Economic Costs Summary: $4.4 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 2014.

What was the Department of Defense allocated for war? The Pentagon's total appropriation for war from 2001-2011 in current dollars was $1.4 trillion. The DOD was also allocated additional funds for its "base" budget. This totals approximately $836 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.

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 US paid for the wars so far? The US 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 US budget deficit, increased the national debt, and had other macroeconomic effects, such as raising interest rates. The US must also pay interest on the borrowed money. The interest paid on Pentagon spending alone, so far (from 2001 through FY 2013) is about $316 billion in current dollars.

The US also increased spending on homeland security by more than $470 billion. 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 US veteransThe US has already spent nearly $160 billion for both medical care and disability for the more than two 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 US has incurred obligations by fighting the wars.  For example, the US 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 more than an estimated $1 trillion.

Unless the US 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 over $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 June 2014)


In constant dollars

[1] Includes spending for military reset, medical care, and base related overseas contingency operations in Trans Sahara and Horn of Africa and procurement. Excludes Operation Noble Eagle.

[2] Includes additional administrative expenses for VA and costs of veterans medical and disability in the VA and through Social Security.

[3] Calculated on DOD and State Department Expenditures for Iraq, Afghanistan and ONE through FY2013.

[4] Totals may not add due to rounding.

[5] Estimate of Net Present Value (NPV) for future spending for Veterans obligations incurred through 2014.  Does not include all future veterans, those still in active duty.

[6] Estimated using 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 US economy, interest rates, government fiscal policy, and national saving.