Iraq: the hidden cost of the war

America won't simply be paying with its dead. The Pentagon is trying to silence economists who predi

They roar in every day, usually direct from the Landstuhl US air-force base in the Rhineland: giant C-17 cargo planes capable of lifting and flying the 65-tonne M1 Abrams tank to battlefields anywhere in the world. But Landstuhl is the first staging post for transporting most of the American wounded in Iraq and Afghanistan back to the United States, and these planes act as CCATs ("critical care air transport") with their AETs - "aeromedical evacuation teams" of doctors, nurses and medical technicians, whose task is to make sure that gravely wounded US troops arrive alive and fit enough for intensive treatment at the Walter Reed Army Medical Centre, just six miles up the road from me in Washington.

These days it is de rigueur for all politicians, ranging from President Bush and Ibrahim al-Jaafari (Iraq's "prime minister") to junior congressmen, to visit the 113-acre Walter Reed complex to pay tribute to the valour of horribly wounded soldiers. Last Christmas, the centre was so overwhelmed by the 500,000 cards and presents it received for wounded soldiers that it announced it could accept no more.

Yet the story of the US wounded reveals yet another deception by the Bush administration, masking monumental miscalculations that will haunt generations to come. Thanks to the work of a Harvard professor and former Clinton administration economist named Linda Bilmes, and some other hard-working academics, we have discovered that the administration has been putting out two entirely separate and conflicting sets of numbers of those wounded in the wars.

This might sound like chicanery by George W Bush and his cronies - or characteristic incompetence - but Bilmes and Professor Joseph Stiglitz, the Nobel laureate economist from Columbia University, have established not only that the number wounded in Iraq and Afghanistan is far higher than the Pentagon has been saying, but that looking after them alone could cost present and future US taxpayers a sum they estimate to be $536bn, but which could get considerably bigger still. Just one soldier out of the 1.4 million troops so far deployed who has returned with a debilitating brain injury, for example, may need round-the-clock care for five, six, or even seven decades. In present-day money, according to one study, care for that soldier alone will cost a minimum of $4.3m.

However, let us first backtrack to 2002-2003 to try to establish why the administration's sums were so wildly off-target. Documents just obtained under the Freedom of Information Act show how completely lost the Bush administration was in Neverland when it came to Iraq: Centcom, the main top-secret military planning unit at Donald Rumsfeld's Pentagon, predicted in its war plan that only 5,000 US troops would be required in Iraq by the end of 2006.

Rummy's deputy Paul Wolfowitz was such a whizz at the economics of it all that he confidently told us that Iraq would "really finance its own reconstruction". Rumsfeld himself reported that the administration had come up with "a number that's something under $50bn" as the cost of the war. Larry Lindsey, then assistant to the president on economic policy at the White House, warned that it might actually soar to as much as $200bn - with the result that Bush did as he habitually does with those who do not produce convenient facts and figures to back up his fantasies: he sacked him.

From official statistics supplied by the non-partisan Congressional Budget Office, we now know that the Iraq war is costing roughly $200m a day, or $6bn every month; the total bill so far is $400bn. But, in their studies, Bilmes and Stiglitz consider three scenarios that were not even conceivable to Bush, Rummy, Wolfowitz et al back in 2003. In the first, incurring the lowest future costs, troops will start to be withdrawn this year and be out by 2010. The second assumes that there will be a gradual withdrawal that will be complete by 2015. The third envisages the participation of two million servicemen and women, with the war going on past 2016.

Estimating long-term costs using even the second, moderate scenario, Bilmes tells me: "I think we are now approaching a figure of $2.5 trillion." This, she says, "includes three kinds of costs. It includes the cash costs of running the combat operations, the long-term costs of replenishing military equipment and taking care of the veterans, and [increased costs] at the Pentagon. And then it includes the economic cost, which is the differential between reservists' pay in their civilian jobs and what they're paid in the military - and the macroecono mic costs, such as the percentage of the oil-price increase."

Let me pause to explain those deceptive figures. Look at the latest official toll of US fatalities and wounded in the media, and you will see something like 3,160 dead and 23,785 wounded (that "includes 13,250 personnel who returned to duty within 72 hours", the Washington Post told us helpfully on 4 March). From this, you might assume that only 11,000 or so troops, in effect, have been wounded in Iraq. But Bilmes discovered that the Bush administration was keeping two separate sets of statistics of those wounded: one (like the above) issued by the Pentagon and therefore used by the media, and the other by the Department of Veterans Affairs - a government department autonomous from the Pentagon. At the beginning of this year, the Pentagon was putting out a figure of roughly 23,000 wounded, but the VA was quietly saying that more than 50,000 had, in fact, been wounded.

Casualty conspiracy

To draw attention to her academic findings, Bilmes wrote a piece for the Los Angeles Times of 5 January 2007 in which she quoted the figure of "more than 50,000 wounded Iraq war soldiers". The reaction from the Pentagon was fury. An assistant secretary there named Dr William Winkenwerder phoned her personally to complain. Bilmes recalls: "He said, 'Where did you get those numbers from?'" She explained to Winkenwerder that the 50,000 figure came from the VA, and faxed him copies of official US government documents that proved her point. Winkenwerder backed down.

Matters did not rest there. Despite its independence from the Pentagon, the VA is run by Robert James Nicholson, a former Republican Party chairman and Bush's loyal political appointee. Following Bilmes's exchange with Winkenwerder - on 10 January, to be precise - the number of wounded listed on the VA website dropped from 50,508 to 21,649. The Bush administration had, once again, turned reality on its head to concur with its claims. "The whole thing is scary," Bilmes says. "I have never been conspiracy-minded, but watching them change the numbers on the website - it's extraordinary."

What Bilmes had discovered was that the tally of US fatalities in Iraq and Afghanistan included the outcome of "non-hostile actions", most commonly vehicle accidents. But the Pentagon's statistics of the wounded did not. Even troops incapacitated for life in Iraq or Afghanistan - but not in "hostile situations" - were not being counted, although they will require exactly the same kind of medical care back home as soldiers similarly wounded in battle. Bilmes and Stiglitz had set out, meantime, to explore the ratio of wounded to deaths in previous American wars. They found that in the First World War, on average 1.8 were wounded for every fatality; in the Second World War, 1.6; in Korea, 2.8; in Vietnam, 2.6; and, in the first Gulf war in 1991, 1.2. In this war, 21st-century medical care and better armour have inflated the numbers of the wounded-but-living, leading Bilmes to an astounding conclusion: for every soldier dying in Iraq or Afghanistan today, 16 are being wounded. The Pentagon insists the figure is nearer nine - but, either way, the economic implications for the future are phenomenal.

So far, more than 200,000 veterans from the current Iraq or Afghanistan wars have been treated at VA centres. Twenty per cent of those brought home are suffering from serious brain or spinal injuries, or the severing of more than one limb, and a further 20 per cent from amputations, blindness or deafness, severe burns, or other dire conditions. "Every person injured on active duty is going to be a long-term cost of the war," says Bilmes. If we compare the financial ramifications of the first Gulf war to the present one, the implications become even more stark. Despite its brevity, even the 1991 Gulf war exacted a heavy toll: 48.4 per cent of veterans sought medical care, and 44 per cent filed disability claims. Eighty-eight per cent of these claims were granted, meaning that 611,729 veterans from the first Gulf war are now receiving disability benefits; a large proportion are suffering from psychiatric illnesses, including post-traumatic stress disorder and depression.

More than a third of those returning from the current wars, too, have already been diagnosed as suffering from similar conditions. But although the VA has 207 walk-in "vet centres" and other clinics and offices throughout the US, it is a bureaucracy under siege. It has a well-deserved reputation for providing excellent healthcare for America's 24 million veterans, but is quite unable to cope with a workload that the Bush administration did not foresee.

The unknown unknowns

There is now a backlog of 400,000 claims from veterans and waiting lists of months, some of which "render . . . care virtually inaccessible", in the words of Frances Murphy, the VA's own deputy under-secretary for health. Claims are expected to hit 874,000 this year, 930,000 in 2008. Casualties returning from Iraq meanwhile outnumber other patients at Walter Reed 17 to one, and many have to be put up at nearby hotels and motels rather than in the hospital beds they desperately need. Suicide attempts are frequent; often the less wounded end up having to care for the more seriously wounded.

Since I researched this piece, the Washington Post has published a series of articles outlining the chaos at Walter Reed and elsewhere. Undercover reporters found soldiers suffering from schizophrenia, post-traumatic stress and other brain injuries, occupying rooms infested with mice and cockroaches. The ensuing furore resulted in the sacking of the general in charge. Even Bush says he is "deeply troubled" by these "unacceptable" conditions at Walter Reed, but his government has carefully avoided the issue of how much it will cost to put right these wrongs. The failure to look after returning, often traumatised troops leads to yet further hidden costs to the US economy: the consequences of unemployment, family violence, crime, alcoholism and drug abuse, for example.

The projected $2.5trn price tag also includes the costs of replacing and replenishing military equipment in use. Nearly 40 per cent of the army's equipment, according to the Washington Post, is currently deployed in Iraq; as long ago as March 2005, Rumsfeld conceded that tanks, fighting vehicles and helicopters were wearing out at six times the normal rate.

Significant quantities of equipment are being destroyed, too. The Washington Post reported last December that the army alone has lost more than 280,000 major pieces of equipment in the combat zones; the Army Times reported as long ago as February last year that 20 M1 Abram tanks, 50 Bradley fighting vehicles, 20 Stryker wheeled combat vehicles, 20 M113 armoured personnel carriers, 250 Hum vees, hundreds of mine-clearing vehicles and the like - plus more than a hundred aircraft, most of them helicopters - have been lost. Those figures have increased considerably since then as fighting has intensified. Add something between $125bn and $300bn for these unanticipated long-term costs, say Bilmes and Stiglitz.

Yet another gargantuan White House miscalculation was over the price of oil. Before his departure, Larry Lindsey told the Wall Street Journal in September 2002 that "the successful prosecution of the war would be good for the economy"; the WSJ echoed his thoughts in an editorial the same day, arguing that "the best way to keep oil prices in check is a short, successful war on Iraq". In 2002, the average cost of a barrel of oil was $23.71; today, it is hovering around $50. Dick Cheney's chums in firms such as his own Halliburton - or ExxonMobil, Shell, BP and Chevron - have profited enormously, but Bilmes estimates that even if only $5 of the oil-price increase can be attributed to the Iraq war, that alone adds $150bn to the cost of war.

There are also countless imponderables that add to the bill. The deployment of hundreds of thousands of reservists depletes the economy. At present, 44 per cent of US police forces, for example, have members deployed as reservists in Iraq, and their duties have to be performed by others in America; the same goes for firefighters, medical staff, prison wardens.

Then there are the future illnesses that may well unfold. For instance, nobody knew that the notorious Agent Orange defoliant, used by the US in Vietnam from 1961-71, would turn out to have had carcinogenic and other effects on US troops. Today, there is mounting evidence that exposure to depleted uranium - used for firing anti-tank rounds from US M1 tanks and A-10 attack aircraft - can cause cancer, diabetes and birth defects. Many veterans are returning to the US with their health apparently in ruins from adverse reactions to anti-anthrax injections and/or consumption of experimental pills to counter chemical warfare agents. The long-term costs of looking after the likes of them make the cost of the actual war dead pale by comparison: spouses of deceased soldiers receive a "death gratuity" of $100,000. Troops are also given the opportunity to take out subsidised life insurance policies for up to $500,000 for dependants. In the dispassionate way economists assess such things, Bilmes and Stiglitz estimate the additional cost to the economy of the death of a young soldier - typically 25 years old - to be $6.5m.

Bilmes has become a marked woman to the Bush administration. She was invited to participate in a VA seminar on the cost of war, to be held on the last day of this month - but then was suddenly uninvited. She is no raving lefty, though, and her economic credentials are unimpeachable: she was responsible for an annual budget of $9bn in the Clinton-era commerce department. Like none other than George W Bush, she, too, holds an MBA from Harvard.

It is sobering to think how the money going down the drain in Iraq could otherwise have been spent. "For this amount of money, we could have provided health insurance for the uninsured of this country," Bilmes tells me. "We could have made social security solvent for the next three generations, and implemented all the 9/11 Commission's recommendations [to tighten domestic security]."

That kind of list goes on: the annual cost of treating all heart disease and diabetes in the United States would amount to a quarter of what the Iraq war is costing. Pre-school for every child in America would take just $35bn a year. In their main paper, Bilmes and Stiglitz come up with an even more intriguing possibility: "We could have had a Marshall Plan for the Middle East, or the developing countries, that might have succeeded in winning hearts and minds."

What a historic triumph that would have been for Bush. Instead, his legacy to generations of Americans will be a needless debt of at least $2.5trn, what his own defence secretary describes as a four-way civil war in Iraq, dangerous instability in the Middle East, and increasingly entrenched hatred of the United States throughout the world. Alas, we are likely to hear the daily roar of those C-17s as they approach Andrews Air Force Base for years to come.

The unknown price that Britain is paying

No one is counting the long-term costs of caring for injured British troops, reports Sam Alexandroni

The cost to Britain of the Iraq war, according to the Ministry of Defence, will hit £5bn at the end of this financial year. This is the figure given for direct spending on fuel, ammunition, repairs and transport; the real bill is certainly much bigger. The greatest of the uncounted costs is the financial and human toll the war is taking on the mental and physical health of British personnel serving in Iraq.

The government has not attempted to calculate the long-term cost of caring for the injured, and official statistics offer little guidance. Four thousand eight hundred personnel have been evacuated from Iraq on medical grounds but only 144 were classified as "seriously" or "very seriously" injured. What about the rest? Nobody in the MoD or NHS was able to say how many personnel who served in Iraq are being treated in Britain, or how many will require long-term medical care. The treatment costs of servicemen at NHS hospitals such as Selly Oak in Birmingham - home to the Royal Centre of Defence Medicine - are passed on to the MoD, which in turn bills the Treasury Reserve, but once a patient leaves the armed forces, ongoing treatment is paid for by the NHS.

Mental health offers similar uncertainties. So far, 2,123 troops who served in Iraq have been diagnosed with mental health problems, 328 with post-traumatic stress disorder (PTSD); but cases take 12 years on average to surface and there is no sure cure. "We won't know for many years after the Iraq war is over how many former servicemen are suffering from psychological problems," says Toby Elliot, chief executive of the charity Combat Stress. "The MoD doesn't provide all the funds we need by a long way. We have to make up 40 per cent of our funding ourselves, and that's a problem."

Nor has anyone tried to quantify the indirect economic effects. The surge in the price of Brent crude oil from $31 a barrel at the start of 2003 to $60 today has been driven largely by increased demand, but Middle East instability affects the market and "Iraq has been factored in for years", according to the oil analyst Jean-Luc Amos. The extent to which the Iraq war has exacerbated the domestic threat of terror and made Britain less safe remains similarly ungauged. Then there are other costs barely considered. In 2002 a study commissioned by Ken Livingstone, the city's mayor, estimated that war in Iraq would cost the London economy £1bn in lost tourism alone, though there has been no post-invasion follow-up.

That no one in the British government has even attempted these calculations is worrying, but perhaps any cost-benefit analysis of the war misses the point. "In the end, if the Iraq war had brought the Iraqis a better life and us greater security, then - whatever the costs - it would seem 'worth it'," says Sir Lawrence Freedman, professor of war studies at King's College London. "Because it has been such a screw-up, then, even at a lower level of calculated costs, it seems like a waste."

Iraq War: Key Dates
Research by Sarah O'Connor

20 March 2003 US and Britain invade
1 May 2003 Bush announces "mission accomplished"
13 December 2003 Saddam Hussein is captured
28 April 2004 Images of US troops abusing prisoners emerge from Abu Ghraib
November 2004 US assault on Fallujah insurgents
30 January 2005 Eight million Iraqis vote in elections
July 2006 Deadliest month in Iraq: 3,438 civilians are killed
30 December 2006 Saddam Hussein is executed
10 January 2007 Bush announces 21,500 troop surge to Iraq
21 February 2007 Blair announces the withdrawal of 1,600 British troops

Iraq 2007 by numbers
Research by Rebecca Bundhun

57,805 minimum number of Iraqi civilians reported killed since the 2003 invasion, according to the Iraq Body Count website
33% of Americans in a March 2007 poll approved of George Bush's Iraq policy
80 US soldiers killed in Iraq last month
7,100 number of UK troops currently in Iraq
135,000 number of US troops currently in Iraq
134 number of British soldiers killed in Iraq
21,500 additional troops Bush plans to deploy in the "troop surge"
28 percentage of Americans in the March poll who said the US will probably or definitely win the war

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