Fudging The Numbers

The season of award shows celebrating Hollywood’s favorite fantasies of the year got underway this week. Back here in the nation’s capital, we’re heading into budget season. Yet, before the Bush administration kicks things off with its 2007 budget request in early February, it seems bent on proving that, in the fantasy department, it can go head-to-head with Hollywood.

Last week, while the president was spinning tall tales of steady progress in New Orleans and in Iraq, his budget office deputy was explaining away the latest rise in the federal deficit–now projected to rise over $400 billion this year. This was just a temporary setback, the Office of Management and Budget’s Joel Kaplan said, caused mostly by unforeseen spending on Katrina. He expressed hope that the deficit would soon be back on its “downward trajectory,” on track to keep the president’s promise of reducing the deficit by half by 2009.

Meanwhile, the chair of the Senate Budget Committee from the president’s own party went off message when he referred to an “expected increase” in the budget deficit. It would be hard–outside of Hollywood and the White House–to see anything else, given the plans for yet another round of tax cuts and for victory in Iraq.

It is an extreme oddity of our budget process that military spending is computed in a way that excludes spending on the wars we are currently fighting. In its latest “Budget and Economic Outlook” projection for the next 10 years, the nonpartisan Congressional Budget Office (CBO) shows what happens when you factor those costs in. They assume the scenario the Defense Department adheres to most often: troop levels in Iraq remaining steady at about 138,000 through the coming year and then declining to about 50,000 for the foreseeable future. If the costs of that deployment are added to the regular military budget, according to the CBO, from 2006 to 2015 the total deficit will rise from $855 billion to $1.4 trillion. And at the end of that period, our public debt will be absorbing a whopping 32 percent of our GDP. That’s like bringing home a $40,000 salary, and spending a third of it paying the interest on your credit card.

Or take the analysis by the nonprofit, nonpartisan Center on Budget and Strategic Assessments (CSBA). They recently examined the gap between the administration’s budget estimates of military spending included in last year’s budget, and CBO’s projections, including war spending and likely cost growth in weapons and other military programs. They also add in the interest payments on the military portion of the debt. Without tax increases or cuts in domestic programs to offset these costs, CBSA’s Steve Kosiak says, the administration’s defense plans will leave us $920 billion deeper in the hole than the administration is willing to admit.

Add in the Iraq war, in other words, and leave the administration’s military spending plans in place, and in 10 years we’ll be staring at a deficit of $5.3 trillion.

That prospect’s not dire enough? Now let’s bring in Nobel Prize winning economist Joseph Stiglitz. He and Linda Bilmes of Harvard’s Kennedy School assigned themselves the project of calculating what the war is really costing us. In their paper released this month, they call the costs already appropriated by Congress explicitly for the war, and those projected by CBO for the next decade, “the tip of a very deep iceberg.”

Looking below the surface, they find additional costs such as lifetime care for the 20 percent of those wounded in Iraq whose brain injuries will require it. In calculating the (incalculable) value of the American lives lost, they used the standard applied in government safety regulations for a prime-age male–about $6 million–rather than the much lower standard DoD death benefit and life insurance payments to survivors. This brings the cost of American soldiers already killed in the war to about $12 billion. Their accounting also includes the increased costs of recruiting, and the depreciation and destruction of military equipment. Such calculations bring the war’s real costs to an estimated $1.2 trillion.

Then they incorporate other matters such as the opportunity costs of foregoing other expenditures, especially in the public sector, that could have been used to promote economic growth. They also look at the doubling in the price of oil since the war began, conservatively attributing 20 percent of this effect to the war. While acknowledging and explaining the difficulties in quantifying these macroeconomic factors, they argue that they should not be ignored, and if they are not, the war’s real cost, pursued according to the administration’s plan, will be closer to $2.2 than $1.2 trillion.

Even these sums do not tell the whole story of this war’s costs. Stiglitz and Bilmes mention several they have left out, including the planning of the war (estimated by the Congressional Research Service at $2.5 billion) and, especially, all costs borne by the Iraqis themselves.

To the extent that Congress allows itself to be drawn into the administration’s fantasy world of steady progress and deficit reduction, this congressional session might qualify for an Academy Award. Unfortunately, these fantasies will have real consequences–for all of us and those who come after us.

Miriam Pemberton is Peace and Security Editor of Foreign Policy In Focus at the Institute for Policy Studies.