An Analysis of the Iraq War by Joseph Stiglitz

Five years ago, as the Bush administration was preparing to attack Iraq, it claimed that the war would cost $50 billion to $60 billion. We are now spending for military operations alone that amount every three months—and that sum does not even include future costs, such as disability and health benefits for returning troops.

War is always expensive, but this war is particularly expensive. It is now the nation's second longest (after Vietnam) and the second costliest (after the all-encompassing World War II). The cost per troop, even adjusted for inflation, is some eight times greater than earlier wars.

From an economic perspective, this is the first war in America's history that ordinary citizens have not been asked to make an economic sacrifice as their sons and daughters risked their lives; as we went to war, there was a huge deficit, but in spite of this, we actually cut taxes on upper-income Americans, meaning the costs are being passed on to future generations.

The war set off the rise in oil prices. Oil cost $25 a barrel before the war, and the futures markets—which already took into account the projected growth in demand by China and other emerging markets—nonetheless expected prices to remain at this level for another decade. The invasion of Iraq changed the equation, and supply did not grow to meet demand.

[Rising oil costs] transferred money out of the pockets of consumers and businesses into the coffers of oil exporters like Saudi Arabia, Venezuela, Kuwait and Russia. This money does not stimulate the U.S. economy.

Indeed, most of the money we have spent on Iraq has not stimulated the U.S. economy … paying contractors from Nepal, the Philippines and elsewhere to cook food, wash laundry, construct barracks and drive trucks in Iraq.

The contractors have done well though—just look at Halliburton Co.'s share prices, which almost tripled in value.

[Excerpt of an article by J. E. Stiglitz and Linda Bilmes, writing in The Chicago Tribune]