Joseph Stiglitz, Winner of the 2001 Nobel Prize in Economics. He is a professor at Columbia University and the former chief economist at the World Bank. He is the co-author of the new book The Three Trillion Dollar War: The True Cost of the Iraq Conflict.
Linda Bilmes, Professor of public finance at Harvard’s Kennedy School of Government. She is co-author of the new book The Three Trillion Dollar War: The True Cost of the Iraq Conflict.
One week after President Bush rejected charges the war in Iraq has hurt the US economy, a new book puts a conservative estimate of the war’s cost at $3 trillion so far. In their first national broadcast interview upon their book’s publication, Nobel laureate and former chief World Bank economist, Joseph Stiglitz, and co-author Linda Bilmes of Harvard University say the Bush administration has repeatedly low-balled the cost of the war — and even kept a second set of records hidden from the American public. [includes rush transcript]
This is a rush transcript. Copy may not be in its final form.
JUAN GONZALEZ: We turn now to take an in-depth look at the cost of the Iraq war. Last week, President Bush rejected charges that the war in Iraq has hurt the US economy. He addressed the issue during an interview with Ann Curry on the Today Show.
ANN CURRY: Some Americans believe that they feel they’re carrying the burden because of this economy.
PRESIDENT GEORGE W. BUSH: Yeah, well —
ANN CURRY: The economy, they say, is suffering because of this war.
PRESIDENT GEORGE W. BUSH: I don’t agree with that.
ANN CURRY: You don’t agree with that? It has nothing to do with the economy, the war, the spending on the war?
PRESIDENT GEORGE W. BUSH: I don’t think so. I think, actually, the spending on the war might help with jobs.
ANN CURRY: Oh, yeah?
PRESIDENT GEORGE W. BUSH: Yeah, because we’re buying equipment, and people are working. I think this economy is down because we built too many houses.
JUAN GONZALEZ: While President Bush claimed the war has nothing to do with the economy, one of the country’s leading economists has just published a book that puts an estimated price tag on the war in Iraq. The number may surprise you: $3 trillion.
That’s the estimate calculated by the Nobel Prize-winning economist Joseph Stiglitz and his co-author Linda Bilmes. According to the book, the Iraq War has become the second-most expensive war in US history, after World War II. For the past five years the Bush administration has repeatedly low-balled the cost of the war.
In response to the $3 trillion price estimate, the White House has gone on the offensive. White House spokesperson Tony Fratto told reporters, “People like Joe Stiglitz lack the courage to consider the cost of doing nothing and the cost of failure. One can’t even begin to put a price tag on the cost to this nation of the attacks of 9/11.”
AMY GOODMAN: Joseph Stiglitz and Linda Bilmes join us now in our firehouse studio to discuss their new book. It’s titled The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Joseph Stiglitz was the winner of the 2001 Nobel Prize in Economics, professor at Columbia University and the former chief economist at the World Bank. Linda Bilmes is a professor of public finance at Harvard’s Kennedy School of Government. She served in the Department of Commerce in the Clinton administration.
We welcome you both to Democracy Now! Joseph Stiglitz, how did you come up with that price tag, $3 trillion?
JOSEPH STIGLITZ: Well, the way you approach this problem is basically adding. You begin with the budgetary numbers. But what they claim as the cost of the Iraq war in the budget is not the full cost. There are the operational costs that everybody understands, but then there are costs hidden elsewhere in the defense budget. But then there are really some very big costs hidden elsewhere, like contractors that have been the subject of such concern. We pay their insurance through the Labor Department.
But the most important cost, budgetary cost, that we haven’t talked about publicly, that haven’t been talked about, are the costs of veterans — their disability, veterans’ healthcare — that will total hundreds of billions of dollars over the next decades. This war has had a huge number of injuries, and that will mount, the cost of caring for them, disability. 39 percent of the people fighting, the 1.6 million who have already fought, and if we continue, it will of course be more than that, are estimated will be — wind up with some form of disability.
Then you go beyond that budgetary cost to the cost of the economy. For instance, when somebody gets disabled, the disability pay is just a fraction of what the loss to their family, to the income that they could have otherwise earned. And then you go beyond that to the macroeconomic cost — the fact that the war has been associated with an increasing price of oil. We’re spending money on oil exports, Saudi Arabia, other oil-exporting countries. It’s money that’s not being spent here at home. There are a whole set of macroeconomic costs, which have depressed the economy. What’s happened is, to offset those costs, the Federal Reserve has flooded the economy with liquidity, looked the other way when you needed tighter regulation, and that’s what led to the housing bubble, the consumption boom. And we were living off of borrowed money. The war was totally financed by deficits. And eventually, a day of reckoning had to come, and now it’s come.
JUAN GONZALEZ: We’re going to get into quite a few of those, but I’d like to ask you about the oil, in particular, because obviously many critics initially, when the war began, criticized it as a war to dominate Iraq’s oil. But as you point out, the price of oil has skyrocketed from about $25 a barrel to $100 a barrel since the war began. And what portion of that rise — you also try to attribute to the actual Iraq war, right?
JOSEPH STIGLITZ: Well, we were very conservative in our book. When we say $3 trillion, that’s really an underestimate. We attributed, in our book, only $5 to $10 to the war itself. But if you look back, in 2003, futures markets, which take into account increases in demand, increases in supply — they knew that China was going to have increased demand, but they thought there would be increases in supply from the Middle East — they thought the price would remain at $25 for the next ten years or more. What changed that equation was the Iraq war. They couldn’t elicit the increase of supply in the Middle East because of the turmoil that we brought there. So we think, actually, the true numbers, not the $5 or $10 that we used, because we didn’t want to get in a quibble, but really a much larger fraction of the difference between $25 that it was at the time in 2003 and the $100 we face today.
AMY GOODMAN: Joseph Stiglitz, the White House press spokesperson, Tony Fratto, said yesterday, “People like Joe Stiglitz lack the courage to consider the cost of doing nothing and the cost of failure. One can’t even begin to put a price tag on the cost to this nation of the attacks of 9/11.”
JOSEPH STIGLITZ: Well, I think the White House lacks the courage to engage in a national debate about the cost of the Iraq war. The Joint Economic Committee has asked the White House to come down and discuss the numbers; they’ve refused. Security is important, and we don’t deny that. The question is whether this war has been the best way of obtaining the security. And no matter what you’re going to do —- you know, what you think about security, you still have to look at the cost. The costs have been important, even for the way we’ve waged the war. The reason the administration presumably did not buy, for instance, the MRAPs, these special vehicles that would have reduced the number of deaths by a very large fraction, is economics. So, you know, no matter what one says, economics is important, and the American people have the right to have an understanding of what those costs are. When we went to war, they said it was going to cost $50 billion. We are now spending that money upfront every three months, and that’s not even including the cost of veterans’ healthcare and disability down the line.
AMY GOODMAN: We’re going to continue this discussion for the hour. Our guests are Joseph Stiglitz and Linda Bilmes. They have just written a book called The Three Trillion Dollar War: The True Cost of the Iraq Conflict. This is Democracy Now!, democracynow.org, the War and Peace Report. Back in a minute.
AMY GOODMAN: We turn to a clip of Andrew Natsios, the former administrator of USAID, the Agency for International Development. During an appearance on Nightline with Ted Koppel in April of 2003, Natsios predicted it would cost the United States $1.7 billion to rebuild Iraq.
TED KOPPEL: I think you’ll agree, this is a much bigger project than any that’s been talked about. Indeed, I understand that more money is expected to be spent on this than was spent on the entire Marshall Plan for the rebuilding of Europe after World War II.
ANDREW NATSIOS: No, no, no, no. This doesn’t even compare remotely with the size of the Marshall Plan.
TED KOPPEL: The Marshall Plan was $97 billion.
ANDREW NATSIOS: This is $1.7 billion. There have been -—
TED KOPPEL: Alright, this is the first. I mean, when you talk about 1.7, you’re not suggesting that the rebuilding of Iraq is going to be done for $1.7 billion.
ANDREW NATSIOS: Well, in terms of the American taxpayers’ contribution, I do. This is it for the US. The rest of the rebuilding of Iraq will be done by other countries who have already made pledges — Britain, Germany, Norway, Japan, Canada — and Iraqi oil revenues. Eventually, in several years, when it’s up and running and there’s a new government that’s been democratically elected, will finish the job with their own revenues. They’re going to get in $20 billion a year in oil revenues. But the American part of this will be $1.7 billion. We have no plans for any further-on funding for this.
TED KOPPEL: I want to be sure that I understood you correctly. You’re saying that the top cost for the US taxpayer will be $1.7 billion, no more than that?
ANDREW NATSIOS: For the reconstruction. And then there’s $700 million in the supplemental budget for humanitarian relief, which we don’t competitively bid, because it’s charities that get that money.
TED KOPPEL: I understand. But as far as reconstruction goes, the American taxpayer will not be hit for more than $1.7 billion no matter how long the process takes?
ANDREW NATSIOS: That is correct. That is the plan, and that is our intention. And these figures of these outlandish figures I’ve seen, I have to say, there’s a little bit of hoopla involved in this.
AMY GOODMAN: That was Andrew Natsios in 2003. He, at the time, was head of USAID, the Agency for International Development. Our guests for the hour are Joseph Stiglitz, who won the 2001 Nobel economics prize, he’s a professor at Columbia University; and Linda Bilmes, she’s a professor at Harvard’s Kennedy School of Government, professor of public finance, and former assistant secretary and chief financial officer at the US Department of Commerce. They have written a book together called The Three Trillion Dollar War: The True Cost of the Iraq Conflict.
Linda Bilmes, your response to Andrew Natsios?
LINDA BILMES: Well, we have actually spent now three times per — we spent three times per Iraqi what we spent per European in the Marshall Plan. And the amount that we have spent in trying to rebuild Iraq has far eclipsed what Andrew Natsios had said, obviously. But I think that the whole story about what happened in the reconstruction is one of the many, many tragedies of the Iraq situation.
Here, you had a situation where President Bush tried to do the right thing. I mean, he went to a very reluctant congress, and he said, “Look, we have to have the money to rebuild Iraq.” And this was in the summer of 2003. Congress said, “Why don’t we loan it?” or whatever, and he said, “No, no, have to have the money.” The money was enacted, and then $19 billion was allocated for the reconstruction of Iraq, available in September 2003, which then mostly was not spent. It was not spent, because for the next six months, Secretary Rumsfeld essentially refused to sign a letter to the Congress guaranteeing that the contracts would be let by competitive bidding. And there was, you know, a ridiculous kind of hold up in the Congress about this issue of the competitive bidding, which meant that by the next summer, very little of the money had been spent. The Office of Management and Budget had rolled back a lot of the money. And by that time, we had lost the hearts and minds of Iraqis. By that time — it was now a year later — electricity was far down, all the things that that rebuilding money was supposed to be for — rebuilding schools, replenishing electricity and basic services — was gone. So it was an enormous, enormously bungled and missed opportunity.
You talk in your book also — the enormous cost of these contracts and the private contractors that are there vis-a-vis actual American soldiers. I think you talk about security contractors making as much as $400,000, compared soldiers making — costing $40,000 to the government — not necessarily making that $40,000, but costing $40,000 to the government. This enormous explosion in terms of cost because of the privatization of so much of the actual war and occupation.
JOSEPH STIGLITZ: That’s right. And I think one of the problems is that the private contractors’ incentives often are not aligned with the national perspectives. For instance, let me give you an example. Going back to the issue of reconstruction, winning the hearts and minds, at the beginning of the war, the unemployment rate got up to 60 percent. It was in our interest to make sure that there were jobs for all the — as many Iraqis. But what did our contractors do? They brought in Filipinos, Nepalese, because they were cheaper. They were trying to minimize the short-run cost. But it wound up feeding the insurgency, because the unemployed young males, combined with the fact that we didn’t protect the caches of arms, was an explosive mixture which exploded.
The other thing that we discovered in the process of doing this kind of research is that when we talk about the upfront cost of the contractors, it doesn’t end there, because we have to pay the insurance for disability and death. But then, the insurance has a little clause. It says it excludes a hostile action. But, of course, when you’re in Iraq, most of the injuries and most of the deaths are hostile action. So the government winds up paying the death benefits and the disability benefits anyway. So it’s another example of really a largesse to the big business, and you can see the fact that there’s excess profits in terms of what’s happened to the stock price of the contractors, and most particularly of Halliburton.
AMY GOODMAN: Before we go to Halliburton, the issue of comparing the Iraq war cost to previous wars, you’ve done that, Linda Bilmes, like World War II.
LINDA BILMES: Well, the Iraq war has been the most expensive war that we’ve fought of all of our wars, apart from World War II. World War II was, of course, a massive operation involving sixteen million Americans. And what is particularly striking about this war, and one of the things that leads to the long-term cost, is the very, very high casualty rate. In previous wars, in World War II and Vietnam and Korea, the number of wounded troops per fatality was about two-to-one or three-to-one. And now, the number of wounded troops per fatality is seven-to-one in combat, and if you include all of those wounded in non-combat and diseased seriously enough to have to be medevaced home, it’s fifteen-to-one. So it’s a very significant difference. And this difference compared to previous wars is, of course, you know, a great tribute to the medical care that they receive on the field and the enormous advances in the care provided at Landstuhl hospital in Germany and other places. But what it means is that the United States has a long-term cost of taking care of many, many thousands of disabled veterans for the rest of their lives.
JUAN GONZALEZ: And, of course, as you have reported previously, the numbers of those disabled veterans and wounded as a result of the war has been consistently downplayed or hidden by the military in terms of what the actual cost to the Veterans Administration and the government is as a whole. And, of course, we’re not even talking about the potential illnesses from depleted uranium or other environmental contamination in Iraq that will be for decades to come an issue that the world will have to deal with.
LINDA BILMES: Absolutely. And this is one of the really outrageous situations about trying to get information about this war, because even today, if you go to the official DOD website, what you will find is a number around 30,000 wounded, but that is only the wounded in combat. Now, the number of fatalities, which is approaching 4,000, is wounded in combat and non-combat. But if you want to find the non-combat wounded — and that includes, for example, soldiers who are injured when they’re driving their vehicles at night, because it’s unsafe to drive during the day; soldiers who are wounded when they are being transported between one place and another, who never would have been there otherwise — it’s much larger. It’s more than double. And that is a number which is very hard to get. We had to use the Freedom of Information Act to get access to that number. It is impossible to sort of underestimate how difficult it is to get hold of information that should be completely in the public domain.
AMY GOODMAN: Joseph Stiglitz, I want to go to that point of using the Freedom of Information Act. You found out through this Freedom of Information Act request the government was keeping a second set of books?
JOSEPH STIGLITZ: That’s right. I mean, one of the very disturbing things is that we went to war for democracy, and yet democracy is more than just having periodic elections. It really involves informed citizens being able to have perspectives on the important decisions. But to be informed, you have to know what is really going on. And that’s why it was, you know, so upsetting that we had to used the Freedom of Information Act to find out this or to find out, for instance, that while the government was saying, the President was saying, we’ll supply all the equipment that the military needs, back in early 2005 there were urgent requests for MRAPs, these vehicles that will resist the IEDs, these explosive device, and protect our soldiers, but because of wanting to keep the apparent cost down, they refused to order them.
And, of course, the total cost — and this is one of the important points we make in our book —- the total cost is not just the upfront cost, but the cost that you have to face for decades later in terms of the injuries and, of course, the cost to the families. So, being penny-wise and pound-foolish means our country is suffering because of that kind of economic decision.
AMY GOODMAN: But I want to stay on this second set of books. So what is being told to the public is only half of the injured, is that right, Linda Bilmes?
LINDA BILMES: That’s right. And last year, after I published a paper on the cost to veterans, the then-Assistant Secretary for Health at the Pentagon phoned me and phoned my dean and said, “Where did you get these numbers?” And I said, “I got them from your website, which we now have access to.” And he said, “Oh, that can’t be.” And I said, “Well, look at your website.” And he said, “Well, fax me my own website.” So I literally faxed him his own website. And then he said, “Oh.” But -—
AMY GOODMAN: Who was this?
LINDA BILMES: This was the Assistant Secretary of Health at the DOD, Winkenwerder, who left, was retired around the time that Gates came in. A number of people from that department were retired. He —-
JOSEPH STIGLITZ: Then they took down those websites.
LINDA BILMES: Yeah, but then, I mean -— yeah, then they took down the websites, and there were websites at the Department of Veterans Affairs that were keyed into those websites, and then they directed the Department of Veterans Affairs to change the Veterans’ websites. And we only found out about this, because hundreds — hundreds — of veterans from all over the country started emailing me and calling me and saying, “Have you seen what’s going on?” So, I mean, we were in the situation where we were academics doing this research, veterans from all over the country watching these websites were coming to tell us this information.
But this kind of trickery has extended both to the budget and to the numbers in the war. And we see it right now in the President’s proposal for the FY09 veterans’ budget, where ostensibly the budget is being increased by $5 billion, but in fact, if you look at the fine print, they’re hoping to recoup over $3 billion by increasing the co-pays and all the fees on the veterans who need to use the services. And so, if you actually netted out, it’s only a $2 billion increase, which is less, when you consider the cost-of-living adjustment, than they had last year.
JUAN GONZALEZ: And you also detail in your book the same kind of flimflam going on with the soldiers who are recruited into the military, a bonus pay that they get that then, if they happen to be injured too soon when they get on the battlefield, they then have to pay back?
JOSEPH STIGLITZ: Yeah. I found that just absolutely astounding. You know, you’re doing this research, and you find things that — I say, “Linda, are you sure? This can’t be!” But they said — you know, the view is, they signed a contract to serve for three years. The fact that they get blown up after one month means they haven’t fulfilled their contract.
AMY GOODMAN: And so, what happens?
JOSEPH STIGLITZ: They have to pay back the money.
LINDA BILMES: Congress is changing this. They’ve intervened to change this. But, I mean, Congress has been intervening to change some of these problems. Right now, there are eighteen pieces of legislation before Congress and a number that have been passed based on our recommendations.
JOSEPH STIGLITZ: Another example that sort of highlights this kind of — you know, some of this may be bureaucratic misbehavior, but still it highlights the kinds of problems our veterans are facing.
JUAN GONZALEZ: It also highlights the total incompetence of the people that are running the operation.
JOSEPH STIGLITZ: Exactly, like, I mean, one of the things — you know, they check out helmets and other equipment, because they want them to be responsible. But they get — then they lose their helmet in an explosion. You know, they’re shipped out, they’re disabled, they’re in concussion. Somebody in the military will send them a bill for their helmet.
LINDA BILMES: It was the GAO study on that, which is unbelievable, about veterans being — hundreds and hundreds of veterans being chased around the country for small amounts of money that they allegedly owe, mostly related to pieces of equipment that they lost during serious injuries.
AMY GOODMAN: We’re talking to Linda Bilmes and Joseph Stiglitz in this national broadcast exclusive, as they reveal the cost of war, a cost they say is a conservative estimate. The Three Trillion Dollar War is the title of their book, The True Cost of the Iraq Conflict. We’ll come back in our conversation with them in a minute.
AMY GOODMAN: Our guests are the Nobel economics laureate Joseph Stiglitz, professor at Columbia University, and Linda Bilmes, professor at Harvard’s Kennedy School of Government. They’ve written a book together they’ve published today, The Three Trillion Dollar War: The True Cost of the Iraq Conflict.
I want to ask you about more of President Bush’s comments from Thursday. He said the United States is not heading into a recession.
PRESIDENT GEORGE W. BUSH: I don’t think we’re headed to a recession. But, no question, we’re in a slowdown. And that’s why we acted and acted strongly with over $150 billion worth of pro-growth economic incentives, mainly money going into the hands of our consumers, and some money going to incent businesses to invest, which will create jobs.
AMY GOODMAN: Joseph Stiglitz?
JOSEPH STIGLITZ: Well, first of all, the economy is almost surely heading into a recession. I was at the American Economic Association meetings. In the past, the probability of going into recession was fifty-fifty. The general consensus is now 75 percent probability of going into recession. But whether we go into recession or not, the real fact is that it is a major slowdown. It’s going to be one of the — I think clearly the deepest downturn in the last quarter-century. The loss of output, the difference between the actual output and our potential output, will be at least one-and-a-half trillion dollars, and that’s not money we’re talking about in this Three Trillion Dollar War. This is a serious problem. And I think at the core of this is the war. You know, in the election campaign, people said there are two big issues: the economy and the war. I think there’s one big issue, and that’s the war, because the war has been directly and indirectly having a very negative effect on the economy.
JUAN GONZALEZ: Well, could you talk about that somewhat, because you obviously go into that in your book, the impact of the enormous borrowing that occurred to finance the war at the same time that the President put through tax cuts — unheard of that we go into war and we cut taxes, rather than raise them — and also just the impact then that spread throughout the entire economy in terms of the housing crisis that we’re into now?
JOSEPH STIGLITZ: Well, this was one of the big points that came up in the joint committee hearing that we were in yesterday.
AMY GOODMAN: You testified yesterday before Congress.
JOSEPH STIGLITZ: That’s right. And this was one of the big points, that in every other war there has been what you might call shared sacrifice. Some people obviously sacrifice more, putting their lives at risk, but everybody was asked to sacrifice. This is the first time that, at the time we went into war, we actually cut taxes, rather than raised taxes. And even as we were cutting taxes, we already had a very large deficit. So that means this war has been totally financed by deficit. And that’s really been the trick that the Bush administration — it wanted people to think that there were no economic trade-offs. We could have a war for free.
JUAN GONZALEZ: And those deficits, the financing came increasingly from abroad, right?
JOSEPH STIGLITZ: Very much so, at least 40 percent from abroad. So that means that Americans will be paying those abroad interest and —- the other aspect of that that’s really important to realize is that while we were saving zero, or household saving went down to zero, the government had negative saving and we were borrowing, the pools of wealth that were being created were in the Middle East, China. So when we have an economic problem, like the fact that Citibank and Merrill Lynch had to be bailed out, they had to turn to these others, to the sovereign wealth funds that were held by other countries, and that makes us more dependent on abroad.
AMY GOODMAN: Who is profiting from this war?
JOSEPH STIGLITZ: Well, actually, there are two big gainers in this war and only two: the oil companies and the defense contractors. And you see that where the pools of wealth are being created. One of the big pools of wealth are in the Middle East, the countries that are the oil exporters. We are transferring hundreds of billions of dollars from American consumers, businesses, to the oil exporters. You can look at it as simple as that.
AMY GOODMAN: Which countries?
JOSEPH STIGLITZ: Well, Saudia Arabia, Iran, Venezuela. You know, if you asked who were the countries that we would not want to help, many of them would be on the list that we have been helping.
AMY GOODMAN: So, what do you think of our headline today: President Bush helps the Axis of Evil? Iran and Venezuela, they benefit from the war in Iraq
JOSEPH STIGLITZ: They are the big beneficiary. That’s very clear. You know -—
AMY GOODMAN: His Axis of Evil, I should say.
JOSEPH STIGLITZ: Exactly. And one of the things that — you know, as economists, we talk about opportunity cost, what you could have done with $3 trillion to win the hearts and minds, to advance security. One of the aspects of this — everybody talks about security. While we were focusing on weapons of mass destruction that did not exist in Iraq, another country joined the nuclear club: North Korea. And so, it shows you, you know, there’s limited resources, time and effort, and we were focusing on the wrong problem. While we were focusing on Iraq, the problems in Afghanistan got worse, and the problem of security in Afghanistan is much worse than it was five years ago. So there’s not only an economic opportunity cost; there’s a security opportunity cost.
JUAN GONZALEZ: Well, I’d like to ask you about the — how the presidential candidates are dealing with this. Obviously, both on the Democratic side, both of the remaining candidates, are saying that they’re going to pull out of the Iraq war, although, as we’ve examined on this show, what they define as pulling out is not quite really pulling out. It’s still maintaining considerable forces and also continuing to build the US military budget, whereas we’re already spending as much on our military budget as the rest of the world combined. Why anyone would want to spend more is beyond me. But your sense of how the candidates are positioned to be able to — in terms of their campaign rhetoric — to deal with some of these problems, Linda?
AMY GOODMAN: Linda Bilmes?
LINDA BILMES: Well, I think that both the Democrats are clearly interested in examining the issues around how much money we would have to spend to stay in Iraq, but I’m not sure that they are looking at it the way we would advise them to look at it. What we would say is that right now we spend $12 billion a month in Iraq alone, $16 billion if you include Afghanistan.
JOSEPH STIGLITZ: And that doesn’t include the cost down the line.
LINDA BILMES: Which doesn’t include the cost down the line, so if you include just the cost that we’ve already incurred for veterans and replenishing equipment and so forth, it’s double that. It’s $25 billion a month. So two more years of staying in Iraq is another $600 billion. Three more years, and you’re getting close to a trillion dollars more.
I guess what we would urge is for the candidates to consider whether US security objectives would be best served by spending that additional $600 billion to $900 billion by retaining our troops in Iraq. You know, it seems to us that one could look at many other ways to spend that kind of money that would achieve our objectives better.
And this, I will say, was brought home to me yesterday, when a Navy Seal, former student of mine, came into my office. He had just been back from fifteen months in Iraq. And the Navy Seals do a very, very difficult job. And he had been in Anbar province, where he had captured the number two al-Qaeda in Iraq leader in Anbar province. This was a big, big catch for him. And he lost a number of men. It was a very, very difficult period for him. And he said — I said, “Well, what happens to him now, to the al-Qaeda in Iraq Anbar guy?” And the Navy Seal said to me, “Well, you know, we can keep him locked up for maybe a year, but after that he’ll be out.” So he said to me, “I don’t know if we’re doing the right thing, if there’s something right or wrong in our strategy here, because inevitably we’re just delaying. We’re just delaying the inevitable problems down the road.” So I think we would strongly urge the candidates to consider that opportunity cost of spending another $600 billion or $900 billion.
JOSEPH STIGLITZ: Can I pick up on the point that you made that we’re spending about one-out-of-two dollars spent in the world on defense? The point is that we are now spending so much money on weapons that don’t work against enemies that don’t exist. The Cold War is over, but we haven’t really changed our defense posture, how we’re spending money. We could spend less and get more security. So it’s not a question of security; it’s a question of spending money intelligently.
JUAN GONZALEZ: But isn’t it true that throughout the history of the United States wars have been the means by which certain sectors of the American economy actually get government financing to develop their technology that they then turn into profit once the war ends? And, you know, for instance, when I see Boeing creating the virtual fence along the border, where did they get that technology from, if not from back in the Persian Gulf War and previous wars that they developed, so that it’s almost like the arms manufacturer is looking for government subsidy for their new technological development?
JOSEPH STIGLITZ: Well, the question is, it would be much more efficient to directly subsidize them to develop the technologies that we need right now. There’s a, you know, major global problem of global warming. If they use some of the ingenuity that they’ve been using to create smart bombs to create smart technologies, clean technologies, we’d all be a lot better off. And so, you know, I think direct spending makes a lot more sense than doing it this very roundabout way.
JUAN GONZALEZ: But you wouldn’t get the taxpayers to finance it, unless you had an enemy that you had to unite against on the exterior.
JOSEPH STIGLITZ: Well, no, the world — there is a problem of saving the planet now. I mean, I think that’s a pretty big threat.
AMY GOODMAN: Joe Stiglitz, you mentioned Halliburton. Talk more specifically about these corporations. Of course, Halliburton, the Vice President’s company.
JOSEPH STIGLITZ: Well, I mean, one of the big issues here is how you elect contracts. You know, I think, as I said earlier, that privatizing the military makes no sense. You know, there are certain things where the private sector should be involved, certain things that should be run by the government. And throughout history, one of the things which is not good to privatize, one of the things that should be run by the government, is the military. It’s not a voluntary interaction. You know, if you produce a good that the consumers want, that’s where the private sector does very well. But the interactions between Blackwater and the people in the street in Iraq are not voluntary interactions. It’s not where the market works well. So, in general, privatizing of the military makes no sense.
But if you’re going to do privatizing, you want to do it efficiently. And there, you want to have competitive bidding. But the Bush administration has over and over again used sole-source contracting. And it’s even worse than that. Often these are cost-plus contracts. So they’re sole-source, cost-plus. And cost-plus, what does that mean? They get reimbursed for whatever they spend, plus. Meanwhile, one of the things that we discovered was that the number of auditors has actually gone down, so while the number of contracts has gone up — estimated over 100,000 contractors — the number of auditors has gone down. And not surprisingly, the incidence of waste, fraud, corruption has gone way up. And you see that in the stock market price. You know, if this were a competitive market, they wouldn’t be making much profits. But the fact that their stock prices have done so well says there have been a lot of profits in this war.
LINDA BILMES: Yeah, and if I could jump in here.
AMY GOODMAN: Linda Bilmes.
LINDA BILMES: This raises one of the other real problems with the war, which is how it has been financed. The administration has — and this is the first war that has ever been financed in this way — has financed the entire war with these so-called emergency supplementals. Now, emergency supplementals circumvent the normal budget process and the normal budget caps, and they’re intended for situations like Hurricane Katrina, where you want to get the money so quickly to the area that you don’t have time to actually scrutinize the money in detail. But we’ve had now five years, twenty-five emergency supplementals. Now, what does this mean? This means that the budget folks of both parties in the Congress and in the Congressional Budget Office and other places don’t have time to actually look at, well, for this particular task, how much does it cost to get it done? So it’s absolutely inevitable that you would have profiteering, corruption, cost overruns for these huge contracts, which are let with virtually no scrutiny whatsoever.
AMY GOODMAN: You end your book, The Three Trillion Dollar War: The True Cost of the Iraq Conflict, with the chapter, “Learning from Our Mistakes: Reforms for the Future.” What are the remedies right now, Joe Stiglitz?
JOSEPH STIGLITZ: Well, there are actually a whole set of reforms. We divided them into two categories: one, in terms of how we treat our veterans; the other one is how we approach the budgetary process, the information process. So, for instance, one of the recommendations is, you know, if you’re going to go fight a war that lasts for more than a year, you can’t use emergency appropriations. If you’re using emergency to statement things aren’t going the way you planned, you ought to give a statement to Congress: why were we wrong? Where did we go wrong in our plans?
Secondly, we think it’s absolutely imperative that Americans have the information to know what this is costing them. It doesn’t determine whether you make — how you — you know, whether you go to war or not, but it’s a critical piece of information, and it has to be comprehensive, It has to be based on not only the cost today, but the cost in the future, the cost to the veterans, disability, the costs hidden in all of the other departments. Social Security Disability payments are going to be going up by tens of billions of dollars. So you want a comprehensive budgetary cost. But you also want to know what are the costs to the rest of the economy, because there’s an incentive to push costs from the budget to the rest of society. If the VA doesn’t have enough money, people are going to wind up, if they can afford it, buying some of this themselves. Because you save money on body armor, families that could have went out and bought the body armor. The cost to our society is the same. In fact, the cost to society is worse, forcing it onto individuals, because some of them couldn’t afford it.
AMY GOODMAN: You support an immediate withdrawal from Iraq, yet you say you would support a Democrat candidate for president; why? That’s voting against your views. They’re not calling for immediate withdrawal.
JOSEPH STIGLITZ: Well, the point is, we have a choice between what I would call a quick withdrawal and being there for a hundred years. If we have a hundred years, this $3 trillion number is just — you know, we’re assuming here a fairly quick scale-down of our activities over the next decade. But we’re saying by 2017, that’s the end, whereas — and when we do our $3 trillion calculation, if you’re talking about McCain’s, you know, a hundred year — we’re there for a hundred years, we’re talking about an order of magnitude larger. And I think the critical issue in writing this book is, one has to make that decision, is, say, if we’re going to be here for another hundred years, is that the best way of increasing our overall security?
AMY GOODMAN: I want to thank you both for being with us on this national broadcast exclusive. Joseph Stiglitz and Linda Bilmes’s book is The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Joseph Stiglitz, the Nobel economics laureate, professor at Columbia University; Linda Bilmes, professor at Harvard’s Kennedy School of Government.
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