| Nobel
laureate Joseph Stiglitz reveals true cost of war during Kellogg
visit
Government
accounting flaws, deception hide grim numbers associated with
Iraq conflict, claims former World Bank economist
By
Matt Golosinski
April
21, 2008 - The United States is bleeding money. That’s
the alarm sounded by Joseph Stiglitz in his new book The
Three Trillion Dollar War, a narrative that details what
he and co-author Linda Bilmes, a Harvard professor of public
finance, say are the staggering hidden costs of America’s
current Iraq War. He brought his discussion to the Kellogg
School on April 18, speaking to a capacity audience from Kellogg
and the larger Northwestern University and Evanston communities.
To hear
the former World Bank chief economist and senior vice president
detail the economic circumstances associated with the conflict,
now in its fifth year and costing U.S. taxpayers $12 billion
each month, is to enter a realm that rivals the bleak, madcap
world conjured by Joseph Heller’s classic satire Catch-22.
For Stiglitz, a 2001 Nobel Prize winner, the tragedy of war
is compounded by significant — and deliberate, he contends
— flaws in how the Bush Administration has accounted
for the war’s expenses.
Citing
the broader economic implications that extend beyond official
budgetary figures that he said obscure the war’s reality,
Stiglitz believes the U.S. government is “vastly undervaluing”
the war’s impact on the economy, including its negative
influence through lost opportunities that might otherwise
shore up domestic infrastructure and education or enhance
technological innovation. Stiglitz calculated that one-sixth
of the Iraq War’s cost would fund Social Security for
the next 75 years, while “just a few days of fighting”
would provide healthcare to all U.S. citizens currently lacking
it.
By using
a cash accounting system that minimizes up-front costs while
obscuring or ignoring massive long-term expenditures, such
as those associated with equipment repair and replacement
or healthcare outlays for soldiers injured or killed in the
war, the U.S. government has convinced some Americans that
the Iraq conflict carries a far more modest price tag than
Stiglitz and Bilmes say is accurate. In fact, Stiglitz, a
professor at Columbia Business School, believes his own $3
trillion figure is “conservative.” The real figure
may be closer to $4 or even $5 trillion, he said, noting that
the Bush Administration’s current tally is only $600
billion — dramatically larger than its initial estimate
of $50 to $60 billion, but well off the mark that Stiglitz
has calculated using what he considers a more accurate system
called accrual accounting. He said that this approach assesses
many of the inevitable future costs associated with the war,
including demobilization and restoring the military to its
pre-war strength. But chief among these costs is long-term
care for those killed or disabled by the conflict, expenses
that Stiglitz said will continue for the next 50 years.
“Disability
costs are a big chunk of change,” he told the audience
in the Kellogg School’s James L. Allen Center, noting
that the country is paying about $4.3 billion a year in healthcare
for those soldiers injured in the first Iraq War, which lasted
only 100 days in 1991. “Today, the costs of a years-long
war will surely be much greater and will go on for decades,”
Stiglitz said, adding that improved battleground medical treatment
has resulted in more soldiers surviving — his figures
were 15 for every 1 fatality — a favorable development,
but one that carries significant lifelong costs to care for
those people. “We have created an unfunded entitlement
as big as the hole in our healthcare system.”
While
the Bush Administration’s cash accounting practice gives
the appearance of fewer expenses, Stiglitz said it also drives
short-term decisions that can have deadly consequences. He
cited the examples of soldiers who were issued no body armor
early in the war, or those whose vehicles were inadequately
armored against improvised explosive devices. Equally troubling,
he said, were instances of soldiers who, after being maimed
and hospitalized, discovered that they were docked by the
military for the remainder of their contracted service pay.
(Congress is likely to change this policy soon, Stiglitz said.)
Deliberate
accounting choices also play a part in the United States’
official tally of its soldiers killed or injured in Iraq,
Stiglitz said. Official injury numbers represent only half
of the actual total, he said, citing data he and Bilmes obtained
from veterans’ organizations who themselves had to use
the Freedom of Information Act to get the full statistics
released. The government, Stiglitz indicated, only counts
injuries it considers the result of direct hostile conflict,
not those it reckons as accidents. As an example, he noted
that any U.S. casualties from a helicopter shot down during
daylight fighting would be numbered among the official tally.
If that same helicopter, flying at night because day travel
is too dangerous, crashes without coming under enemy fire,
the injuries are not officially tabulated as battle casualties,
Stiglitz said. Importantly, however, the U.S. taxpayer will
be responsible for funding all such war injuries, whether
or not these appear as “official” in government
records.
In addition,
the economics surrounding how the war is being fought —
with significant privatization through contractors like Blackwater
and Halliburton — creates “perverse incentives,”
according to Stiglitz. With salaries up to five times higher
for private security forces, the U.S. military is faced with
serious financial challenges when trying to recruit talent
or retain those eligible for discharge at the end of their
tours. “The administration wanted to convince citizens
that we can do war on the cheap,” Stiglitz said, but
its policies actually have increased the military’s
costs since the armed services must now offer more money in
salary and bonuses to compete with private contractors.
Stiglitz
also pointed to what he considered broader economic mistakes
made during the last eight years of the Bush Administration,
which have contributed to the U.S. deficit ballooning from
$6 trillion to $9 trillion, with about a third of that increase
“directly due to the Iraq War,” according to Stiglitz.
What’s more, that economic circumstance has resulted
in some 40 percent of war costs actually being funded by foreign
countries, through investments in instruments such as Treasury
bonds, a situation Stiglitz said leaves the United States
“more vulnerable to global volatility.” He faulted
“lax regulation” and a “reckless increase
in liquidity” by the Federal Reserve under former Chairman
Alan Greenspan and current Chairman Ben Bernanke as contributing
to the recent real estate bubble and credit crunch, and considered
this fiscal policy an attempt to prop up a fundamentally flawed
economy whose collapse during the early years of the war could
have eroded public support for the military intervention.
Stiglitz,
chairman of the Council of Economic Advisers from 1995-1997,
also criticized the Bush Administration for cutting taxes
during wartime, thereby passing the costs on to future generations.
For the
first time in U.S. history, “We have put this war entirely
on our credit card,” he said. |
