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The Economic Costs of the War in Iraq


Scott Wallsten


Technology Policy Institute

Katrina Kosec


Stanford University

September 2005

AEI-Brookings Joint Center Working Paper No. 05-19

Abstract:     
Government policies are routinely subjected to rigorous cost analyses. Yet one of today's most controversial and expensive policies - the ongoing war in Iraq - has not been. The $212 billion allocated by the U.S. Treasury has been widely reported. But the real, direct economic costs include more than budgetary allocations. Other costs include lives lost, injuries, and lost civilian productivity of National Guard and Reserve troops mobilized for the conflict. The conflict, however, also has generated cost savings, especially in terms of resources no longer being used to enforce UN sanctions and people no longer being killed by Saddam Hussein's regime.

In this paper we monetize these direct costs and avoided costs of the war in Iraq, both todate and the total expected net present value of costs through 2015. Our estimates are imprecise. The data are not of high quality and every calculation requires a number of assumptions. In addition, we do not calculate indirect effects of the conflict, such as its impact on oil prices or other macroeconomic impacts, or certain intangibles, like the benefits of a stable democratically elected government in Iraq, should one emerge. Nonetheless, our best estimates suggests that the direct economic costs to the U.S. through August 2005 are about $255 billion, about $40 billion to coalition partners, and $134 billion to Iraq. These estimates suggest a global cost to date of about $428 billion. The avoided costs, meanwhile, are about $116 billion. We estimate that the expected total net present value of the direct costs through 2015 could be $604 billion to the U.S., $95 billion to coalition partners, and $306 billion to Iraq, suggesting a global total expected net present value of about $1 trillion. The net present value of total avoided costs, meanwhile, could be about $429 billion.

Number of Pages in PDF File: 31

Keywords: Iraq, war, costs, macroeconomics

JEL Classification: H56

working papers series


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Date posted: November 15, 2005  

Suggested Citation

Wallsten, Scott and Kosec, Katrina, The Economic Costs of the War in Iraq (September 2005). AEI-Brookings Joint Center Working Paper No. 05-19. Available at SSRN: http://ssrn.com/abstract=848408 or http://dx.doi.org/10.2139/ssrn.848408

Contact Information

Scott Wallsten (Contact Author)
Technology Policy Institute ( email )
1401 Eye St. NW
Suite 505
Washington, DC 20005
United States
HOME PAGE: http://www.wallsten.net
Katrina Kosec
Stanford University ( email )
Stanford, CA 94305
United States
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