11/08/2011 01:38 pm ET Updated Jan 08, 2012

Estimating Iraq War Damages Sustained by the United States (2003-2011)

President Obama's recent announcement of U.S. troop withdrawal from Iraq was welcomed news. The Iraq war is the second longest American war in history after Afghanistan. The U.S. has been at this war for 102 months thus far; longer than the war time span of Vietnam, Korean, World War II, World War I and the Civil War.

The United States has sustained significant war damages in human lives and casualties as well as loss of wealth. We lost approximately 4000 lives of young men and women and sustained approximately 40,000 war injuries with varying degrees of disabilities. The long term effects will be pervasive for medical care treatment of injured veterans and loss of their earnings at market value. Of the $14+ trillion national debt of the United States, nearly one trillion dollars or 7.5%% was the direct and explicit cost of the Iraq war.

But wars have implicit costs as well, including the loss of parents by young children and loss of family members whose pains are carried for a life time. War damages are pervasive and multidimensional.

To capture the true economic cost of the war, the approach of opportunity cost or the foregone opportunities that were lost was undertaken into account such as the present value of the future stream of earning that a dead soldier would have earned in the market place during his/her remaining work life expectancy. Because of the young average age of the deceased (approximately 25 years), the loss of work-life expectancy was estimated at 45 years including 50+ years loss of life expectancy. The average loss of earnings based on the present value of future stream of earnings at market rate during work-life expectancy of a deceased soldier amounted to approximately $10 million. The market value of the average care cost of the disabled victims was estimated at half a million dollars. In the calculations the disabled victims were classified into three categories (high, average, and low). The implicit cost of the war is not estimated in this study.

At the cost of approximately one trillion dollars, 4,000 human lives and 40,000 disabled casualties, the U.S. succeeded to eliminate Saddam Hussein and bring about a regime change in the governmental structure of Iraq from Sunni to Shiite domination, but no weapons of mass destruction were found. What is the significance of that change to the U.S. national security interest? In fact, Saddam Hussein's government was anti-al Qaeda, anti-Iranian with a secular orientation. The regime change in Iraq has availed a unique opportunity for Iran to extend its hegemony over Iraq.

In addition to strategic drawbacks, the cost of care of disabled veterans and disability compensation will peak decades after the conflict is ended. And since the war was financed through borrowing, the cost of interest, repayment of principal, caring for disabled veterans and disability payments will continue to put pressure on the budget deficit.

A ripple effect of the Iraq invasion was the rise in oil prices from approximately $30/barrel in 2003 to $140/barrel in 2008, costing American consumers $4/gallon at the pump. The war debt has caused congressional gridlock and inability to effectively address the current economic impasse. Given the enormous cost sustained by the U.S. without significant strategic gains, former secretary of defense Robert Gates advised that the United Sates must abstain from these small but costly wars in the future.
*Nake M. Kamrany is professor of economics at the University of Southern California and Director of program in law and economics. Michelle Taft is a research associate of the Economics Depart at USC and is associated with the Law School at the University of Washington. This article is an abstract of a larger study that was undertaken by the Department of economics at USC.