Saturday, March 01, 2008
Americans already instinctively understand it. That's why, when recently polled about the most effective policy for overcoming the recession, they selected withdrawing the troops from Iraq as their first choice, ahead of other more conventional economic stimulus plans.
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.