Iraq and Afghanistan wars will cost each US household $75,000
The cost to America of the wars in Iraq and Afghanistan could now reach as much as $6 trillion (€4.7tn) – or $75,000 (€59,000) for every household in the country – a study from Harvard University has concluded.
The calculation, which includes the cost of spiralling veterans' care bills and the future interest on war loans, paints a grim picture of how America's future at home and abroad has been mortgaged to the two conflicts entered into by former president George W Bush in 2001 and 2003.
"There will be no peace dividend," is the stark conclusion from the 22-page report from the Kennedy School of Government, "and the legacy of Iraq and Afghanistan wars will be costs that persist for decades".
America is preparing for a final withdrawal from Afghanistan, a decision that President Barack Obama trumpeted in his State of the Union address as a sign that America was finally moving forwards after a sapping decade of war.
However, the working paper by Prof Linda Bilmes makes clear that the true legacy of the two conflicts – which have cost $2tn (€1.56tn) in actual outlay to date – has not yet begun to be appreciated.
"There's a sense that we are turning the corner, but unfortunately, the legacy of these wars, because of decisions about the way we fought and funded these wars, means we will be paying the costs for a long time to come," Prof Bilmes said in an interview.
"We may be mentally turning the page, but we are certainly not from a budgetary and financial perspective."
The report, which builds on 2010 estimates made by Prof Bilmes and the Nobel laureate Joseph Stiglitz, highlights the rise in the long-term cost of treating veterans who both survive in greater numbers and seek treatment for a wider selection of ailments, from back pain to post-traumatic stress.
"More than half of the 1.56 million troops who have been discharged to date have received medical treatment. . . and been granted benefits for the rest of their lives," the report said, adding that the real bills would not fall due for decades to come.
"The peak year for paying disability compensation to World War One veterans was in 1969 – more than 50 years after Armistice. The largest expenditures for World War Two veterans were in the late 1980s. Payments to Vietnam and first Gulf War veterans are still climbing," it said.
The second major hidden cost of the two conflicts will be servicing the debts incurred as a result of the "unprecedented" decision to pay for the wars entirely from debt while cutting taxes – as the Bush administration did in 2001 and 2003.
The decision to finance the war through borrowing has already added $2tn to the US national debt – or about 20pc of total national debt added between 2001 and 2012, with worse to come.
The cost estimates dwarf the initial projections. In 2002 Lawrence Lindsey, then President Bush's chief economic adviser, estimated that the "upper-bound" costs of war against Iraq would be $200bn (€156bn). (© Daily Telegraph, London)