stiglitz and Linda Bilmes

Published by Allen Lane, 2008, £20

THIS IS THE story of a colossal fraud perpetrated by George W Bush’s administration on the people of the US and the world. Economics Nobel Prize winner, Joseph Stiglitz, and Harvard lecturer, Linda Bilmes, expose the manipulation behind the ‘global war on terror’, in particular Iraq but also Afghanistan. They estimate this will cost at least $3 trillion, far higher than any official figure.

It is a murky business: "No modern firm would attempt to run its business without timely, accurate information provided by good accounting systems. Yet the accounting practices used by the government are so shoddy that they would land any public firm before the Securities and Exchange Commission for engaging in deceptive practices".

There are the stark facts: nearly 4,000 US troops killed in Iraq, more than 58,000 wounded, injured or seriously ill (a further 7,300 in Afghanistan), 100,000 veterans suffering from serious mental health disorders. Life is worse for the Iraqi people now than under Saddam Hussein’s dictatorship. The infrastructure has been destroyed, access to electricity and water is worse than before the war, sectarian violence is rife.

Stiglitz and Bilmes remind us of the false premises behind the war: the asserted (non-existent) link between Saddam and the terrorist attacks on the World Trade Center and Pentagon on 11 September 2001; the false ‘intelligence’ that Iraq had weapons of mass destruction; that the war would cost little and pay for itself; and that ‘democracy’ would soon follow in Iraq.

They restate the political importance of the support Tony Blair gave Bush: "At a time when the United States faced loud opposition from France, Germany, Russia and China, and the United Nations, Tony Blair visited Washington and spoke in favour of military action against Iraq to a joint session of the Congress. His support was critical in enabling the Bush administration to convince Congress to authorise the war". Blair slavishly followed Bush, and Britain contributed 46,000 troops, 10% of the initial invasion force.

In the detail Stiglitz and Bilmes provide on the injuries of the troops, the lack of healthcare, and the plight of Iraqi people, their compassion is evident. This book, however, provides little room for those aspects. It is a forensic examination of statistics and projections. It is meticulously sourced, each chapter dealing with a different aspect of the economic consequences of the war, keeping a running tab on the total. The approach is cautious, erring on the conservative side. It fulfils a useful purpose, although it does get rather dry and, at times, repetitive.

Neo-con delusion

ON 19 MARCH 2003, the US and its ‘coalition of the willing’ invaded Iraq. The neo-con tactic was ‘shock and awe’: mercilessly crush Iraq under a terrible onslaught of ballistic missiles and massive military hardware. Six weeks later, Bush was on board USS Abraham Lincoln, gloating under the banner, ‘Mission Accomplished’. Five years on, the US is still fighting in Iraq, longer than its engagement in the first or second world wars, or the Korean war.

Contrary to neo-con delusion, the Iraq invasion and occupation has laid bare the limits of US power. Riding high as the only superpower after the collapse of the Stalinist system, the neo-cons believed they could impose their ultra-free market neo-liberalism on a compliant world. US military might overwhelmed Iraq’s depleted forces with relative ease, but the plan has blown up in their faces. The breathing space afforded by the latest troop ‘surge’ in Iraq is temporary and superficial. The deep sectarian divisions are being consolidated into three main areas, the Kurdish north, Shia south and Sunni centre. US power has been weakened in the Middle East. The regional influence of the Iranian regime has been strengthened. And now, once again, US impotence is being graphically illustrated in the Georgian Caucasus crisis.

As capitalist commentators, Stiglitz and Bilmes are concerned at the damage done to US prestige on the world stage, and want to see its "good reputation" "restored". As the US is the largest economy and military power in the world, this is an important issue for capitalists and their system: "Most disturbing is that America is no longer seen as a bastion of civil rights and democracy. The Iraq war ‘for democracy’ has almost given democracy a bad name… It is inevitable that those who see the Bush administration and its conduct of the war unfavourably also begin to see America and its conduct of business in the same light".

Capitalism as a system has been tainted. Unfortunately, more wars and conflict are guaranteed into the future. This is especially true in the period we have now entered, where economic crisis exacerbates competition and tensions between nation states and regions. Only a radical change in the way society is run can put an end to this reckless process. By planning the use of resources and economic development, a democratic socialist system would enable us to collectively organise society on the basis of human solidarity.

A chronic underestimate?

THE BUSH ADMINISTRATION was wrong, or lied, about how much the war would cost. Former defence secretary, Donald Rumsfeld, initially claimed that the war would cost $50-60 billion ($57-69bn in 2007 dollars). He said that the post-war reconstruction of Iraq could pay for itself through increased oil revenues.

By the time The Three Trillion Dollar War had gone to press, Congress had appropriated $865 billion for military operations, reconstruction, embassy costs, security at US bases, and foreign aid programmes in Iraq and Afghanistan. Of that, $634 billion is for Iraq – ten times the administration’s early estimates. The operating costs in 2008 are projected to exceed $12.5 billion a month in Iraq, with a further $3.5 billion in Afghanistan – $16 billion a month, up from $4.4 billion in 2003: "To think of it another way, roughly every American household is spending $138 per month on the current operating costs of the wars…"

Stiglitz and Bilmes also refer to the costs for Britain. As a consequence of Blair’s lap-dog role, what they call "the British experience" has mirrored that of the US: rising casualties and costs, unclear funding, military overstretch, outrage at the treatment of severely wounded veterans and so on. The then chancellor, Gordon Brown, set aside £1 billion for the war. By late 2007, that had risen to £7 billion ($14bn) in direct operations in Iraq and Afghanistan (76% of that in Iraq).

This includes money from the Special Reserve – separate from the regular defence budget (which has also increased) – and is taken by the ministry of defence when required by arrangement with the treasury. No specific approval is needed by parliament. By the end of 2007, there were 5,000 British troops in Iraq, 7,000 in Afghanistan. Stiglitz and Bilmes estimate the budgetary cost at $30.6 billion, $40 billion when social costs are included.

What the authors term the "chronic underestimate" of costs in the US continues. In January 2007, for example, the administration said it would cost $5.6 billion to deploy an additional 21,000 troops in the ‘surge’. But that only covers the combat troops for four months. The surge also requires 15-28,000 support troops which doubles the cost. This does not include the long-term health and disability costs of those injured in the surge or of replacing the equipment damaged and destroyed.

Stiglitz and Bilmes give ‘best-case’ and ‘realistic-moderate’ scenarios. In the best-case, the number of US troops in Iraq and Afghanistan fall to 180,000 (pre-surge level) this year, and to 75,000 by 2010. By 2012 there would be a non-combat force of 55,000. This compares with 80,000 US troops in South Korea, and the 20,000 troops in Kuwait ten years after the Gulf war. It assumes that non-combat forces will cost half that of current forces, that the numbers of private contractors will be slashed, and that the total number of deployed troops will have been 1.8 million – by 2008, 1.6 million US troops had already been deployed. This would add $521 billion in future expenditure ($382bn for Iraq).

The realistic-moderate model assumes a slower withdrawal of troops which remain in combat for longer. This requires 2.1 million troops in total by 2017, adding $913 billion ($669bn for Iraq).

Hiding the truth

US APPROPRIATIONS LAW states that funding for wars should be separate from regular defence appropriations. However, the administration masks the true costs by hiding war expenditures inside the ‘normal’ defence budget, which has increased from 3% of GDP in 2001 to 4.2% in 2008. And the administration has ensured minimal congressional oversight by habitually demanding money from ‘emergency’ funds, which require a much lower standard of justification or review by budget and appropriations committees.

In 2006, the Department of Veterans Affairs (VA) budget was based on data for 2003. It ran out of money, so Congress appropriated $3 billion in emergency funds to keep it going. In 2007, Bush asked for billions more in ‘emergency supplemental’ funding so military hospitals could handle the injured returning troops. In May 2007, the Pentagon estimated it needed $141.7 billion for fiscal year 2008. In September 2007, the secretary of defence, Robert Gates, increased that to nearly $190 billion. It’s blank-cheque accountancy.

US government accounting further obscures the true picture because it is based on ‘cash accounting’ – what is actually spent today – leaving out future obligations, such as healthcare and disability costs. All but the smallest businesses in the US are required by law to use ‘accrual accounting’, which shows future costs as they are incurred.

To navigate the complicated system of medical, disability, social security and other benefits, Stiglitz and Bilmes base their projections on the claims rate to date, a definite underestimate because the longer the occupation drags on, the higher the rate will be. They use the Gulf war as a benchmark because the same criteria for eligibility for benefits apply today. The combat in that war lasted a few weeks and left 147 US troops dead and 235 wounded. Nonetheless, 45% of the 700,000 personnel deployed have filed disability compensation claims of which 88% have been approved.

The Iraq and Afghanistan conflicts are counted in years, with the average deployment lasting 15 months, and with about a third of troops serving two or three deployments. The US House of Representatives Budget Committee estimates that 263,000 veterans from this war will claim healthcare from the VA in 2008. And in Stiglitz and Bilmes’s best-case scenario, the total will reach 712,800, costing $121 billion in healthcare, and $277 billion in disability benefits during their lives.

In the realistic-moderate scenario, 850,000 troops will file claims totalling $285 billion in healthcare and $388 billion in disability payments. On top of this has to be added social security payments, calculated at $25 or $44 billion.

Many factors have driven up costs. Because of opposition to the war, and the high casualty rates, the Department of Defence (DOD) has had to pay much higher sums to recruit and retain soldiers. The Pentagon has increased regular military pay by 28%, doubled special pay, and boosted retirement benefits. Faster promotions have been introduced. Thousands of additional recruiters have been hired, sign-up bonuses for new recruits have risen to up to $40,000, and re-enlistment bonuses can reach $150,000. Much of this is funded through the regular defence budget and does not show up in calculations for the global war on terror. War costs also crop up in other departments, for example, housing and social security, labour department, etc, and are excluded from the administration’s reckoning.

The Vietnam war put an end to the conscript-based US army. Outrage at the brutality and futility of that occupation provoked fierce resistance in the US and worldwide, affecting the predominantly young, working-class, and disproportionately black and Latino troops. Today’s army relies on the growing use of private contractors – to cook and clean, service weapons systems, protect embassy staff, as drivers and translators, etc. An article in the New York Times (12 August 2008) puts the number in Iraq at 180,000, at a cost of $100 billion since the invasion.

Their insurance is paid by the government and is estimated to be 10-21% of salaries. At 15% of a weekly wage of $1,000 – some private security guards earn around $6,000 (an army sergeant gets up to $1,330) – this would add another $780 million a year. Over 1,000 contractors have been killed and more than 12,000 wounded. If only half the dead and wounded or their families file claims, the long-term costs of these benefits would be around $3 billion.

Chewed up & spat out

THE FIRST AND second world wars saw the ratio of injuries per fatality at 1.8 and 1.6 respectively. Vietnam and Korea saw a ratio of 2.6 and 2.8. In Iraq and Afghanistan it is more than seven to one. If non-combat injuries are included, the ratio soars to 15 to one. The enormous jump in survival rates is a reflection of more efficient armour and advances in battlefield medicine. The budgetary consequences, which have not been factored in by the administration, are immense.

More than 263,000 troops have been treated at veterans’ medical facilities in the US. More than 100,000 have been treated for mental health conditions. Another 185,000 have sought counselling and readjustment services. One in three diagnosed with post-traumatic stress disorder is permanently incapable of working.

The US administration, like every other capitalist state, quickly turns its back on troops once they are no longer of use, leaving them to fend for themselves. Returning troops often find themselves adrift, between the DOD, which is responsible for active duty personnel, including medical care at military facilities, and the VA, which manages medical treatment and disability compensation for those who have been discharged. The handover between the two systems causes delay in treatment and/or benefits payments.

Once benefits have been granted, they apply for life. Getting on to the system, however, is complicated and many veterans are overwhelmed by the complexity of the paperwork. There are large backlogs of pending claims, high rates of error in processing, and inconsistency across regional offices. Appeals take an average of two years. At the end of 2007, the backlog was over 400,000, with 110,000 more than six months.

Of the 1.6 million US servicemen and women so far deployed in Iraq and Afghanistan, 751,000 had been discharged by December 2007, and 224,000 had applied for disability benefits. All are potentially eligible. All are eligible for VA medical care for at least two years. The best-case scenario provided by Stiglitz and Bilmes estimates that the claimants will receive the Gulf war average of $6,506 a year. The realistic-moderate model uses the actual average for new claimants in 2005: $7,109. The average for Vietnam veterans is $11,670.

A veteran considered to be 100% disabled will receive $45,000 from the VA and maybe another $12,000 in disability benefits, as well as some help with health care. But this is a fraction of what it costs to look after someone for 24-hours a day. That burden is picked up by close family and/or community volunteers. Because of the inadequacies of healthcare, many veterans go private. In 20% of families of veterans who are incapacitated, someone has been forced to leave employment to become a full-time carer. Clearly, this impacts most on families with low incomes.

The life of a US soldier shows up on Pentagon accounts as $500,000, paid to family in death benefits and life insurance. At the start of the war it was $262,240. If someone dies in an environmental disaster, the Environmental Protection Agency typically pays out $7.2 million – near the centre of the range. Insurance companies and others do likewise. At half-a-million dollars, the budgetary cost of the 4,300 US dead in Iraq and Afghanistan is $2.15 billion. If the payout was $7.2 million each, it would be more than $30 billion.

The overall costs

AT THE START of the Iraq war, the US government was running a deficit. No new taxes have been levied – indeed, taxes for the rich have been lowered – and non-defence expenditures have continued to grow. So, for the purposes of budgeting, Stiglitz and Bilmes assume that all of the funding for the war has been borrowed. In their realistic-moderate model, interest payments by 2017 will amount to $1 trillion.

They also attempt to deal with the macroeconomic effects of the conflicts. The oil price has more than quadrupled since the invasion of Iraq. In the best-case scenario, they pick the figure of $5 per barrel of the price increase over seven years being attributable to the war, with $10 for eight years in the realistic-moderate model. As the US imports around five billion barrels a year, that gives totals of $175 billion and $400 billion respectively.

But more expensive oil adversely affects the whole of any oil-importing economy, from government to individual family expenditure, and every stage of the production process. Stiglitz and Bilmes calculate this at $187 billion in the best-case, and $800 billion in the realistic-moderate model. (If, on the other hand, $35 per barrel could be attributed to the war, the oil impact of the war alone would be in excess of $3 trillion.)

Stiglitz and Bilmes take into account many other factors, too numerous to include here, including ‘incidence analysis’, which is used by public-sector economists to ascertain the consequence of policy decisions, on the premise that spending in one sector displaces spending somewhere else. Having made all the calculations, they present their two scenarios: between $2.7 trillion and $5 trillion, their Three Trillion Dollar War.

They point out that $1 trillion could pay for eight million housing units; 15 million teachers for a year; provide 530 children with health insurance for a year; or 43 million students with four-year scholarships. Two trillion dollars is equal to the total US commitment to the poorest countries for the next 30 years.

The devastation of Iraq

THERE ARE MANY other unfathomable costs: economic, social and political. By September 2007, 4.6 million Iraqi people (one in seven) had been uprooted from their homes, the largest migration in the Middle East since the creation of Israel in 1948. Because of the exodus of Iraq’s middle classes, the country today has fewer than half the doctors it had at the beginning of the war.

By the beginning of this year, 7,697 Iraqi soldiers had died alongside US troops – the US government does not keep track of the number of Iraqi soldiers injured. Nor is there an accurate figure for the number of Iraqi fatalities. A study by Johns Hopkins University in July 2006 into the increase in the death rate in Iraq since the war put the number at 654,965. If the death rate remains the same, by the end of March 2010, the number of Iraqi deaths over and above the pre-war rate would exceed a million.

Stiglitz and Bilmes highlight the disastrous economic policies pursued by the Bush administration in its attempt to impose a neo-liberal regime in Iraq. Thomas Foley, appointed in August 2003 as head of private-sector development, boasted that he would privatise all of Iraq’s state-owned enterprises in 30 days. He was told that this was against international law: "I don’t care about any of that stuff… I don’t give a shit about international law. I made a commitment to the president that I’d privatise Iraq’s business". In September 2003, Paul Bremer, the ruler appointed by Bush, abolished many import tariffs and capped corporate and income tax at 15%.

The neo-con agenda was cynical to the core. It was to install a compliant pro-US regime, secure cheap oil and boost US influence in the Middle East region. It was insane and it failed. But US policies have ruined Iraq’s economy. There has been negligible foreign direct investment into Iraq outside of oil, and Iraqi companies have been driven to the wall, unable to compete with the flood of cheap imports from China and elsewhere. Prices rose as dollars flooded into the country, and the US Treasury compelled Iraq to raise interest rates and tighten credit, further stifling any chance of economic growth. However, Foley’s privatisation plan has not materialised. And US attempts to privatise oil has stalled in the face of resistance by oil workers and the vested interests of Kurdish and Shia power blocs.

Much of the money earmarked for reconstruction has gone straight into the pockets of US contractors, completely bypassing Iraqi workers. Contractors have tended to employ workers from even lower-wage economies in South Asia, etc. Understandably, this intolerable situation has fuelled intense anger in the Iraqi population. Struggling to survive, the marginalised, unemployed youth have provided the numerous militia and criminal gangs with the bulk of their recruits.

US plans unravelling

DESPITE DENIALS BY Bush, US troops are digging in for a long stay. Apart from the hundreds of small bases, major construction is taking place. Al-Asad, 120 miles west of Baghdad, houses 17,000 troops and contractors. Al-Balad (Camp Anaconda) houses 22,500 troops and several thousand contractors, and is the US military’s main air transportation and supply hub. Al-Talil, in the south, is a key link with Kuwait. The US has constructed a huge new ‘embassy’ in Baghdad, which is more than six times the size of the UN complex in New York.

These fortress-bases are largely self-sufficient in utilities, power, communications and medical facilities. They are oases of plenty surrounded by the generalised want of the majority of the population. They include sports facilities, department stores, 24-hour restaurants, car rental, cinemas, internet access and cable television.

Here too, the US is meeting resistance. Negotiations between the US and Iraqi governments have dragged on without resolution over a security deal to replace the UN mandate for international forces which expires on 31 December. US secretary of state, Condoleezza Rice, was flown into Baghdad in August to try to break the deadlock, without success. Bolstered by Iran, Iraqi prime minister, Nouri al-Maliki, is demanding US troops out of the cities by the summer of next year, with complete withdrawal by the end of 2011.

Stiglitz and Bilmes argue for troop withdrawal on the basis of cutting economic and political losses, and to avoid throwing good money after bad. They also contend that the war in Iraq has prevented success in Afghanistan. It is another form of madness to believe that US prestige could be restored by moving to a different type of quagmire – an idea which Barak Obama also seems to favour.

Nonetheless, Stiglitz and Bilmes have hit on an important shift. Many people in the US no longer believe ‘victory’ is possible in Iraq. The main discussion is now how to withdraw the troops. There has been a marked shift in the world. US imperialism no longer appears invincible, the confidence of its ruling class has been shaken.


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