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War's cost, while not out of line, weighs on future

The war eats up less than 1 percent of GDP, but it's all paid for with debt.

By ASSOCIATED PRESS
Published March 18, 2007


NEW YORK - After four years, America's cost for the war in Iraq has reached nearly $500-billion - more than the total for the Korean War and nearly as much as 12 years in Vietnam, adjusting for inflation. The ultimate cost could reach $1-trillion or more.

A lot of money? No question.

But even though the war has turned out to be much more expensive than Bush administration officials predicted on the eve of the March 2003 invasion, it is relatively affordable - at least in historical terms.

Iraq eats up less than 1 percent of the nation's gross domestic product, compared with as much as 14 percent for Vietnam and 9 percent for Korea.

"I think it's hard to argue it's not affordable," said Steven M. Kosiak, director of budget studies at the Center for Strategic and Budgetary Assessments, a defense think tank in Washington, D.C.

The problem, he and other budget analysts argue, isn't so much the overall cost of the Iraq war. It's the way the government has chosen to pay for it.

For one thing, war funding for both Iraq and Afghanistan has come in the form of supplemental appropriations outside the normal federal budget process. Typically these "supplementals" are used to pay for unexpected emergencies such as Hurricane Katrina, and they receive much less scrutiny from Congress.

President Truman quit asking for supplementals after the first year of the Korean War. The Vietnam War started appearing in the federal budget beginning in 1966, the year after regular troops were committed.

But after four years the Iraq war is still being funded with supplementals. In December, congressional budget leaders from both parties sent a letter to President Bush asking him to start paying for Iraq through the traditional budget process. The administration has done that in its 2008 budget year request - but not before asking for another $100-billion supplemental to keep the war going through the end of this year.

And during previous wars, presidents have asked Americans to make tough sacrifices in order to help pay for the war effort, said Robert Hormats, a managing director at Goldman Sachs and author of the forthcoming book The Price of Liberty: Paying for America's Wars.

"No such thing has occurred" during this war, Hormats said.

Instead, the war is being paid for with debt.

Administration officials downplay the war's cost and the growing defense budget, which will be larger by the end of this year than at any time since World War II. Defense Secretary Robert Gates pointed out that defense and war spending is still only about 4 percent of the nation's total economic output.

But with projections that the costs of Social Security and especially Medicare are about to go through the roof, the war is contributing to a fiscal problem that is expected to become increasingly apparent over the course of the next decade.

And the war's costs will continue to accrue long after the last U.S. troops finally leave Iraq. A recent study by Linda Bilmes of Harvard University's Kennedy School of Government put the total cost of providing medical care and disability benefits to veterans of Iraq and Afghanistan at $350-billion to $700-billion.

In a study co-authored with Columbia University economist and Nobel laureate Joseph Stiglitz, Bilmes estimated that the real price of the Iraq war, when you add up spending to date, future costs and economic impacts such as elevated oil prices, is well over $2-trillion.