Economy & Trade, Headlines, Middle East & North Africa, North America

FINANCE-US: As Iraq Costs Soar, Contractors Earn Record Profits

Eli Clifton

WASHINGTON, Aug 2 2007 (IPS) - In a report to lawmakers earlier this week, the non-partisan Congressional Budget Office found that the war in Iraq could cost U.S. taxpayers over a trillion dollars when the long-term costs of caring for soldiers wounded in action, military and economic aid for the Iraqi government, and ongoing costs associated with the 190,000 troops stationed in Iraq are totaled up.

U.S. soldiers on patrol in southwest Baghdad, Jul. 28, 2007. Credit: DoD/Staff Sgt. Dennis J. Henry Jr., U.S. Air Force.

U.S. soldiers on patrol in southwest Baghdad, Jul. 28, 2007. Credit: DoD/Staff Sgt. Dennis J. Henry Jr., U.S. Air Force.

White House Office of Management and Budget Director Mitch Daniels’ 2003 estimate that the war in Iraq could cost 50-60 billion dollars stands in stark contrast to the 500 billion dollars already allocated to the conflict in Iraq and reconstruction projects.

“We are now spending on these activities more than 10 percent of all the government’s annually appropriated funds,” Robert A. Sunshine, the assistant director for budget analysis, said Tuesday.

In Sunshine’s report to Congress, he showed that in an optimistic scenario – the U.S. reduces its troop levels in Iraq to 30,000 by 2010 – the war will still cost taxpayers an additional 500 billion dollars.

In a less optimistic scenario in which 75,000 US troops remain in Iraq over the next five years the cost to the U.S. government would total an additional 900 billion dollars.

“This is the consequence of going to war haphazardly and without a plan. We’re at a point where we look at how much is approved by congress, we’re at 450 billion dollars. Then the 116 billion dollars requested by the [George W.] Bush administration puts the total at over 556 billion dollars,” Brian Katulis, senior fellow at the Centre for American Progress, told IPS.

“The Vietnam war when inflation adjusted cost 652 billion dollars,” he added.

While Congressional Budget Office reports showed a gloomy outlook for U.S. costs in Iraq, last week several of Washington’s biggest defence contractors released profit reports disclosing huge growth in divisions benefiting from military contracts in Iraq and Afghanistan.

Northrop Grumman’s information and services, and electronics divisions showed 15 percent and 7 percent growth, respectively, for the second quarter compared to the same fiscal quarter last year.

General Dynamics’ combat systems unit experienced a 19 percent growth in sales due to continued demand for tanks and armored vehicles while Lockheed Martin announced a 34 percent rise in profits to 778 million dollars.

Lockheed’s newest revenue projections are now as high as 41.75 billion dollars.

“2008 [military related] appropriations are the highest it’s ever been. 2007 was the highest before that. War spending continues to go on. In addition [contractors] are cashing in on increasing military budgets that have nothing to do with the war, such as the F-22 Raptor and large scale weapon systems,” Miriam Pemberton, research fellow at the Institute for Policy Studies, told IPS.

“Not only has this recent quarter been profitable, they have now locked in spending that will keep those profits going,” she said.

The increase in profits by defence contractors can be correlated to only a portion of the current and predicted spending associated with the war in Iraq.

The Congressional Budget Office’s report estimated that medical costs will exceed 9 billion dollars if the U.S. stations 30,000 troops in Iraq, but could exceed 13 billion dollars if 75,000 troops remain in Iraq over the next several years.

Training of police and soldiers in Iraq and Afghanistan over the next decade is estimated to cost at least 50 billion dollars.

Estimates for rebuilding and diplomatic expenses suggest that the U.S. government will need to spend at least 20 billion dollars through 2017, outside of military expenses.

Costs in coming months may continue to rise as the military will require funding for the troop surge and for the purchase of armoured vehicles for the additional troops and to replace vehicles unsafe due to the threat posed by roadside bombs.

In January 2006, Joseph Stiglitz, a Columbia University professor who won the Nobel Prize for economics in 2001, and Linda Bilmes, a Harvard budget expert, released a report estimating that the cost of the war in Iraq may come to more than 2 trillion dollars when costs associated with lifetime disability and healthcare for injured soldiers and the overall effect on the economy are taken into account.

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