The Uncertain Cost Of War(s)

This brief is a part of series prepared by the Burke Chair in Strategy on current issues in defense budgeting and strategy. Other briefs within this series include,

• “The Coming Challenges in Defense Planning, Programming and Budgeting” which can be downloaded at: https://www.csis.org/analysis/macroeconomics-us-defense-spending
• “Unplanning’ for Uncertainty” which will be released shortly.
•  “The Macroeconomics of US Defense Spending” which can be downloaded at: https://www.csis.org/analysis/coming-challenges-defense-planning-programming-and-budgeting

This particular brief is divided into three sections and focuses on the difficulty of accurately assessing the real costs of the wars in Iraq and Afghanistan as well as the problem of the Department of Defense’s (DOD) over-reliance on “emergency” supplemental funding for Overseas Contingency Operations (OCO) in Iraq and Afghanistan. It bases its analysis on research done by and statistics provided by the DOD, the Government Accountability Office (GAO), the Congressional Budget Office (CBO), and the Congressional Research Service (CRS).

The first section analyzes the costs of war from WWII to present. The analysis in this section comes to three key conclusions. First, as of 2008 the CRS estimated the combined costs of the wars in Iraq and Afghanistan as the second highest in US history after WWII, surpassing the total spent on the Vietnam War in real terms (Slide 6). Second, while defense spending as a whole is high relative to Clinton Era spending, as a share of GDP and total federal outlays, recent defense spending is at one of its lowest points since WWII (Slide 7). Third, current US defense spending as a fraction of GDP and total federal outlays is lower than during any other wartime era since WWII except for the Gulf War (Slide 8).

The second section analyzes funding for OCO since the beginning of major Global War on Terrorism (GWOT) operations in 2001. In contrast to funding for previous wars, Operation Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF) have been funded primarily through “emergency” supplemental spending bills.

Until 2010 these supplemental funding requests were sent to Congress during the middle of each fiscal year, after Congress already received and passed the DOD’s initial, fiscal year budget request for the year (Slide 10). Research presented in this report reveals that the DOD for most of OEF and OIF has essentially been running two concurrent budgets: an initial fiscal year budget to fund day-to-day DOD operations and budget based on emergency supplementals to fund OCO in Iraq and Af-Pak (Slide 10-27). 

Moreover, this section also reveals that the “actual” war costs are difficult, if not impossible to precisely assess due to this dual budget funding method. The GAO, CBO, DOD and CRS all arrive at different estimates of the “real” costs of war. It is important to note that the obscurity of war costs constitute a further, although perhaps intangible, “cost” in themselves. By perpetually underestimating the costs of war, supplemental war funding has essentially misled politicians into believing more discretionary funding is available than actually is. This in turn leads to inefficient policymaking and deeper deficit spending.

The third section (Slides 29-35) analyzes attempts by the Obama Administration and the DOD to institutionalize war funding into the DOD’s FY 2011 Budget. The Administration still submitted its request for OCO funding a supplemental request, separate from the baseline DOD budget request. However, in a break from the past, the Administration simultaneously submitted OCO supplemental and the baseline budget requests. Moreover, comparison of the FY 2010 OCO supplemental, FY 2010 “emergency” OCO supplemental and the FY 2011 OCO supplemental seems to reflect the Administration’s efforts to institutionalize war funding into the FY 2011 budget request. Allowing for some variation due to changes in conditions and requirements on the ground, the FY 2011 OCO supplemental is roughly equivalent to the sum of initial and emergency FY 2010 OCO funding requests.

The fourth and final section analyzes the difficulties associated with projecting future war costs. This section comes to two key conclusions. First, difficulties associated with accurately assessing past war costs make extrapolating projections of future war costs difficult (Slides 37-42). Second, despite efforts in FY 2011 to institutionalize war funding into the initial budget request, any projections of future war costs remain heavily contingent upon factors exogenous to budgetary choices, such as the conditions on the ground and domestic support for the wars (Slides 43-50).