The rising economic cost of the Iraq war

Fighting in Iraq has been prolonged and remains intense enough that it has pushed the total cost of US military operations since Sept. 11, 2001, close to that of the Korean War.

Despite the yawning federal deficit, Congress hasn't blinked at this price. And while annual defense spending is now as high as it ever was during the Reagan buildup, the US economy as a whole is much larger, making it easier, in economic terms, for the nation to shoulder the bill.

Yet the costs for Pentagon operations are likely to pile up in years ahead. By 2010, war expenses might total $600 billion, according to the Congressional Budget Office. Much depends on when - and how many - US military personnel can be withdrawn from the Iraqi theater of operations.

"We can't be any more certain about the trend of the defense budget than we can be about the number of troops that will be deployed overseas," says Steven Kosiak, director of budget studies for the Center for Strategic and Budgetary Assessments.

The demands and unpredictability of war have, in essence, turned the defense budget into a two-part allocation. First is the regular budget request, which contains acquisition and research and development funds as well as personnel and operations costs, and which Congress considers in its normal appropriations process. Second is the supplemental appropriations - the add-on emergency spending requested by the administration later in the year.

Congress gave final passage to a 2005 supplemental defense bill just last week. Of the $82 billion contained in the bill, all but $76 billion will pay for Defense Department operations costs. The cost of the US military in Iraq is running about $5 billion a month, estimated the former Pentagon comptroller earlier this year.

Fighting in Iraq "is lasting longer, and is more intense, and the cost to keep troops in the theater of operations is proving to be much greater than anyone anticipated," wrote Rep. John Spratt (D) of South Carolina, ranking minority member of the House Budget Committee, in a recent Democratic report on war costs.

Overall, Congress has approved about $192 billion for the Iraq war itself, according to an analysis by the Congressional Research Service. Another $58 billion has been allocated for Afghanistan, and some $20 billion has gone for enhanced air security and other Pentagon preparedness measures in the US.

That totals $270 billion for all military operations since 2001, according to the CRS analysis. The cost of war in Iraq by itself has already far exceeded the $85 billion inflation-adjusted price tag of the 1991 Gulf War, notes Mr. Kosiak. Plus, that war was largely paid for by contributions from US allies.

As for all military operations combined, add in the $50 billion in war spending the Senate Armed Services Committee last week added to the fiscal 2006 defense budget bill, and the total will surpass $320 billion in US funds. "That's close to the Korean war level of $350 billion [in today's dollars]," says Kosiak.

Unsurprisingly, operations and maintenance constitute the single largest extra expense of the Iraq war. Almost half of the just-passed emergency spending bill's defense funds went for ground operations, flying hours, fuel, and travel.

Iraq fighting has been particularly grinding, noted Secretary of Defense Donald Rumsfeld at a Senate budget hearing in February. On average, combat vehicles are experiencing four and a half years of peacetime wear in one year.

"A bradley fighting vehicle that usually runs about 800 miles a year - that's in peacetime training - now sometimes is being driven in the range of 4,000 miles in Iraq," said Secretary Rumsfeld.

About half of the remaining emergency defense funds was devoted to personnel. This means not basic pay but incremental costs: the extra money paid reserve troops when they are called to active duty, for instance, as well as hazard pay and other special compensation.

The rest went largely to weapons procurement, such as replacement of six National Guard UH-60 helicopters lost in Iraqi and Afghan operations.

More spending on the war is sure to come - even if the US begins to draw down troops levels. While it is difficult to estimate precisely, it is sure to be in the hundreds of billions, experts say. The Congressional Research Service pegs the cost of US operations in Iraq and Afghanistan at an additional $458 billion through 2014.

This is hardly cheap, but given the overall size of the US economy, and the levels of defense spending maintained during the cold war, it is well within the bounds of recent experience, according to Center for Strategic and International Studies military expert Anthony Cordesman.

Total defense spending in 2006 will probably be around 4 percent of gross national product, notes Mr. Cordesman. The average since 1992 for this measure has been 3.6 percent.

"When it does come to economic and federal 'overstretch,' defense is unlikely to be the cause," Cordesman argues in a recent report.