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The Three Trillion Dollar War

Author: Joseph E. Stiglitz- Nobel prize winner in Economic Sciences (2001) & former chief
economist of World Bank
Linda J. Bilmes: Professor at Harvard University
The book explains the cost of Iraq War & also the hidden cost of the war. Further the
book also gives us the insight about the records of cost of war which are maintained on
cash basis & not on accrual basis ( mainly a strategy to avoid public scrutiny ). Hence
there are certain war cost which would be many folds of the cost of the war till date
which are un-accounted yet. (The future cost of running the war, Disability
Compensation to veterans, Medical care of the veterans, interest payment on loans to
cover the federal deficit, increased cost of oil and its impact on the economy)
In fact the expenses of the war were wrongly estimated by Bushs economic adviser and
defense secretary Donald Rumsfeld, who said that the money spent on the war would
be made for by the oil revenues, which was a conscious lie told to the people to justify
the war.
Also, the war was on the assumption that Iraq had weapons of mass destruction which it
did not possess ( as mentioned in the preface ).


The book also explains the impact of War on macroeconomics of the country. The same
is explained with the information that the US has borrowed 850 Billions $ during 2006 &
author has used the following phrase to describe the impact:

The richest country in the world could not live within it means partly because it was
fighting one of the historys most expensive war

One significant macroeconomic effect of the war was the increase in oil prices ( the
book attributes an increase of $5 to $10 of increase in oil price to the Iraq war )

Books also talked about opportunity cost of War. The authors states that cost incurred
in the war could have been used for fixing social security problem security is actually
less than what it would have been otherwise since armed forces have been depleted,
equipment and ammunition used up at a rate faster than the rate of replacement, build
additional houses, Hire public school teachers, insured health care of the
children.(Investment in technology, education & research)

Book describes the factors for increase in the War Cost:
- Rising cost of personnel (Cost per troop has increased sharply)
- Growing use of contractor the contractors have been expensive since they were
chosen through single source bidding, some with cost plus, govt paid whatever they
charged. And then instead of Iraqis getting jobs, the contractors imported cheap labour
from other countries.
- Rising cost of fuel ( from $25 to $100 ), which again affected military expenses
- Cost for replacement of equipment and weaponry as the military stock wears out since
the war has been stretched, also monthly costs have risen due to cost of training &
equipping Afghan and Iraqi forces
The book has considered time value of money in computing the expense & all the
expenses has been considered in terms of 2007.
The computation of cost in the books has been enumerated under two scenarios as
best case scenario & real or moderate case scenario.
Budgetary costs of the conflict can be divided into 4 categories :
- Costs which have already been incurred
- Future operating costs and costs to be paid even after the war is over
- Hidden costs increase in the core defense budget and cost of expanding the size of
the military
- Interest costs on the borrowed money
One of the chapters of the books explains that there are some social cost which are not
borne by government which are as follows:
- Social Cost borne by veterans family & friends
- Opportunity cost of a person required to take care of disabled veterans
- Economic value of the loss of life and economic costs of the seriously injured
- Economic cost of the quality-of-life impairment due to mental health disability
- Cost of not keeping Guards & reservists at home during natural calamity (Hurricane -
Katrina)
Global consequences of war:
- The life of Iraqi people & Iraq as whole (Death & Injury of Iraqi people, Iraq economy
etc.) and the cost to Iraq economy
- Global peace & security (Islamic country felt that war in the name of democracy was
rather to gain a control over Middle East Oil)
- Cost estimates of United Kingdom
- Cost to Afghanistan due to US neglect because of the Iraq war development stand-
still
- Cost to oil importers ( mainly traditional US allies ) and advantages to oil exporters (
redistribution of wealth and global economic power to Middle east countries )
- Major blow to global peace and security ( a survey showed that US presence in Iraq
was viewed as a greater threat to world peace than North Korea )

Learning from our Mistakes:
- War shall not be funded through emergency supplemental except for the first year
- War funding shall be subject to review on regular intervals
- The administration shall create comprehensive set of military accounts including the
expenditures of the Department of Defense, the State Department, the Department
of Veterans Affairs, and the Department of Labor, as well as Social Security and
health care benefits that arise from military service.
- The Department of Defense should be required to present clean, auditable financial
statements
- There should be a presumption that the costs of any conflict lasting more than one
year should be borne by current taxpayers, through the levying of a war surtax,
currently the war cost was borne by borrowed fund which will have effect on the
next generation
- Shift the burden of proof for eligibility (presumption) for health care benefits and
disability from soldiers to government. If the veterans claim war-related disability
then he shall be entitled to such claim unless the department of veterans affairs
provides evidence for otherwise.
- Last but not least GOING TO WAR is not to be undertaken lightly since with the study of
books it is clear that war is very expensive & richest of all is also cannot afford it easily.

The books at the inception also gives the disclaimer that it doesnt analyses any
benefit out of war it is only based on cost of war & adverse implications of the
war.