Supplemental appropriations can mask war’s financial cost

NEW YORK – After four years, America’s cost for the war in Iraq has reached nearly $500 billion – more than the total for the Korean War and nearly as much as 12 years in Vietnam, adjusting for inflation. The ultimate cost could reach $1 trillion or more.

But even though the war has turned out to be much more expensive than Bush administration officials predicted on the eve of the March 2003 invasion, it is relatively affordable – at least in historical terms.

Iraq eats up less than 1 percent of the nation’s gross domestic product, compared with as much as 14 percent for Vietnam and 9 percent for Korea.

“I think it’s hard to argue it’s not affordable,” said Steven M. Kosiak, director of budget studies at the Center for Strategic and Budgetary Assessments, a defense think tank in Washington, D.C.

The problem, he and other budget analysts argue, isn’t so much the cost of the war as how the government has chosen to pay for it.

For one thing, war funding for both Iraq and Afghanistan has come in the form of supplemental appropriations outside the normal federal budget process.

Typically these “supplementals” are used to pay for unexpected emergencies such as Hurricane Katrina, and they receive much less scrutiny from Congress.

President Truman quit asking for supplementals after the first year of the Korean War. The Vietnam War started appearing in the federal budget beginning in 1966, the year after regular troops were committed.

But after four years, the Iraq war is still being funded with supplementals. In December, congressional budget leaders from both parties sent a letter to President Bush asking him to start paying for Iraq through the budget process. The administration has done that in its 2008 budget year request – but not before asking for another $100 billion supplemental to keep the war going through the end of this year.

And during previous wars, presidents have asked Americans to make sacrifices to help pay for wars, said Robert Hormats, a managing director at Goldman Sachs and author of the forthcoming book “The Price of Liberty: Paying for America’s Wars.”

Virtually every war in U.S. history has required the government to borrow at least some money, Hormats said. But Franklin D. Roosevelt also eliminated some New Deal programs and cut others to help pay for World War II (the most expensive of American wars, it cost more than $2 trillion in inflation-adjusted dollars). Truman raised taxes and slashed domestic spending during Korea.

“No such thing has occurred” during this war, Hormats lamented this month during a panel discussion held at the New School’s Schwartz Center for Economic Policy Analysis in New York. “This war we had no reassessment of fiscal policy, no alteration of fiscal policy to make room in the budget to pay for the war.”

Instead, the war is being paid for with debt.

Administration officials downplay the war’s cost and the growing defense budget.

Defense Secretary Robert M. Gates acknowledged in Congressional testimony last month that his department’s 2008 budget request, along with supplemental funding for the war, had produced some “sticker shock.” But he pointed out that defense and war spending is still only about 4 percent of the nation’s total economic output, a much smaller fraction than it has been historically.