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Debating the Cost of the Iraq War

Interviewees: Joseph E. Stiglitz, University Professor, Columbia University
Robert D. Hormats, Vice Chairman, Goldman Sachs (International)
Interviewer: Lee Hudson Teslik, Assistant Editor, CFR.org
March 10, 2008

Few economic debates rouse passions like discussion of the costs of the Iraq war. Experts continue to disagree whether the five-year-old war will have a positive or negative economic impact, and what the scale of that impact will be. Dollar estimates of the war’s total costs vary dramatically. A new book by the Nobel Prize-winning economist Joseph Stiglitz promises to fuel the debate. The book estimates the Iraq war could cost the United States $3 trillion or more—numbers well above the Congressional Budget Office’s estimates. Stiglitz’s figures have drawn criticism from analysts including CFR’s Amity Shlaes. Here he defends his figures, saying he and co-author Linda Bilmes used conservative numbers and that total costs could in fact tally as much as $5 trillion.

Another expert with a book out on war costs, Goldman Sachs International Vice Chairman Robert Hormats, puts the discussion in context by looking at historical U.S. war spending. Hormats says the costs of the Iraq war can be seen two ways. As a percentage of U.S. gross domestic product, he says, the Iraq war is much cheaper than other wars, but it also presents several long-term costs not accounted for in official cost estimates. Hormats and Stiglitz agree that a greater effort should be made to make the discussion of war costs more transparent to U.S. citizens, many of whom aren’t aware of the costs because war expenditures have been funded through budget supplements and paid for using debt.


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