Afghanistan War Takes a Toll on the U.S. Economy

“The true cost of the [Afghanistan] war is only just beginning,” Joseph Stiglitz and Linda Bilmes recently wrote in Financial Times. “Indeed, the costs after withdrawal may exceed those during the war. Choices made in the past decade mean high costs for years to come – and will constrain other national security spending.”

Stiglitz, recipient of the 2001 Nobel Prize in economics, and Bilmes, a professor at the Harvard Kennedy School, are no strangers to the concept of hidden and delayed war costs. In 2008 they authored a groundbreaking study showing that the Iraq war, officially counted at $800 billion, would likely cost on the order of $3 trillion.

The same thing will happen in Afghanistan, the authors of The Three Trillion Dollar War write. The direct cost of the war has already topped $600 billion. Ongoing military operations will bring that total to at least $700 billion through 2014.

Even after U.S. forces transition from a combat to a training and advising role, the financial burden of the war will continue. Stiglitz and Bilmes highlight some of the big costs, like caring for the veterans of the Afghanistan war (total estimated cost: $1 trillion); supporting the Afghan security forces ($5 billion to $8 billion per year).

U.S. aid to Afghanistan is also sure to be a significant issue. Congress has already appropriated close to $90 billion — over $50 billion for security assistance and close to $40 billion for economic and humanitarian reconstruction. Despite this significant investment, the Afghan security forces remain largely incapable of operating independently of U.S. and allied trainers. Meanwhile, billions of aid dollars have been wasted on unneeded and unsustainable projects, or simply lost to fraud and corruption.

Congress is taking small steps to increase transparency and accountability in U.S. aid to Afghanistan. But it may be too little too late.

“In all of their nation’s history, Afghans have never seen such wealth or experienced such beneficence as the West is providing now,” writes Pulitzer prize winner Joel Brinkley. “But instead of creating a model program of nation building, all of that has badly distorted the economy and the people’s expectations.”

In Afghanistan, the U.S. strategy has created an aid bubble and made little sustainable progress on the security front. In the U.S., the war has been a drag on the economy, driving up the projected national debt.

“The legacy of poor decision-making from the expensive wars in Afghanistan and Iraq will live on in a continued drain on our economy – long after the last troop returns to American soil,” Stiglitz and Bilmes conclude.

Is it too late to address the effect the Afghanistan war will have on the U.S. economy? Maybe, there are certainly some steps we can take. The first one is ending the Afghanistan war and developing a new strategy for more effective (and less costly) engagement with Afghanistan. Another essential step is reining in government spending (and the out-of-control defense budget in particular). These won’t be easy steps, but they are crucial if we want to get our fiscal house in order.

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