Given the statements that the U.S. might be “surging the surge”, expect an incremental $40 billion to be expended over the next two years.
From Statement of Robert A. Sunshine, “Estimated Costs of U.S. Operations in Iraq and Afghanistan and of Other Activities Related to the War on Terrorism,” July 31, 2007, Committee of the Budget, House of Representatives.
Cost of the Increase in Force Levels
CBO projected the cost of the recent increase in the number of troops deployed to Iraq and also estimated the total amount of funding that would be required through 2017 to sustain U.S. forces in Iraq, Afghanistan, and other locations involved in the war on terrorism. Compared with DoD’s previously announced plans for 2007, CBO estimates that an additional 30,000 to 40,000 personnel from the four military services have been deployed on the ground in the Iraq theater. Those additional troops will cost about $10 billion, $22 billion, or $40 billion, respectively, depending on whether that increase is sustained for four months, 12 months, or 24 months.
Table 3 from Statement of Robert A. Sunshine, “Estimated Costs of U.S. Operations in Iraq and Afghanistan and of Other Activities Related to the War on Terrorism,” July 31, 2007, Committee of the Budget, House of Representatives
CBO estimates the FY2007 burn rate in Iraq as something close to $10 billion per month (10 bdpm), similar to the figure cited by CRS (see this post).
What is even more interesting to me is the costing out of VA-related expenses.
Spending by the Department of Veterans Affairs for Medical Care,
Disability Compensation, and Survivors’ Benefits
CBO estimated spending for medical care, disability compensation, and survivors’ benefits on the basis of casualty rates for veterans of operations in Iraq and Afghanistan over the 2003–2006 period. Almost $1 billion in supplemental appropriations was provided to the VA in 2007 for medical administration costs, medical and prosthetics research, medical services for veterans of those operations, and
other related purposes. In addition, CBO estimates that the VA will spend another $0.7 billion in 2007 for medical care and disability compensation for veterans of operations in Iraq and Afghanistan, as well as for compensation for survivors of service members who die in those operations.
Under the first scenario, in which the number of deployed troops declines to 30,000 by 2010, the VA would spend more than $9 billion over the 2008–2017 period on medical care, disability compensation, and survivors’ benefits. Alternatively, if deployed forces declined to 75,000 by 2013, as in the second scenario, the VA would spend almost $13 billion for those purposes, CBO estimates (see Table 7 on page 16). The costs of those two scenarios would not vary substantially with changes in the number of months that deployed forces were maintained at the current level before troop levels began to decline.
Table 7 from Statement of Robert A. Sunshine, “Estimated Costs of U.S. Operations in Iraq and Afghanistan and of Other Activities Related to the War on Terrorism,” July 31, 2007, Committee of the Budget, House of Representatives
Note that even with the drawdown to 30,000 troops by FY2010, costs are $1 billion in that year. Doesn’t seem like much, but since these costs are likely to rise in nominal terms over time, the cumulative cost will be substantial. Suppose we take a conservative approach, and assume health and disability costs rise at the same pace as the personal consumption expenditure deflator (pretty unlikely given what we know about health service costs). Further assume that the social discount rate is 3%, and these expenditures continue for 50 years after FY2010. Then the present discounted value of VA expenditures associated with the operations in Iraq and Afghanistan will be approximately $27 billion (in 2010 dollars). Assume VA expenditure inflation exceeds the general PCE by 2 percentage points. Then the PDV is $40 billion.