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The Economic Costs of the War in Iraq
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Abstract
Government policies are routinely subjected to rigorous cost analyses. Yet one of today’s most controversial and expensive policies—the ongoing war in Iraq—has not been. The 212billionallocatedbytheU.S.Treasuryhasbeenwidelyreported.Butthereal,directeconomiccostsincludemorethanbudgetaryallocations.Othercostsincludeliveslost,injuries,andlostcivilianproductivityofNationalGuardandReservetroopsmobilizedfortheconflict.Theconflict,however,alsohasgeneratedcostsavings,especiallyintermsofresourcesnolongerbeingusedtoenforceUNsanctionsandpeoplenolongerbeingkilledbySaddamHussein’sregime.InthispaperwemonetizethesedirectcostsandavoidedcostsofthewarinIraq,bothto−dateandthetotalexpectednetpresentvalueofcoststhrough2015.Ourestimatesareimprecise.Thedataarenotofhighqualityandeverycalculationrequiresanumberofassumptions.Inaddition,wedonotcalculateindirecteffectsoftheconflict,suchasitsimpactonoilpricesorothermacroeconomicimpacts,orcertainintangibles,likethebenefitsofastabledemocraticallyelectedgovernmentinIraq,shouldoneemerge.Nonetheless,ourbestestimatessuggeststhatthedirecteconomiccoststotheU.S.throughAugust2005areabout255 billion, about 40billiontocoalitionpartners,and134 billion to Iraq. These estimates suggest a global cost to date of about 428billion.Theavoidedcosts,meanwhile,areabout116 billion. We estimate that the expected total net present value of the direct costs through 2015 could be 604billiontotheU.S.,95 billion to coalition partners, and 306billiontoIraq,suggestingaglobaltotalexpectednetpresentvalueofabout1 trillion. The net present value of total avoided costs, meanwhile, could be about $429 billion.