Debate rages about impact of Iraq war on U.S. economy

WASHINGTON -- The refusal of the top U.S. commander in Iraq to give Congress a timetable for additional troop withdrawals has escalated an already fierce debate about the rising cost of the conflict to taxpayers — and to the faltering domestic economy.

The testimony this week by Gen. David Petraeus comes as Congress prepares to debate later this month the latest in a chain of emergency spending bills to continue Iraq operations. But with the U.S. economy veering toward recession, lawmakers from both parties are increasingly restive about voting for open-ended funding, especially as the White House resists their plans to increase aid for housing and other domestic needs.

Economists differ on the magnitude, but they generally agree the true cost of the war goes beyond the direct appropriations for fighting it. Effects include bigger deficits and higher oil prices. Now, economics are getting tangled up with politics.

Congressional Democrats tend to play up the drag the war places on the economy, and to highlight the White House's willingness to run larger deficits to fund the war while stinting on domestic needs. Many Republicans in Congress reject the notion that the war effort is a significant factor in the current economic slowdown and say that by making the nation safer, the funding has large benefits.

Rep. Rahm Emanuel, D-Ill., says his voters frequently bring up the issue of Iraq funding, and their message is clear: "Take care of our own first."

"This is one where the public is way ahead of Congress," says Emanuel. "They see libraries that are closing earlier, schools that aren't getting built, yet they're still getting the bill for projects halfway around the world."

Including current White House requests, the price tag for U.S. military action in Iraq and Afghanistan and associated costs of the "war on terror" since 2001 is on track to exceed $750 billion, according to the non-partisan Congressional Budget Office.

The cost of war

That figure reflects only a small fraction of the economic cost of the war, according to analysts such as Columbia University economist Joseph Stiglitz. He says the ultimate price tag for Iraq — which administration officials initially pegged at $50 billion to $60 billion — is easily $3 trillion or above when factors such as the cost of health care for disabled veterans, surging oil prices and the economic impact on families who have lost breadwinners are considered.