Hearing of the House Budget Committee - The Growing Costs of the Iraq War
Interview
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REP. DOGGETT: Thank you very much for your testimony.
With reference to the monies that have already been expended, about what percentage of those figures are attributable to the war in Iraq?
MR. ORSZAG: Roughly 70 percent.
REP. DOGGETT: About 70 percent. And hasn't that varied at times, sometimes much higher but seldom lower?
MR. ORSZAG: Well, earlier on it was lower while we were concentrated just --
REP. DOGGETT: Indeed, earlier on --
MR. ORSZAG: -- in Afghanistan.
REP. DOGGETT: -- everything was lower. I'm sure you recall that when the president's top economist, Lawrence Lindsey, suggested that perhaps the initial White House figure of $50 billion for the total cost over all time for the war in Iraq might be off a little bit, they found him another job outside the administration.
If I understand the burn figures, as they're referred to presently, we currently spend in about four months in Iraq what the White House told the American people initially would be the cost of the total war.
Is that about right?
MR. ORSZAG: We're spending roughly $11 billion a month.
REP. DOGGETT: Well, maybe -- we actually got an estimate of 12 billion (dollars) from witnesses this summer from the Pentagon. But perhaps five months to spend the -- or almost five months to spend the amount of money now American taxpayers, American people are being asked to expend or borrow the money to finance this, that the total cost of the war was alleged to have cost.
And then can you tell us -- I know that since the president declared "mission accomplished," we've had about 97 percent of all of the service members that we have lost who've been killed in Iraq, who've died since he declared mission accomplished. Do you know about how much money has been spent in Iraq since the president declared mission accomplished?
MR. ORSZAG: I think it's be pretty easy to get off of our -- the table that we provided. So we could add that up for you and provide it to you.
REP. DOGGETT: Thank you.
And as far as whether the accuracy and the veracity of the story from the White House has changed any since these initial estimates of $50 billion in Iraq, you made reference to the analysis that CBO did, that your office did of the cost of this tragic surge that the president has embarked on. And your analysis showed that the cost of the surge would be substantially greater this year than the White House tried to sell the American people on, didn't you?
MR. ORSZAG: Yes. And this was -- and maybe I can just explain for a moment, this was an area I had been asked earlier in which the administration explicitly criticized something that CBO did.
REP. DOGGETT: Yes, sir. And it is that point that I wanted to focus on, their reaction to a study that was done to try to analyze, so we would have the facts here in Congress, of what the true cost in dollars, not in blood -- we know that is very high -- but the true cost in dollars would be this year. They said that your estimate was inflated, did they not?
MR. ORSZAG: They used some inflammatory language. Yes, sir.
REP. DOGGETT: I think it was stronger than that. And in fact, they had apparently omitted to include the support troops. They just had the -- they just put the people that are out on the front lines, but they didn't consider -- I know they contract a lot of that out to Blackwater and the like, but they didn't consider any of the support cost or all of the support cost for those troops.
MR. ORSZAG: And in particular, I remember this quite well because it was very early in my tenure, so it sticks in my memory. The administration had announced an increase of five brigades in the theater and were assuming that -- were counting only direct combat troops in terms -- to get their roughly 20,000 troop increase. Our national security team, which is outstanding, pointed out that you never send combat troops in without military police and the people who help feed them and all of the other support behind them, and that there was no way that you'd send in five brigades with only 20,000 troops.
REP. DOGGETT: Yes, sir.
Well, and looking, again, throughout this year to see if the veracity index or the mendacity index perhaps of the White House has changed any since that initial $50 billion for the total cost of the war, at the beginning of the year we were told that we would need next year 145, 147 billion dollars. On July the 31st, talking from your chair, we were told it might be in 165 to 170 billion dollar range.
What is the current request total to this Congress to pay for the war in Iraq next year?
MR. ORSZAG: Slightly under $200 billion.
REP. DOGGETT: So it's already risen to slightly under -- it's about 196 billion (dollars) --
MR. ORSZAG: That's correct.
REP. DOGGETT: -- something like that.
And in terms of the total cost, you were asked whether it was the worst-case scenario. It's not a scenario -- in your estimates, the $8,000 per every person -- it's not a scenario that you defined, it's one you were given.
It does not consider what the cost would be if Vice President Cheney is successful in launching an attack on Iran. It doesn't consider what the cost would be if we kept the current troop levels there in Iraq.
But if it's $2.4 trillion, can you just give us some comparison to, say, the budget today -- or what $2.4 trillion would purchase that the ordinary American citizen could begin to understand what it means to pay out $8,000 per person?
MR. ORSZAG: Well, there's no question that $2.4 trillion is a lot of money.
I understand that you and your colleagues have provided many such comparisons for the American public --
REP. DOGGETT: How does this compare to the --
MR. ORSZAG: -- so I'll leave it at that.
REP. DOGGETT: -- the federal -- the entire federal budget today? What is that?
MR. ORSZAG: It's slightly -- it's more than that. But again, that's a 10-year -- that's over an extended period of time. And then it's difficult to compare it to a one-year figure.
REP. DOGGETT: But the total amount over 10 years would be about what portion of the total federal budget today?
MR. ORSZAG: You want me to -- again, the $2.4 trillion is over actually more than 10 years and then it would be the -- I don't know -- three-quarters or so of one year's federal budget.
REP. DOGGETT: (Inaudible) -- what we spend today. Thank you.
MR. ORSZAG: But I'm not exactly sure that -- I wouldn't normally do that kind of comparison.
REP. DOGGETT: Thank you.
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REP. DOGGETT: Thank you very much. And I would again note that throughout this hearing at no point has there been -- except for one very brief moment -- has there been more than one Republican member present, and now there are no Republican members present -- not because we discouraged their participation but for reasons that they can explain.
I would like to redirect Mr. Orszag's testimony to an inquiry I had earlier that I got cut a little short on. Many of us feel that this surge was a serious mistake, that it has not accomplished its purpose. I understand it is not your function to analyze that aspect of it, but just looking purely at the dollars and cents, at the time that you made your estimate at the Congressional Budget Office you were criticized vigorously earlier this year just as this administration has criticized almost everyone who differed with it on anything about the Iraq war.
I note in particular that it was said that you had greatly overestimated the cost of the surge, and I would just ask you to respond generally on how the estimates of the Congressional Budget Office compare with the actual costs of the surge in this fiscal year.
MR. ORSZAG: The cost of the surge is very closely tied to the number of troops involved. We had originally put forward a range that at the lower bound was 35,000 additional troops. We are now above that.
So I think the record shows that our analysis was right on target, again, a credit to the outstanding staff that CBO has. And to the extent that the administration had criticized that original analysis, the facts as they have turned out have not been kind to that criticism.
REP. DOGGETT: I thank you. In fact, I believe Secretary Gates said you greatly overestimated this. Rather, the truth is that this administration -- from its original $50 billion estimate on the cost of the war in Iraq right through the estimates that are being made outside this committee today -- consistently low balls, misstates to the American people the true cost of the dollars and, of course, the true cost in blood that we are paying for this go-it-alone misadventure.
I want to ask you about one other aspect of that. Again, just asking you about the numbers: At the onset of this war we were told by the administration that as far as the cost of reconstruction that this was going to be an easy matter, that it would be handled through the Iraqis themselves because they were in a rich country.
How much have the costs of the Iraq war -- on the reconstruction side, how much have we already paid out versus this self-pay claim that was made at that time? I believe specifically on March 27th of '03 the comment was: "The oil revenues of Iraq could bring between 50 and 100 billion (dollars) over the course of the next two or three years. We're dealing with a country that can really finance its own reconstruction and relatively soon," Paul Wolfowitz said here in testimony in the House.
MR. ORSZAG: There is no question -- and in the figures that I gave you for 2001 through 2007, you saw that a subcomponent of the $39 billion cost over that period, which is part of the overall $600 billion, is for reconstruction. And there's no question that there's a significant amount of net effect negative -- that is, extra cost -- in that area. In other words, it is not the case that reconstruction efforts have paid for themselves.
REP. DOGGETT: Have you done any analysis of how much of our appropriations have actually gone to pay for weapons for those who are opposing us? They're doing I know a General (sic) Accountability Office study showing a significant diversion of weapons to the insurgents. Has there been any analysis of that at CBO?
MR. ORSZAG: We have not done that. That's more of a GAO --
REP. DOGGETT: And then there's also been an indication that a significant amount of money -- I believe the most recent purchase proposed $100 million of our appropriations going to buy the Iraqis weapons from the Chinese. Have you done any analysis of how much money has been expended on purchasing weapons from China, Russia, Iran?
MR. ORSZAG: No, we have not.
REP. DOGGETT: And with reference to the so-called -- another bit of fiction, an illusion, the so-called coalition of the willing. Have you done any analysis of how much this administration has spent already, and how much it has committed us to in the future, to buy members of the coalition of the willing so that they would be willing?
MR. ORSZAG: Again, I wouldn't necessarily use that kind of terminology, but --
REP. DOGGETT: I understand you speak more as an economist than an accountant; I'm just speaking about practical implications.
MR. ORSZAG: The information I have is that the Department of Defense has reported using $1.2 billion of its -- or in the material for 2008 that its requested $1.2 billion of its funds for support of coalition partners in 2006 and $1.4 billion in 2007; that was part of the material that it used to justify its 2008 request.
REP. DOGGETT: And that was out of its appropriation request for Iraq?
MR. ORSZAG: Again, those numbers are from the past, and yes, it's part of this overall total, but we have the information from the request that they submitted for 2008.
REP. DOGGETT: I see.
Does that include building a missile defense system in Poland and the Czech Republic?
MR. ORSZAG: No.
REP. DOGGETT: So, I don't know whether that's being done because of all the renditions and the hidden prisons there or more directly related to Iraq.
Does it include any trade benefits that were given to any of these alleged willing partners?
MR. ORSZAG: No.
REP. DOGGETT: Thank you very much.
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REP. DOGGETT: Thank you, Mr. Chairman.
And thanks to both of you for your important testimony.
Professor, we have heard over the last several years so many misrepresentations, so many gross untruths, so many lies from this administration about the cost of the war in Iraq, that it was refreshing to have the landmark study that you and Dr. Stiglitz provided concerning the trust costs of this war, and I know you're working on updating it. I believe, if I remember correctly, that the general reaction of the administration to your initial study was that you were the folks with the green eyeshades and the bean counters and that decisions need to be made for other reasons.
Let me ask you an area that I'm sure is difficult to give true numbers on, looking at it from an economic standpoint, but wouldn't you agree that there is a very real cost to America in systematically disguising the real costs of this war? Isn't there a cost to delusion?
MS. BILMES: Well, I think that by not looking at the true cost of the war, it makes it very difficult for you in Congress to essentially do a cost-benefit analysis when you take a vote. I mean, if you think you're taking a vote on a $70 billion supplemental, and the true costs is actually twice that, you are not really able to do your job properly.
So I think that the way that the administration has requested money for this war through this series of so-called emergency supplementals is a misuse of the vehicle of the emergency supplemental, and I certainly would argue that war costs should be made transparent and more full.
REP. DOGGETT: So that if you come in and you reject the findings of the bipartisan Iraq Study Group and instead increase the number of troops in a surge, and then when an independent group like the Congressional Budget Office responds to a request from our chairman for the cost of that surge and you criticize the actual results of what the surge will cost by not accounting in all the front-line troops, not counting in the support troops.
And I guess, Mr. Chairman, the Congressional Budget Office is due for some criticism because though they were accused by the secretary of Defense of greatly overestimating the cost, they actually underestimated the cost slightly of the surge.
Let me ask you if when you have this delusion, when you have these misrepresentations, if there is a cost not just in dollars, but if there isn't a link to the blood that's been spilt and the lives that have been lost -- and I'm thinking specifically, for example, of the administration's delay in providing the armor that our troops needed to be protected from the IEDs.
MS. BILMES: Yes. I mean, I think, you know, very much so, and I think nowhere do we see this more than in the situation with the MRAPs. I mean, we know that four years ago the Marines were already asking for MRAPs because they already knew conclusively that they protected our soldiers better from exactly the type of injuries that they were facing in Iraq then even the up-armored humvees. And despite that, it was not until Secretary Gates came in and ordered a review and looked at it that we have finally now, four years later --
REP. DOGGETT: And many lives.
MS. BILMES: And many, many lives later that we have finally asked for the money for the resources to purchase -- to replace the 18,000 humvees. But, of course, you can't just wave your hand and replace 18,000 vehicles overnight; it takes awhile to actually manufacture them. So all this while, we are continually exposing our troops to injury and death as a result of a sort of penny-wise, pound- foolish approach to the budgeting.
REP. DOGGETT: As you know, there's been some discussion around these halls lately about a war tax, but isn't it true that we are already paying a Bush war tax, a Bush gas tax, every time we pump a gallon of gasoline? Aren't we paying higher prices because of the war in Iraq?
MS. BILMES: Well, I mean, I would say yes and no. I mean, on the one hand, because of the way this war has been waged, it has been waged with an all-volunteer paid army and with paid contractors. So essentially, the cost in blood has been translated into a financial cost. And since we have borrowed all the money to go to war, the financial cost has been passed on to the next generation.
So you could argue that we have not -- we the public, we have not borne the cost of the war at all yet, except for in the economy there are a number of factors which do affect us to certain extent, one of them being the price of oil. Now, the price of oil before we went to war was $25 a barrel, and at that time, the futures markets, which look out and scan the horizon for changes, already anticipated the enormously growing demand from China and India, and they, nevertheless, expected that the price of oil would remain constant.
So, certainly, if my colleague Joe Stiglitz was here, this being exactly the area where he won his Nobel Prize for this asymmetry of information, he would argue that you should attribute almost all of the increase in the oil price to the instability in the Middle East caused by the invasion of Iraq. But I, being a conservative person, have said we should only have 5 or 10 dollars worth of this increase, and that alone has an impact on the economy of 2 to 400 billion dollars. And obviously, people feel it when they buy gas because they feel that they have less money to spend on other things.
REP. DOGGETT: I gather, just in concluding that -- from your testimony -- that you and Dr. Stiglitz do agree that we've hardly had shared sacrifice, that there have been some people that have actually been winners in this tragedy. And who are they?
MS. BILMES: Well, there have been a small number of winners, such as the oil companies and some contractors such as Kellogg, Brown & Root and Blackwater. But overall, they have been few. And our counterfactual analysis, which looks at how the economy would have fared had we invested the money at home, shows that we would be considerably better off if we had invested the money at home.
REP. DOGGETT: Thank you.
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REP. DOGGETT: Thank you, Mr. Chairman.
Ms. Belasco, if I understand your written testimony, you have attempted to give a apple-to-apple inflation-adjusted dollar cost of the cost of what has been spent in the current wars versus what we did in Korea and Vietnam; is that correct? On Page 4.
MS. BELASCO: Yes.
REP. DOGGETT: And if I understand your testimony and the findings that have been made, we are -- already, we have spent about twice the cost of the Korean War.
MS. BELASCO: Yes.
REP. DOGGETT: And we have spent -- again, comparing apples to apples -- in real dollars, we have already spent about 90 percent of the cost of the 12-year war in Vietnam.
MS. BELASCO: Well, but I do want to clarify that those figures refer to the cost not only for Iraq but also for Afghanistan --
REP. DOGGETT: Yes.
MS. BELASCO: -- and enhanced security.
REP. DOGGETT: I understand your testimony.
MS. BELASCO: It's all three global war on terror operations.
REP. DOGGETT: And we also heard testimony that about at least 70 percent of that is in Iraq, but you also point out, making it Persian Gulf-specific, that we have already spent six times the cost of the Persian Gulf War -- on Page 4.
MS. BELASCO: Yes.
REP. DOGGETT: And you --
MS. BELASCO: Again, all three operations.
REP. DOGGETT: Yes, and you add to that, however, that on the cost of the Persian Gulf War, United States taxpayers were only asked to pay 7 percent of the costs because we had other people contributing to the cost of the war.
MS. BELASCO: Kuwait and Saudi Arabia, yes.
REP. DOGGETT: Yes, and in the case of this war, we're actually paying others to come into the war instead of relying on substantial payments from others to help finance the war.
Finally, Mr. Chairman, I would just like to note that we've now gone through the testimony of these two important witnesses. We have not had one of the 16 members of the Republican side of this committee appear, just as we did not have anyone from the administration appear on this very important matter.
As we look at the $2.4 trillion figure that is the estimate for the cost of these wars, it is a mind-boggling number. But as Mr. Becerra pointed out earlier, if we want to try to compare it and understand it, it's about half of the 75-year cost of eliminating all of the sharp fall in Social Security. It is more than every American, government, private, public will spend on health care this year.
It would be enough to purchase the average cost of a home in the United States today for 10 million American citizens. It would provide $36,000 in four-year tuition assistance to every high school student who will graduate this year. It is an enormous figure. It would -- in just five months of spending in Iraq alone, it would permit us, according to House Transportation Committee, to fix every deficient bridge in this country. It's an immense factor, and the American people need to understand that while there is a tragic cost in blood, that the cost to our pocketbooks, to our grandchildren and great-children's (sic) pocketbooks is immense.
Thank you.
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