What Did the Iraq War Cost? More Than You Think.

Vets' care, foreign policy implications, budget woes add to Iraq War pricetag.

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By its very definition, war spending—indeed, any government spending—improves GDP, as anyone who has ever taken an economics 101 course knows. Spending on World War II is credited with helping the U.S. decisively climb out of its depression slump. Likewise, the Iraq War helped the economy in some ways. But to many experts, the costs will far outweigh and outlast the benefits.

As U.S. operations in Iraq end, tallying up the costs and benefits of a nine-year ordeal is a daunting task. Estimates on Iraq War spending vary. The Congressional Research Service has put the Operation Iraqi Freedom pricetag at $806 billion. President Obama said that the Iraq War would cost over $1 trillion, all told. Either way, compared to past U.S. conflicts, spending on the Iraq war has been relatively small—at its height, spending on WWII helped drive government spending to 42 percent of GDP, according to the Congressional Budget Office. At its height, operations in Iraq cost around 1 percent of GDP.

But the long-term costs will well exceed this total, and the budgetary consequences are far-reaching.

On the positive side, the Iraq War did bolster the economy in some ways.

[Debate Club: Was the Iraq War Worth It?]

"It reduced unemployment compared to what it otherwise would have been" both with military and contractor jobs, says Stan Collender, a senior partner at Qorvis Communications who has also worked on both the House and Senate Budget Committees.

[Read analysis of the latest jobs report.]

According to figures from the Commerce Department, GDP has grown at an average quarterly rate of 4.1 percent since the start of 2003, when the Iraq War began. While the war's contribution to that growth was likely small, Collender believes it is significant.

"[Troops] were getting hazardous duty pay, which means they were sending more money home. We weren't really on a wartime economy, certainly not compared to Vietnam or WWII, but you can't say that it wasn't an insignificant part of economic or GDP, given where the economy has been."

Coming to a hard figure on the costs versus benefits of the Iraq War may indeed be impossible—particularly because untangling those costs from those of the simultaneous war in Afghanistan is difficult. However, it is clear that the costs of the war will ultimately go far beyond those of the costs of combat and reconstruction.

One key way that the war's costs will outlast its operations is in veterans' health care. A recent paper from the Center for American Progress estimates that the projected total cost of veterans' healthcare and disability will run between $422 billion and $717 billion.

Columbia University Economics Professor Joseph Stiglitz and Linda Bilmes, a lecturer at Harvard's Kennedy School of Government, have also argued that fighting in Iraq diverted resources from Afghanistan, prolonging conflict in that country. All told, Stiglitz and Bilmes have put the cost at well over $3 trillion.

Whatever the cost, some experts say that it wasn't what was financed in the Iraq War but how it was financed that is problematic.

"The problem is not the impact on the GDP. It basically was financed through debt, which is a completely different issue," says Anthony Cordesman, the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies.

"It's really the decision of how to pay for it that has had such a negative effect on the U.S. economy. Because unlike any previous war in U.S. history, this was paid for entirely by debt at the same time that we cut taxes," says Bilmes. While entitlements and other mandatory spending make up a majority of annual federal budgets and contribute heavily to deficits and debt, the Iraq War also contributed significantly. The Center for Budget and Policy Priorities has estimated that the wars in Iraq and Afghanistan, together with the Bush tax cuts, will account for almost half of the projected $20 trillion debt in 2019.

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Cordesman stresses that asking "what if" can be an exercise in futility. Calculating the opportunity cost of engaging in the Iraq War, as opposed to however else government might have spent (or not spent) the same amount of money, "borders on the absurd," he says, as there are countless alternatives to any option. "The opportunity cost of every decision you take is almost inevitably suboptimal," he says.