Facts and Figures

• Estimated cost of invading Iraq: $80-90 billion. [1]
• Cost to Illinois: $3.5 billion.

References

1. The New York Times, July 30, 2002, ``Profound Effect on U.S. Economy Is Seen From a War Against Iraq.'' The Christian Science Monitor, August 19, 2002, ``Iraq War to Carry a High Tab."

1. Cost of an invasion into Iraq: $80-90 billion

The New York Times and The Christian Science Monitor have estimated the cost at approximately $80-100 billion.  (References to the exact articles appear below.)  Their estimates are largely based on the assumption that any current invasion will be roughly comparable in magnitude to US military action during the 1991 Gulf War.  Note that this may be a lower bound since in 1991, US forces moved through Kuwait but did not have to engage in a long term military action in Baghdad itself.  This may be required for a current invasion of Iraq.

1.1 How much would the US have to pay
The New York Times article notes that for the 1991 Gulf War, the US paid only 20% of the bill with US allies picking up the rest of the cost.  However, this time, the article notes, allies have expressed less interest in funding a war.  The article warns that the US should expect to pay the full costs of any such military conflict.

1.2 How much would an invasion cost the 7th Congresisonal District and Illinois?
The cost would be approximately $200 million for the 7th Congressional District and $3.5 billion for the entire state.  Note that this is in terms of federal tax revenue that has to be raised.  It does not address potential cuts in social programs. These might have a particular impact on the 7th Congressional District's needs.

2. Cost of maintaining ``peacekeeping'' troops in Iraq: $20-30 billion/year (or $250-350 billion in today's dollars)

There are one-time costs associated with invading Iraq.  However, given that the Bush Adminsitration has stated that its goals are regime-change, there are long term costs associated with such military actions.  Unless the Bush Adminstration plans to invade Iraq and then leave after one year no matter what happens, there will be the cost of maintaining the sort of regime change which the adminsitration is seeking. 

Using figures from the Center for Defense Information about the costs of maintaining US troops in Asia under non-wartime conditions, we estimate that the cost of keeping troops in Iraq will be approximately $20-30 billion/year. 

In specific, the CDI states that:
 

``According to the Pentagon, the cost of stationing 100,000 troops in Asia is about $8 billion.  However, that is just the bas ecost.  Estimates of the toal cost of stationing the troops, prepositioning equipemtn and preparing for contigencies is roughly $100 billion.''

In addition, it would be helpful to have some estimate of how long occupying troops would be necessary.  As the example in Korea demonstrates, the process can last several decades.

Given the possibility of a long term occupying force in Iraq, we can how much would it cost to pay to maintain such a force year after year.  (Answering this question concerns technical issues such as the present and future values of monies as well as an expected rate of return on one's investments.  For here we offer one calculation based on an expected rate of return of 8% and the assumption that peacekeeping troops will be needed indefinitely.)

The cost of maintaining troops in Iraq (under these assumptions) is approxiately $250-350 billion.

Note that this cost may be far greater than the one-time cost of an invasion.

3.  How will a war affect the economy?

3.1 Increase the deficit and interest rates
Unless the federal government raises taxes to pay for these additional expenditures, the federal deficit will increase.  Interest rates would likely rise.  (We do not estimate here by how much nor what affect this will have on the economy.  We note however, that homeownership and the willingness of businesses to borrow depends heavily on interest rates.)

3.2 Uncertainty of war can affect consumer confidence
The 1991 Gulf War offers some relevant data on this.  Prior to the war, consumer confidence was at approximately 100.  During and shortly after the war, consumer confidence dropped  to 60.  (The Consumer Confidence Index is a statistic which measures the confidence consumers have in the economy in the near future.  It uses a survey which asks consumers what they will expect to be purchasing soon.)

Given that US consumer spending is the single most important engine in driving the US economy, fluctuations in  consumer confidence, especially over a long period, can have significant impacts on the economy.  It's worth noting here that the state of Illinois and Chicago in particular as trasnportation and conventions hubs are hit disproportionately hard by downturns in the economy.  (The exact amount by which Illinois would be affected is worth further investigation.)

3.3 Rising oil prices can depress the economy
Again, data from 1991 is relevant.  Oil prices went from $15 to $34 a barrel in a short period of time.  The affect this had on the 1991 recession is worth keeping in mind.

3.3.1 Strategic Oil Reserve is of limited use
The US maintains a Strategic Oil Reserve.  This reserve, however, contains enough crude oil to last the US only 36 days of its consumption.  Thus, it is of limited use if oil prices remain high over a long period.

4. Alternative strategies to invading Iraq
According to President Bush, the main reason to invade Iraq is to destroy Iraq's ability to use chemical or biological weapons.  If we happen to accept President Bush's claim, there are two issues to consider from our perspective: 1) will invading Iraq put the US at greater risk of a biological or chemical attack from some other source such as al Qaeda? 2) how else can the US protect itself against biological or chemical weapons?

To remark briefly about 1), one can note that an invasion of Iraq might put the US at greater risk of some other biological or chemical attack.  It may also work to boost recruitment campaigns of volunteers to carry out such attacks.  While this is not a foregone conclusion, any analysis of an invasion which did not consider these consequences would simply be ignoring a potential problem here.

As far as the second item is concerned, the Christiam Science Monitor reports that the city of San Jose is ranked number one in preparation against biological or chemical attacks.  The city was able to accomplish this at a cost of $2.4 million for a city of approximately 900,000 inhabitants.  Thus the cost per person is approximately $2.68.  Extrapolating to the cost of getting the entire US to that level of preparation, one arrives at an estimate of $1 billion.  (Even assuming that this is the cost per year, the total cost will be approximately $10 billion as a whole.)

This defensive strategy has the advantage over the option of invading Iraq in that it protects the US against biological or chemical attacks from any source including Iraq or al Qaeda.

The strategy also has the advantage in cost in that it is a small fraction of the cost involved in an invasion.

Using the calculations above, one may estimate that the one time costs of invading Iraq to be $90 billion and the costs of maintaining peacekeeping troops to be $20-30 billion/year ($200-300 billion in the present).  The total cost may be thus: $390-490 billion.  We can compare this to the $1 billion cost of preparing the US for biological or chemical weapons by using the following graphic.

Total cost of invading Iraq (each $ stands for 1 billion dollars):

Total cost of preparing the US for biological or chemical attacks:

Further investigation of these policies, their effectiveness and their costs is warranted..
 

Appendix: Other Facts and Figures

• Estimated cost per year of maintaining ``peacekeeping'' troops in Iraq: $20-30 billion. [2]
• Consumer Confidence Index (CCI) in 1990 prior to Gulf War: 100. [3]
• CCI during the Gulf War: 60.
• CCI currently: 100.
• Size of Strategic Oil Reserve (SOR): 700 million barrels of crude [4].
• Number of months the SOR could satisfy US consumption: 1.2
• Rank of San Jose in preparedness against biological attacks: 1. [5]

Amount San Jose spent per person this year in preparedness measures: $2.68.

1. Based on data from the Center for Defense Information (http://www.cdi.org/adm/1039/transcript.html), in specific: ``According to the Pentagon, the cost of stationing 100,000 troops in Asia is about $8 billion a year. However, that is just the base cost. Estimates of the total cost of stationing troops, prepositioning equipment and preparing for contingencies is roughly $100 billion." Note: The ``present value'' of paying for these peacekeeping costs: $200-300 billion (assuming a 10% rate of return).
2. Consumer Conference Board.
3. The New York Times, July 30, 2002, ``Profound Effect on U.S. Economy Is Seen From a War Against Iraq.''
4. The Christian Science Monitor, November 9, 2002, ``California city is touted as national leader in planning for emergencies.''