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Posted 10/25/2002
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Capitol Connection
How much would a war with Iraq cost?
It's not just the cost of a war, but what happens days and years afterward. Here are three reasons why a second conflict with Iraq could turn out to be more expensive than the first one.
By Ed Henry
Top White House economic adviser Larry Lindsey kicked up a storm in Washington recently when he estimated that the "upper bound" of the cost of a war with Iraq is 1% to 2% of gross domestic product (GDP) or roughly $100 billion to $200 billion.
Republicans scoffed at the numbers, with White House Budget Director Mitch Daniels correcting his colleague by saying that the $200 billion figure is "likely very, very high." And the nonpartisan Congressional Budget Office weighed in by saying that $50 billion is a better estimate.
But Democrats on the House Budget Committee have released a report contending that the cost of a new war would easily eclipse $100 billion. The report cites several factors that could make this campaign cost far more than the $61 billion that the Persian Gulf War cost more than a decade ago.
"And if the war has an adverse impact on the U.S. or global economy, or proves more difficult and lengthier than assumed, $200 billion may unfortunately prove to be a reasonable estimate," said the report released by Rep. John Spratt, D-S.C., the top Democrat on the House Budget panel.
Spratt notes the possibility of a spike in oil prices as a potential unintended consequence of a war. And he says that a war will make it likely that projected federal budget deficits ($452 billion over the next four years) will grow and last at least a year longer -- a development that could prove problematic for the bond market.
The cost of war vs. the cost of not waging war
But Kevin Hassett, a scholar at the American Enterprise Institute, does not believe that increased borrowing by the government will result in higher interest rates. And he said that the CBO estimate of $50 billion for a war in Iraq seems more on the mark than the predictions by Lindsey and Democrats on Capitol Hill. "Given the fact that we destroyed a lot of Saddam Hussein's equipment in the last Gulf War, how could it cost more?" said Hassett, a former senior economist at the Federal Reserve. "It's a big number to get past what we spent last time."
It's a risky political strategy for the Democrats to make too much of the potential budgetary cost of a war, Hassett added. Plus, he said, the cost of not waging a war with Iraq could be far worse in terms of the threat of a nuclear attack against the United States if Iraq is able to obtain weapons of mass destruction.
"If this guy is going to blow up an American city, then worrying about how much it's going to cost us (to wage a pre-emptive war) doesn't seem to me to be a wise political strategy," he said. "You have to compare the costs to the benefits."
Spratt agrees that the budgetary concerns should not be paramount, and he believes that America's $10 trillion economy will ultimately be able to absorb the costs. Nevertheless, he says that the nation has to pay some attention to the fact that war will "have a large impact on a federal budget already in deficit."
Here are three reasons why a second conflict with Iraq could turn out to be more expensive than the first one:
The actual war could last much longer.
Most military analysts believe that taking out Saddam Hussein will be relatively easy because the Iraqi army is much weaker this time around. But even Defense Secretary Donald Rumsfeld has told Congress that it's impossible to estimate the length of a war accurately. "You don't know if it is going to last two days or two weeks or two months," he said. He is sure of one thing: "It certainly isn't going to last two years."
In its analysis, the CBO predicted that it will cost $13 billion to deploy U.S. forces to the Persian Gulf region alone. Combat would cost taxpayers up to $9 billion a month. Thus the length of the war will obviously be pivotal to figuring out the overall cost.
Democrats predict that the initial military operation could cost up to $93 billion. That includes costs for the buildup, personnel, operating support, purchases of new equipment and technology, and interest. That assumes a war lasting 30 to 60 days and a U.S. military force of 125,000 to 250,000 troops. (More than 500,000 troops were used in the first Gulf War.)
Spratt notes that while there’s been much speculation that Iraq's army may be less powerful now, Iraq may have learned from some of mistakes made in 1991 and could turn a second war into an expensive and time-consuming urban conflict.
"Rather than having large numbers of troops dispersed unprotected in the desert, Iraq could concentrate its forces in urban areas," says a report prepared by Spratt's staff. "This strategy would almost certainly be ultimately futile,” the report adds. But “Iraqi forces would capitalize on our desire to avoid civilian casualties by using their own citizens as hostages to limit U.S. fighting capability."
Hassett, however, stands by his belief that this war may be even quicker than the last one. "What we did last time was a big enterprise," he said.
Humanitarian and reconstruction costs may be high.
In 1991, the United States ejected Iraq from Kuwait and then basically came home (to the consternation of conservatives who wanted the first President Bush to send troops all the way to Baghdad). But with "regime change" serving as the modus operandi this time around, a military victory would just be phase one in the overall picture. U.S. forces will be expected to oust Hussein from power. Then, they’ll have to remain in Iraq as a peacekeeping force for an unspecified period of time. Democrats contend that the U.S. may also be required to care for up to 1 million refugees.
How big a peacekeeping force would be needed? James Webb, Secretary of the Navy during the Reagan administration, estimates the need at 50,000 troops. And he notes that they will be in hostile territory and may have to stay for 30 to 50 years after a military victory.
"In Japan, American occupation forces quickly became 50,000 friends," Webb said. "In Iraq, they would quickly become 50,000 targets."
The CBO believes that it will cost up to $4 billion a month -- $48 billion a year -- for the U.S. to occupy postwar Iraq. A four-year occupation, thus, might cost as much as $192 billion alone. "There is speculation among members of Congress now that we could be there years, not months," said CBO Director Dan Crippen.
America could be going it alone this time.
In the first Gulf War, about 90% of the $61 billion tab was picked up by U.S. allies, which included Saudi Arabia, Kuwait, Japan, Germany and South Korea. Since the administration has signaled a willingness to go it alone this time, Democrats insist that the U.S. will end up bearing the brunt of the new cost.
"If the rest of the world doesn't want to come with us at the outset, it seems highly unlikely that they would line up for the follow-through," said Senate Appropriations Committee Chairman Robert Byrd, D-W. Va., a leading critic of the administration's Iraq policy.
Indeed, Hassett acknowledges that it will be difficult to get allies to chip in this time. "It's true that the American taxpayer will bear a higher burden this time," he said.
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