NCPA - National Center for Policy Analysis

Potential Cost of War with Iraq

December 26, 2002

In September National Economic Council Director Lawrence Lindsey estimated that war with Iraq would cost $100 billion to $200 billion.

Although Lindsey has not offered any supporting evidence, it appears he may have speculated that war would cost 1 percent to 2 percent of the U.S. gross domestic product of about $10 trillion. Based on comparable wars, such as the Gulf War or the Spanish-American War, Lindsey's estimate is reasonable.

Several detailed efforts have been made to measure the cost of an Iraq war.

  • Based mainly on the Gulf War, the House Budget Committee's Democratic staff reckoned the immediate military cost at $48 billion to $93 billion.
  • The Congressional Budget Office figured the incremental cost of deploying forces to the Persian Gulf would be between $9 billion and $13 billion, plus another $6 billion to $9 billion per month as long as the war lasts.
  • Returning our troops home after hostilities end would cost $5 billion to $7 billion, with another $1 to $4 billion per month for occupation forces.

The direct out-of-pocket costs of war are only a small part of the overall cost, which economist William Nordhaus of Yale University has tried to add up.

  • He figures the total cost of a war with Iraq over 10 years could vary between $99 billion and $1.9 trillion.
  • If Saddam thoroughly destroys Iraq's oil producing facilities and the price of oil rises to $80 per barrel because OPEC fails to increase production, slower growth will cost Americans $1.2 trillion.

However, the fear of terrorist attack imposes a very real economic cost now. And if Saddam Hussein uses weapons of mass destruction, the cost of doing nothing could be much greater than the cost of a preemptive strike.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, December 25, 2002; see also William D. Nordhaus, "The Economic Consequences of War with Iraq," NBER Working Paper No. 9361, December 2002, National Bureau of Economic Research; and "Letter to the Honorable Kent Conrad and John M. Spratt Jr. regarding estimated costs of a potential conflict with Iraq," September 30, 2002, Congressional Budget Office.

For Nordhaus study

http://www.nber.org/papers/w9361

 

Browse more articles on Government Issues