Cost of US military operations in Afghanistan and Iraq

Since the terrorist attacks of September 11, 2001, the United States Congress has allocated some US$50 billion from the national budget for military operations in Afghanistan and US$100 billion for operations in Iraq. These figures represent the combined cost to the Department of Defense of conducting those operations until the end of September 2004, including the initial build up of US forces, the conventional combat phases of the two wars and the ongoing ‘stability’ operations that continue to be carried out in both countries. They do not include funding for reconstruction. Since US troops are expected to remain in Iraq and Afghanistan next year, more funding will clearly have to be provided to cover those costs as well.

When the Bush Administration submitted its fiscal year 2005 budget request for national defence at the beginning of February 2004, it decided not to include funding for these future operations. The US$423 billion included in the regular annual allocations request is intended to cover the cost of modernising the US military, staffing and operating it at peacetime levels. It will not be required to absorb the extra costs incurred as a result of on going military operations in Iraq and Afghanistan. Those costs will have to be covered through an emergency supplemental appropriation, which the Administration expects to submit to Congress in January 2005.

However, there are already serious concerns about the long-term sustainability of the Bush Administration’s current defence plan. In February 2004, the non-partisan Congressional Budget Office (CBO) published its concise description of the US Department of Defense’s (DoD’s) plans for the next eighteen years. An examination of the cost estimates provided by the CBO, combined with the findings of its analysis of the President’s overall federal budget submission, reveal that if the current defence plan experiences the same rates of cost increase in weapons purchase and operations and support activities as they have historically:

• the administration’s defence budget projections may understate the cost of the current defence plan (including military operations) by some US$765 billion over the coming decade.
• if added to the budget, these extra costs would lead to additional spending of about US$700 billion over the next 10 years.
• If this additional spending were not offset by tax increases, or cuts in entitlements or domestic spending, they would increase the size of the federal debt by some US$885 billion (US$700 billion in program costs plus US$185 billion in related interest costs) above the Administration’s most recent projections.

Worsening Deficit Forecasts

These increased budget pressures come on top of a dramatic worsening in the state of the federal budget over the last three years. In early 2001, the CBO projected a 10-year surplus of about US$5.6 trillion between 2002 and 2011. By contrast, their baseline estimate now projects deficits totalling above US$2 trillion over the next decade.

Unfortunately, it is likely that the outlook will deteriorate in coming years. In addition to further increases in funding for defence, in its most recent budget request, the Administration has proposed to maintain the tax cuts of 2001 and 2003 whilst increasing funding for homeland security. The CBO have estimated that this proposed budget would push total federal deficits to some US$2.75 trillion over the 2005-2014 period, and keep the government in deficit throughout the entire decade. The unbudgeted cost growth in DoD programs and activities discussed above, however, suggest that this may be an under-estimate. Fully implementing the Administration’s plans could in fact cause federal deficits to reach some US$3.6 trillion over the coming decade. Deficits of this size could, of course, have a significant impact on the US economy over the long run and have a ripple effect on economies in other parts of the developed and developing world.

Steven M. Kosiak

Steven M. Kosiak is the Director of Budget Studies at the Center for Strategic and Budgetary Assessments (CSBA), a Washington, DC-based think tank that focuses on military strategy and budget issues.

See also

Cost Growth in Defense Plans, Occupation of Iraq and War on Terrorism, Could Add $900 Billion to Projected Deficits, Steven M. Kosiak, March 2004 www.csbaonline.org/4Publications/Archive/U.20040309. CostGrowth/U.20040309.CostGrowth.pdf

One Year Later: The Cost of Military Operations in Iraq, Steven M. Kosiak, March 2004 www.csbaonline.org/4Publications/Archive/U.20040318.
OIFSpending/u.20040318.OIFSpending.pdf

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