New estimate on US' cost of war up $4B from last month

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[00:00:00]Let's talk more about the cost of the Iran war now with Dean Baker, co-founder of the Center for Economic and Policy Research. Dean joins me now from Washington. Pleasure to have you on, sir. Uh so, I just want to start with the Pentagon estimate. We heard it. They revised it up to 29 billion. Democrat Senator Patty Murray, who's on the Senate Appropriations Committee, said she thought the the Pentagon's estimate was suspiciously low. And then we've got a Harvard University expert, Linda Bilmes. She says that ultimately going forward, this war could cost the US up to $1 trillion. That'd be 30 times more than the current quote. So, I just wonder, what's your assessment what the Pentagon is putting the price at?

[00:00:38]Well, clearly the Pentagon estimate is very low ball, and this is, you know, the assumption what we've spent to date.

[00:00:45]And even there, my guess is they've not included replacement of a lot of the weapons that have been used. The estimate from the from Harvard is that's a long, you know, I'm not going to say it's wrong. I mean, that's we saw in Iraq that it did end up being a very long war, costly over the years. I think that estimate, again, I have to be careful. I've not looked at it closely, but I think it's in that vein, saying, let's imagine that we're in a situation where we have an ongoing conflict, not just for a few months, but maybe for several years. And, you know, that number, a trillion in that context, certainly is a ballpark number.

[00:01:20]Now, I did a bit of rudimentary maths.

[00:01:21]So, if you divide that 29 billion by the US population, I mean, it works out at over $80 per person. If you said to the American population, "You're all going to pay over $80 for this war, and that amount that's not final, that's going to keep going up the longer it goes on."

[00:01:35]Um I'm not sure not many not that many people would have actually gone for that. So, there's a direct cost to the population. Is that a fair thing to say?

[00:01:45]A- Absolutely. And it it's it is ironic because uh President Trump quite explicitly ran his campaign saying that he was going to keep us out of a war. In fact, he accused his opponent, of Kamala Harris that she was going to get us into a war in Iran. I mean, there's no mistaking it. That was very explicit. So, you had a lot of people that voted for him with the idea that he'd keep us out of Middle East wars.

[00:02:09]And he was very critical of the at least after the fact the war in Iraq that dragged on for some time and the war in Afghanistan that didn't finally end until President Biden took our troops out in 2021 after going there in 2001.

[00:02:22]So, this is very much at odds with what he had campaigned on. And yeah, I think there's very it is unusual not to get too much into US politics, but if you go back to the Iraq war, there was a big effort by President Bush at the time to to sell us that it's really important to get nuclear weapons. He spent months trying to build support, took it to Congress.

[00:02:44]We didn't see that here. And to this day, I don't think if you ask five people, why did we go to war with Iraq?

[00:02:50]I think you'd get a Iran, you'd get a different answer from each of them.

[00:02:55]If we look at this consumer price index, it's showing inflation's up to 3.8% for April. That's slightly more than they were expecting. But I mean, I mean, this isn't a direct I assume not the direct result of the war. It's the knock-on effect, the indirect consequences, the fact that oil isn't passing freely around the world. But I mean, average Americans are seeing consequences from this conflict now.

[00:03:16]Absolutely. And it's it's again, you know, probably you're President Trump ran saying he was going to bring prices down. And apparently a lot of people believed that. I mean, as an economist, I could say that didn't seem very likely. But a lot of people clearly believed that. And we were on a path to 2% inflation at the time of the election. I mean, you could look at the forecast at the time. They all expected inflation going down to 2% this year. Instead, we're looking at almost 4%. So, part of that was his tariffs, part of it is mass deportation, so that's displaced a large segment of our our workforce. And then of course, the war driving up oil prices. And if this [clears throat] continues, there's going to be kick-on effects in in agriculture. We you know, a lot of the world's fertilizer comes from the area.

[00:03:57]So, this is just the beginning in terms of the economic cost. And already, uh needless to say, people aren't happy about it. I mean, ultimately, because it's costing companies a lot a lot of money, could it could it cost people their their jobs? And also, how quickly will it reverse when things change? Cuz Trump said, "Oh, as soon as the war's over, oil prices energy prices will drop quickly." But I mean, is it that easy to reverse things?

[00:04:20]Yeah, well, we are seeing job loss here and there. One of our airlines, a smaller one, Spirit, shut down literally shut down. So, I I I forget they have like 10,000 employees. That's not a huge number in an economy with 170 million workers. But, you know, you're you're seeing that, you know, you will be seeing that. People having money out of their pocket to pay more for gas aren't going to be going to restaurants. Um so, you will see that. I don't know this isn't an economic collapse story, but that definitely does slow growth. It will cost some number of jobs. And in terms of the reversal, um it's not all this oil that's going offline, isn't going to come online right away. And of course, even if it did, it doesn't get here. So, you're still going to have inflated prices even in the most optimistic scenario. There's a deal tomorrow, the straits open. We're still going to see inflated gas oil prices for for probably four, five, six months of world for next six months. And that's in I'll just say an extremely optimistic scenario.

[00:05:12]Right, I had a look. Current US national debt, 39 trillion US dollars. If you just even at worst case estimates, if you're just throwing another trillion, it's like 40 trillion. So, I mean, it's a tab that's never been paid down. Why does it matter if it just goes up by another trillion?

[00:05:27]Well, to be honest, I'm probably not the person that's worried the most about the debt, but I do worry about inflationary impacts, about displacing, you know, money spent on keeping troops there, money spent on weaponry. That's not money spent on health care, on education, um a green transition. I I it's Well, I guess it is promoting the green transition. You send oil prices through the roof. People look to electric to to clean energy. So, I guess in that sense it's positive, but it's not the best way to get there.

[00:05:56]Dean, absolute pleasure to speak to you.

[00:05:57]Thank you so much for coming on. Dean Baker is the co-founder of the Center for Economic and Policy Research.

[00:06:04]Thanks for having me on.