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Re: [casi] New Study on the Cost of a War with Iraq

According to the Washington Post, the cost of war will be even more than 120
billion $. Think about it.
Dirk Adriaensens.

U.S. Facing Bigger Bill For Iraq War
Total Cost Could Run As High as $200 Billion

Washington Post Staff Writer
Sunday, December 1, 2002; Page A01

Within a month of the Iraqi invasion of Kuwait in August 1990, the first
Bush administration launched what became known as "Operation Tin Cup" -- a
frenzied round of diplomacy aimed at getting U.S. allies to help pay for war
with Iraq. As a result, the bill to American taxpayers for the Persian Gulf
War was about $7 billion, a fraction of its cost.

Although it is difficult to predict how much Americans would pay for a new
war with Iraq, one fact seems indisputable: It will be many times more than
the cost of the last war, if only because other countries are much more
reluctant to share the burden.

Informal estimates by congressional staff and Washington think tanks of the
costs of an invasion of Iraq and a postwar occupation of the country have
been in the range of $100 billion to $200 billion. If the fighting is
protracted, and Iraqi President Saddam Hussein blows up his country's oil
fields, most economists believe the indirect costs of the war could be much
greater, reverberating through the U.S. economy for many years.

The 1991 Gulf War led to a brief spike in oil prices and a fall in consumer
confidence that helped tip the country into a recession that cost President
George H.W. Bush his chances of reelection. Despite the high economic and
political stakes, there has been no equivalent of Operation Tin Cup this
time around, and the current administration has refused to engage in public
debate about the likely costs of a new war.

"If we can plan a war, we should also be planning a way to pay for the war,"
said Rep. John M. Spratt Jr. (S.C.), the ranking Democrat on the House
Budget Committee. "Last time, we were able to slough the costs off on other
countries. This time, we will have to absorb most of these costs ourselves.
Someone ought to be asking questions about the impact on the budget."

A White House official, speaking on condition of not being identified, said
it would be premature to talk about the costs of a war with Iraq because
President Bush has not decided on the use of military force. He added that
unofficial estimates of the cost of war had to be weighed against the
"potentially incalculable" political, diplomatic and economic costs of
permitting Hussein to develop and spread weapons of mass destruction.

Using different methodologies, the nonpartisan Congressional Budget Office
and staff for the Democrat minority on the House Budget Committee have
concluded that a short, decisive war involving the deployment of 250,000
U.S. troops could cost between $44 billion and $60 billion. This is
significantly less than the cost of the 1991 war, which came to nearly $80
billion in 2002 dollars, reflecting the fewer numbers of troops involved. A
protracted war, by contrast, could cost upward of $100 billion.

The direct military costs of a new war will likely be less than in 1991
under most scenarios, but the postwar occupation costs will be considerably
greater, most experts believe.

In Kuwait, most U.S. troops were able to pack up and go home in a few weeks.
In Iraq, a large international military presence will be required for many
years to provide security for a post-Hussein government and avert a civil
war between ethnic factions, which include Kurds in the north, Sunnis in the
center and Shiites in the south.

"It's a no-brainer that this is going to cost us more than the last time,"
said Michael O'Hanlon, a military economist at the Brookings Institution.
"In addition to the nominal price tag for the operation, you will need a
large stabilization force in there for a number of years. Anything else will
not be strategically viable."

Extrapolating from similar peacekeeping operations in Bosnia and Kosovo,
O'Hanlon estimates that the United States is likely to initially spend
between $15 billion and $20 billion a year for its share of a multinational
stabilization force for Iraq. Depending on how long the stabilization force
remains in Iraq, the cost to the American taxpayer could be between $50
billion and $100 billion. His calculations are based on an assumption that
U.S. allies will pick up two-thirds of the cost of the stabilization force.

Adding the costs of a stabilization force to the costs of an invasion brings
the total to between $100 billion and $200 billion. This is in line with an
upper-bracket estimate by White House economics adviser Lawrence B. Lindsey
in an interview with the Wall Street Journal in September. The White House
subsequently distanced the administration from Lindsey's comments, saying
they were not based on any official study.

If the war costs between $100 billion and $200 billion, it would still be
relatively inexpensive in historical terms. Because of the growth in the
U.S. economy, wars are getting cheaper, at least to the American consumer.
In a $10 trillion economy, the cost of a second Gulf War would be between 1
percent and 2 percent of the nation's annual gross domestic product,
compared with 12 percent for the Vietnam War, 15 percent for the Korean War
and 130 percent for World War II.

Measured against a federal budget of about $2 trillion a year, the cost of
the war would be proportionately larger: between 5 percent and 10 percent.

"You have to ask yourself where would that money come from," said Spratt,
who represents the pay-as-you-go philosophy in Congress. "While the costs of
the war are clearly not beyond our means, they are beyond our budget.
Remember, this all comes at a time when we are losing control over the

In 1991, U.S. taxpayers paid about 12 percent of the military costs of the
Gulf War, with the remainder of the burden being shared among such countries
as Saudi Arabia, Kuwait, Germany and Japan. This time around, none of these
countries is expected to contribute significantly.

Iraq could be expected to assume major responsibility for the long-term
costs of its economic reconstruction out of increased oil revenue. But the
country has been devastated by two decades of war and economic sanctions,
and cannot pay for a U.S.-led invasion and military occupation.

The generosity of the allies was "exhausted" by the first attack on Iraq,
said Chas Freeman, a former U.S. ambassador to Riyadh who helped raise $16.8
billion from the Saudis to pay for Desert Storm. He added that the Saudi
government would find it politically impossible to pick up a substantial
portion of the costs of a new Gulf War even if it had the money, because the
Saudi public is "now 100 percent against an attack on Iraq."

Freeman says the U.S. government grossly underestimated the costs of the
1991 war by excluding various services provided free by the Saudis. These
included the costs of housing and repatriating Kuwaiti refugees, the
provision of free fuel, transport and lodging to coalition forces, and a
major environmental cleanup. In a future conflict, many of these costs will
be borne directly by the United States.

The most uncertain cost of the war, economists agree, is the impact on the
broader U.S. economy. Such costs are difficult to quantify. William
Nordhaus, a professor of economics at Yale University, estimates the
indirect cost of the 1991 conflict with Iraq at about $500 billion, many
times larger than the official military price tag. Depending on what happens
in a future conflict, the macroeconomic impact of the war could be between
zero and $1 trillion, according to his estimates.

"I was surprised to discover that the nonmilitary costs are likely to be
much larger than the military costs," he said.

A recent conference by the Washington-based Center for Strategic and
International Studies considered three scenarios for a war with Iraq. The
benign scenario, the probability of which was estimated at 40 percent to 60
percent, envisaged a decisive victory for allied forces in four to six weeks
and no disruption in oil supplies. Under this scenario, oil prices would
likely come down in the aftermath of the war, boosting the U.S. economy.

A worst-case scenario (5 percent to 10 percent probability) envisaged
fighting for three to six months, massive political unrest in the Middle
East, terrorist attacks against the United States and large-scale damage to
Iraqi oil facilities.

An intermediate scenario (30 percent to 40 percent probability) included
limited damage to oil facilities, major urban warfare and fighting for up to
three months. The intermediate and worst-case scenarios would have "serious
adverse effects" on the U.S. economy, according to Laurence H. Meyer, a
former Federal Reserve Bank governor now with the Center for Strategic and
International Studies. The worst-case scenario would likely lead to a global

Nordhaus said U.S. wars have almost always gone over budget. The Civil War
was 13 times more expensive than the worst-case forecast of Abraham
Lincoln's treasury secretary. Similarly, in early 1966, the Pentagon
underestimated the likely cost of the Vietnam War by about 90 percent.


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