Nobel Laureate Joseph Stiglitz and Harvard Economist Linda Bilmes on the True Cost of the US Invasion and Occupation of Iraq

One week after President Bush rejected charges the war in Iraq has hurt the US economy, a new book puts a conservative estimate of the war’s cost at $3 trillion so far. In their first national broadcast interview upon their book’s publication, Nobel laureate and former chief World Bank economist, Joseph Stiglitz, and co-author Linda Bilmes of Harvard University say the Bush administration has repeatedly low-balled the cost of the war—and even kept a second set of records hidden from the American public.

JUAN GONZALEZ: We turn now to take an in-depth look at the cost of the Iraq war. Last week, President Bush rejected charges that the war in Iraq has hurt the US economy. He addressed the issue during an interview with Ann Curry on the Today Show.

      ANN CURRY: Some Americans believe that they feel they’re carrying the burden because of this economy.


PRESIDENT GEORGE W. BUSH: Yeah, well—


ANN CURRY: The economy, they say, is suffering because of this war.


PRESIDENT GEORGE W. BUSH: I don’t agree with that.


ANN CURRY: You don’t agree with that? It has nothing to do with the economy, the war, the spending on the war?


PRESIDENT GEORGE W. BUSH: I don’t think so. I think, actually, the spending on the war might help with jobs.


ANN CURRY: Oh, yeah?


PRESIDENT GEORGE W. BUSH: Yeah, because we’re buying equipment, and people are working. I think this economy is down because we built too many houses.

JUAN GONZALEZ: While President Bush claimed the war has nothing to do with the economy, one of the country’s leading economists has just published a book that puts an estimated price tag on the war in Iraq. The number may surprise you: $3 trillion.

That’s the estimate calculated by the Nobel Prize-winning economist Joseph Stiglitz and his co-author Linda Bilmes. According to the book, the Iraq War has become the second-most expensive war in US history, after World War II. For the past five years the Bush administration has repeatedly low-balled the cost of the war.

In response to the $3 trillion price estimate, the White House has gone on the offensive. White House spokesperson Tony Fratto told reporters, “People like Joe Stiglitz lack the courage to consider the cost of doing nothing and the cost of failure. One can’t even begin to put a price tag on the cost to this nation of the attacks of 9/11.”

AMY GOODMAN: Joseph Stiglitz and Linda Bilmes join us now in our firehouse studio to discuss their new book. It’s titled The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Joseph Stiglitz was the winner of the 2001 Nobel Prize in Economics, professor at Columbia University and the former chief economist at the World Bank. Linda Bilmes is a professor of public finance at Harvard’s Kennedy School of Government. She served in the Department of Commerce in the Clinton administration.

We welcome you both to Democracy Now! Joseph Stiglitz, how did you come up with that price tag, $3 trillion?

JOSEPH STIGLITZ: Well, the way you approach this problem is basically adding. You begin with the budgetary numbers. But what they claim as the cost of the Iraq war in the budget is not the full cost. There are the operational costs that everybody understands, but then there are costs hidden elsewhere in the defense budget. But then there are really some very big costs hidden elsewhere, like contractors that have been the subject of such concern. We pay their insurance through the Labor Department.

But the most important cost, budgetary cost, that we haven’t talked about publicly, that haven’t been talked about, are the costs of veterans—their disability, veterans’ healthcare—that will total hundreds of billions of dollars over the next decades. This war has had a huge number of injuries, and that will mount, the cost of caring for them, disability. 39 percent of the people fighting, the 1.6 million who have already fought, and if we continue, it will of course be more than that, are estimated will be—wind up with some form of disability.

Then you go beyond that budgetary cost to the cost of the economy. For instance, when somebody gets disabled, the disability pay is just a fraction of what the loss to their family, to the income that they could have otherwise earned. And then you go beyond that to the macroeconomic cost—the fact that the war has been associated with an increasing price of oil. We’re spending money on oil exports, Saudi Arabia, other oil-exporting countries. It’s money that’s not being spent here at home. There are a whole set of macroeconomic costs, which have depressed the economy. What’s happened is, to offset those costs, the Federal Reserve has flooded the economy with liquidity, looked the other way when you needed tighter regulation, and that’s what led to the housing bubble, the consumption boom. And we were living off of borrowed money. The war was totally financed by deficits. And eventually, a day of reckoning had to come, and now it’s come.

JUAN GONZALEZ: We’re going to get into quite a few of those, but I’d like to ask you about the oil, in particular, because obviously many critics initially, when the war began, criticized it as a war to dominate Iraq’s oil. But as you point out, the price of oil has skyrocketed from about $25 a barrel to $100 a barrel since the war began. And what portion of that rise—you also try to attribute to the actual Iraq war, right?

JOSEPH STIGLITZ: Well, we were very conservative in our book. When we say $3 trillion, that’s really an underestimate. We attributed, in our book, only $5 to $10 to the war itself. But if you look back, in 2003, futures markets, which take into account increases in demand, increases in supply—they knew that China was going to have increased demand, but they thought there would be increases in supply from the Middle East—they thought the price would remain at $25 for the next ten years or more. What changed that equation was the Iraq war. They couldn’t elicit the increase of supply in the Middle East because of the turmoil that we brought there. So we think, actually, the true numbers, not the $5 or $10 that we used, because we didn’t want to get in a quibble, but really a much larger fraction of the difference between $25 that it was at the time in 2003 and the $100 we face today.

AMY GOODMAN: Joseph Stiglitz, the White House press spokesperson, Tony Fratto, said yesterday, “People like Joe Stiglitz lack the courage to consider the cost of doing nothing and the cost of failure. One can’t even begin to put a price tag on the cost to this nation of the attacks of 9/11.”

JOSEPH STIGLITZ: Well, I think the White House lacks the courage to engage in a national debate about the cost of the Iraq war. The Joint Economic Committee has asked the White House to come down and discuss the numbers; they’ve refused. Security is important, and we don’t deny that. The question is whether this war has been the best way of obtaining the security. And no matter what you’re going to do—you know, what you think about security, you still have to look at the cost. The costs have been important, even for the way we’ve waged the war. The reason the administration presumably did not buy, for instance, the MRAPs, these special vehicles that would have reduced the number of deaths by a very large fraction, is economics. So, you know, no matter what one says, economics is important, and the American people have the right to have an understanding of what those costs are. When we went to war, they said it was going to cost $50 billion. We are now spending that money upfront every three months, and that’s not even including the cost of veterans’ healthcare and disability down the line.

AMY GOODMAN: We’re going to continue this discussion for the hour. Our guests are Joseph Stiglitz and Linda Bilmes. They have just written a book called The Three Trillion Dollar War: The True Cost of the Iraq Conflict. This is Democracy Now!, democracynow.org, the War and Peace Report. Back in a minute.