Economic Costs Summary: $3.1 Trillion and Counting

There are at least three ways to think about the economic costs of these wars: what has been spent already, what could or must be spent in the future, and the comparative economic effects of spending money on war instead of something else.


Spending to Date: How much have the wars in Afghanistan, Iraq and Pakistan since 9/11 cost?   

The Costs of War economics research team used the most up-to-date publicly available figures at the time of their writing to calculate the spending on the wars from 2001 through fiscal year 2013. 

What was the Department of Defense allocated? 
The Pentagon's total allocation for war from 2001-2011 in current dollars was $1,406 billion. The DOD was also allocated additional funds for its base budget.  This totals between $706 and $780 billion, some portion of which has been used for war expenses (such as increased medical care for active duty soldiers), and all of which might be counted as having been appropriated as a result of the war climate in Washington. 

War related spending is also found in the foreign assistance budget, known on Capitol Hill as "International Assistance" spending. Aid to Afghanistan, Iraq and Pakistan grew because of the war to $104 billion in current dollars.   Much of that spending by the State Department and USAID directly supported military efforts.

How has the U.S. paid for the wars so far?  The United States paid for past wars by raising taxes and or selling war bonds.  The current wars were paid for almost entirely by borrowing. This borrowing has raised the U.S. budget deficit, increased the national debt, and had other macroeconomic effects, such as raising interest rates. The U.S. must also pay interest on the borrowed money. The interest paid on Pentagon spending alone, so far (from 2001 through FY 2013) is about $259 billion in current dollars. 

The U.S. also increased spending on homeland security by more than $455 billion beyond the levels already in place.  We include this as excess spending on homeland security that occurred as a result of the war on terror. Considered by many an important part of domestic mobilization for the wars, there continue to be questions about the effectiveness of this spending.

What has already been spent to care for the medical and disability needs of U.S. veterans?  The U.S. has already spent $135 billion for both medical care and disability for more than a million veterans of these wars. Each day, more veterans continue to apply to receive their benefits.

Obligations for Future Spending: The costs of war don't end when the fighting stops.  Specifically, the U.S. has incurred obligations by fighting the wars.  For example, the U.S. is obligated to pay the future medical and disability costs of veterans. As in past wars, medical and disability costs will peak in about 30 to 40 years, totaling an estimated $754 billion.

Unless the U.S. immediately repays the money borrowed for war, there will also be future interest payments.  We estimate that interest payments could total about $1 trillion dollars by 2023, or $7 trillion by 2053.

Opportunity Costs of War Spending: What could the economy look like if we had not spent that money on war?  Were jobs lost or gained by war? Military spending does produce jobs.  But spending in other areas could produce more jobs.  

Military spending has also affected investment in public assets and infrastructure.  While investment in military infrastructure grew, investment in other, non-military, public infrastructure did not grow at the same rate. (Text updated as of March 2013)


In constant dollars

[1] Includes appropriations for Afghanistan, Iraq and Operation Noble Eagle.

[2] Average of Bilmes and Wheeler estimates of Additional Pentagon Spending attributable to the wars. Costs include military reset, operations in OEF operations in Africa, increases in pay and medical expenses.

[3] Includes appropriations for Afghanistan, Pakistan and Iraq.  Does not include appropriations for Uzbekistan.

[4] Assuming that the US Congress Overseas Contingency Operations appropriations for the DOD and State/USAID for Afghanistan and Pakistan are roughly at 2008 (pre-surge levels) and that Iraq appropriations continue to decline.  The US is projected to have 32,000 troops in Afghanistan at the end of February 2013 and the U.S. may keep as many as 8,000 - 10,000 troops in advisory and support roles in Afghanistan for some years beyond the withdrawal of combat forces after 2014.

[5] Net Present Value for current veterans.

[6] Estimated using a Solow model to model feedbacks from deficit-financed government defense spending into current GDP, the capital stock, and interest rates.  The severity of the burden of war-related interest payments will depend on many factors, not least, the overall future health of the U.S. economy, interest rates, government fiscal policy, and national saving.