The High Cost of the War on Terror

With terrorism and terrorists making "front page news" in the world's media on a seemingly endless basis, I started wondering about how much the "War on Terror" had cost the United States since September 11, 2001.  Fortunately, Professor Neta Crawford at Boston University released a report in mid-2014 that looks at the cost of the wars in Afghanistan, Iraq and Pakistan through to the end of fiscal 2014.

Let's open with George W. Bush's speech from September 20th, 2001 where he announces the beginning of the War on Terror:

The author opens by noting that it is almost impossible to tally the entire cost of war, largely because it is impossible to assess the long-term human toll of conflict.  That said, the expenditures that are recorded on government ledgers can provide us with a reasonably accurate total of how much has been spent on the three phases of the War on Terror. 

Here is a table which summarizes the spending on each of the major categories from September 2001 to fiscal 2014:

To the end of fiscal 2014, Washington has both spent and taken on future spending obligations that total $4.4 trillion, excluding what has been requested for fiscal 2015.  This total does not include all of the budgetary and economic costs associated with the wars in Afghanistan and Iraq; while the author estimated the number of deaths that could be directly attributed to the violence of the conflict, it does not include the deaths of people that were killed indirectly because their nation's infrastructure (i.e. hospitals etcetera) was damaged and destroyed.  In the case of Iraq, the total number of civilian deaths is estimated to be in the hundreds of thousands.

There are several components to the spending on the War on Terror:

1.) Spending on the Overseas Contingency Operations.

2.) Increased spending on the Pentagon's base budget.

3.) Increased interest on the debt accumulated from spending on the War on Terror.

4.) Future Military and Veterans-related spending.

Let's look at the four components in more detail.  The Executive Branch and Congress describe the wars as Overseas Contingency Operations (OCO).  Here is a figure that breaks down the costs associated with the Overseas Contingency Operations for both Afghanistan (in red) and Iraq (in blue):

In total, direct spending from fiscal 2001 to fiscal 2014 on the operations in Afghanistan and Iraq have totalled $1.591 trillion with spending of $718.6 billion on Afghanistan and $823.8 billion on Iraq.  In addition, $19.3 billion was spent on U.S. subsidies to Pakistan's military for their operations against militant organizations including al-Qaeda and the Taliban.  

Fighting a war also impacts the base budget for the Pentagon.  While Congress made special appropriations for the Afghanistan and Iraq wars, the base budget for the Pentagon also increased; this additional base budget spending allows the Pentagon to procure new weapons, pay for the salaries and health benefits of active duty soldiers, complete military construction projects etcetera.  Prior to the attacks of September 11, 2001, the Pentagon's base budget was not expected to grow.  The author quotes two other studies which show that the declaration of the War on Terror led to an increase of between $796 billion and $876 billion to the Pentagon's base budget.

In addition, there are war-related costs that occur outside of the military budget, particularly the costs associated with the more than 50,000 U.S. soldiers that were officially wounded in battle who required medical care.   Additional VA medical costs are estimated to be $28.01 billion, Social Security disability costs are estimated to be $5.08 billion, VA disability costs are estimated to be $41.3 billion and other VA costs are expected to be $86 billion.

Here is a table that summarizes the additional war-related spending of $996.5 billion:

It is also important to note that the War on Terror was funded by taking on additional federal debt rather than increasing revenue through the imposition of higher taxes or spending cuts.  This means that there will be increased interest owing on the War on Terror debt.  As of 2014, this increased interest cost totalled approximately $316 billion and, it is estimated that the cumulative interest costs related to the $1.5 trillion of direct military spending on the War on Terror from 2001 to 2003 over the next 40 years will add more than $7.9 trillion to the national debt.

Let's now look at the costs associated with the care of the veterans of the wars in Afghanistan and Iraq.  Veterans of these wars often return with multiple and complex traumas that will require a greater and greater degree of care as the veterans age.  In 2013, a study estimated that these costs would reach $836 billion between 2014 and 2053 as shown on this table:

To summarize, here is a table showing the costs to date and the future costs of the wars in Afghanistan and Iraq:

It is hard to remember what happened over a decade ago, but in mid-September 2002, President Bush's chief economic advisor, Lawrence Lindsey estimated that the upper bounds of the costs of the War on Terror would be in the $100 to $200 billion range or 1 to 2 percent of GDP which was around $10 trillion in 2002.  At the time, according to the Wall Street Journal, Mr. Lindsey noted that the spending wouldn't have an appreciable effect on interest rates or add much to the federal debt, observing that one year's worth of additional spending was nothing in the grand scheme of things.   As late as 2007, the Congressional Budget Office projected that U.S. operations in Afghanistan and Iraq and other activities related to the War on Terror would cost between $1.2 trillion and $1.7 trillion from fiscal 2001 to fiscal 2017 as shown on this table:

The past and future costs associated with the War on Terror have greatly exceeded even the most pessimistic projections.  The additional debt burden that is placed on future generations by the past spending on the War on Terror will make it difficult for the United States to mount future military interventions should they be deemed necessary.  As has become quite clear since September 2001, there is a very high price to pay for being the world's sole superpower and a target for terrorists around the world.