By Tim Fernholz and Jim Tankersley
National Journal
The most expensive public enemy in American history died Sunday from two bullets.
As we mark Osama bin Laden's death, what's striking is how much he cost our nation—and how little we've gained from our fight against him. By conservative estimates, bin Laden cost the United States at least $3 trillion over the past 15 years, counting the disruptions he wrought on the domestic economy, the wars and heightened security triggered by the terrorist attacks he engineered, and the direct efforts to hunt him down.
What do we have to show for that tab? Two wars that continue to occupy 150,000 troops and tie up a quarter of our defense budget; a bloated homeland-security apparatus that has at times pushed the bounds of civil liberty; soaring oil prices partially attributable to the global war on bin Laden's terrorist network; and a chunk of our mounting national debt, which threatens to hobble the economy unless lawmakers compromise on an unprecedented deficit-reduction deal.
All of that has not given us, at least not yet, anything close to the social or economic advancements produced by the battles against America's costliest past enemies. Defeating the Confederate army brought the end of slavery and a wave of standardization—in railroad gauges and shoe sizes, for example—that paved the way for a truly national economy. Vanquishing Adolf Hitler ended the Great Depression and ushered in a period of booming prosperity and hegemony. Even the massive military escalation that marked the Cold War standoff against Joseph Stalin and his Russian successors produced landmark technological breakthroughs that revolutionized the economy.
Perhaps the biggest economic silver lining from our bin Laden spending, if there is one, is the accelerated development of unmanned aircraft. That's our $3 trillion windfall, so far: Predator drones. "We have spent a huge amount of money which has not had much effect on the strengthening of our military, and has had a very weak impact on our economy," says Linda Bilmes, a lecturer at Harvard University's John F. Kennedy School of Government who coauthored a book on the costs of the Iraq and Afghanistan wars with Nobel Prize-winning economist Joseph Stiglitz.
(TIMELINE: Obama's big secret. When he knew about bin Laden (and we didn't)
Certainly, in the course of the fight against bin Laden, the United States escaped another truly catastrophic attack on our soil. Al-Qaida, though not destroyed, has been badly hobbled. "We proved that we value our security enough to incur some pretty substantial economic costs en route to protecting it," says Michael O'Hanlon, a national-security analyst at the Brookings Institution.
But that willingness may have given bin Laden exactly what he wanted. While the terrorist leader began his war against the United States believing it to be a "paper tiger" that would not fight, by 2004 he had already shifted his strategic aims, explicitly comparing the U.S. fight to the Afghan incursion that helped bankrupt the Soviet Union during the Cold War. "We are continuing this policy in bleeding America to the point of bankruptcy," bin Laden said in a taped statement. Only the smallest sign of al-Qaida would "make generals race there to cause America to suffer human, economic, and political losses without their achieving anything of note other than some benefits for their private corporations." Considering that we've spent one-fifth of a year's gross domestic product—more than the entire 2008 budget of the United States government—responding to his 2001 attacks, he may have been onto something.
THE SCORECARD
Other enemies throughout history have extracted higher gross costs, in blood and in treasure, from the United States. The Civil War and World War II produced higher casualties and consumed larger shares of our economic output. As an economic burden, the Civil War was America's worst cataclysm relative to the size of the economy. The nonpartisan Congressional Research Service estimates that the Union and Confederate armies combined to spend $80 million, in today's dollars, fighting each other. That number might seem low, but economic historians who study the war say the total financial cost was exponentially higher: more like $280 billion in today's dollars when you factor in disruptions to trade and capital flows, along with the killing of 3 to 4 percent of the population. The war "cost about double the gross national product of the United States in 1860," says John Majewski, who chairs the history department at the University of California (Santa Barbara). "From that perspective, the war on terror isn't going to compare."
On the other hand, these earlier conflicts—for all their human cost—also furnished major benefits to the U.S. economy. After entering the Civil War as a loose collection of regional economies, America emerged with the foundation for truly national commerce; the first standardized railroad system sprouted from coast to coast, carrying goods across the union; and textile mills began migrating from the Northeast to the South in search of cheaper labor, including former slaves who had joined the workforce. The fighting itself sped up the mechanization of American agriculture: As farmers flocked to the battlefield, the workers left behind adopted new technologies to keep harvests rolling in with less labor.
(UPDATED: New pictures from bin Laden's Pakistani hideout)
World War II defense spending cost $4.4 trillion. At its peak, it sucked up nearly 40 percent of GDP, according to the Congressional Research Service. It was an unprecedented national mobilization, says Chris Hellman, a defense budget analyst at the National Priorities Project. One in 10 Americans—some 12 million people—donned a uniform during the war.
But the payoff was immense. The war machine that revved up to defeat Germany and Japan powered the U.S. out of the Great Depression and into an unparalleled stretch of postwar growth. Jet engines and nuclear power spread into everyday lives. A new global economic order—forged at Bretton Woods, N.H., by the Allies in the waning days of the war—opened a floodgate of benefits through international trade. Returning soldiers dramatically improved the nation's skills and education level, thanks to the GI Bill, and they produced a baby boom that would vastly expand the workforce.
U.S. military spending totaled nearly $19 trillion throughout the four-plus decades of Cold War that ensued, as the nation escalated an arms race with the Soviet Union. Such a huge infusion of cash for weapons research spilled over to revolutionize civilian life, yielding quantum leaps in supercomputing and satellite technology, not to mention the advent of the Internet.
Unlike any of those conflicts, the wars we are fighting today were kick-started by a single man. While it is hard to imagine World War II without Hitler, that conflict pitted nations against each other. (Anyway, much of the cost to the United States came from the war in the Pacific.) And it's absurd to pin the Civil War, World War I, or the Cold War on any single individual. Bin Laden's mystique (and his place on the FBI's most-wanted list) made him—and the wars he drew us into—unique.
By any measure, bin Laden inflicted a steep toll on America. His 1998 bombing of U.S. embassies in Africa caused Washington to quadruple spending on diplomatic security worldwide the following year—and to expand it from $172 million to $2.2 billion over the next decade. The 2000 bombing of the USS Cole caused $250 million in damages.
(FALLOUT: U.S. Pakistani relations strained like never before)
Al-Qaida's assault against the United States on September 11, 2001, was the highest-priced disaster in U.S. history. Economists estimate that the combined attacks cost the economy $50 billion to $100 billion in lost activity and growth, or about 0.5 percent to 1 percent of GDP, and caused about $25 billion in property damage. The stock market plunged and was still down nearly 13 percentage points a year later, although it has more than made up the value since.
The greater expense we can attribute to bin Laden comes from policymakers' response to 9/11. The invasion of Afghanistan was clearly a reaction to al-Qaida's attacks. It is unlikely that the Bush administration would have invaded Iraq if 9/11 had not ushered in a debate about Islamic extremism and weapons of mass destruction. Those two wars grew into a comprehensive counterinsurgency campaign that cost $1.4 trillion in the past decade—and will cost hundreds of billions more. The government borrowed the money for those wars, adding hundreds of billions in interest charges to the U.S. debt.
Spending on Iraq and Afghanistan peaked at 4.8 percent of GDP in 2008, nowhere near the level of economic mobilization in some past conflicts but still more than the entire federal deficit that year. "It's a much more verdant, prosperous, peaceful world than it was 60 years ago," and nations spend proportionally far less on their militaries today, says S. Brock Blomberg, a professor at Claremont McKenna College in California who specializes in the economics of terrorism. "So as bad as bin Laden is, he's not nearly as bad as Hitler, Mussolini, [and] the rest of them."
Yet bin Laden produced a ripple effect. The Iraq and Afghanistan wars have created a world in which even non-war-related defense spending has grown by 50 percent since 2001. As the U.S. military adopted counterinsurgency doctrine to fight guerrilla wars, it also continued to increase its ability to fight conventional battles, boosting spending for weapons from national-missile defense and fighter jets to tanks and long-range bombers. Then there were large spending increases following the overhaul of America's intelligence agencies and homeland-security programs. Those transformations cost at least another $1 trillion, if not more, budget analysts say, though the exact cost is still unknown. Because much of that spending is classified or spread among agencies with multiple missions, a breakdown is nearly impossible.
It's similarly difficult to assess the opportunity cost of the post-9/11 wars—the kinds of productive investments of fiscal and human resources that we might have made had we not been focused on combating terrorism through counterinsurgency. Blomberg says that the response to the attacks has essentially wiped out the "peace dividend" that the United States began to reap when the Cold War ended. After a decade of buying fewer guns and more butter, we suddenly ramped up our gun spending again, with borrowed money.
The price of the war-fighting and security responses to bin Laden account for more than 15 percent of the national debt incurred in the last decade—a debt that is changing the way our military leaders perceive risk. "Our national debt is our biggest national-security threat," Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, told reporters last June.
All of those costs, totaled together, reach at least $3 trillion. And that's just the cautious estimate. Stiglitz and Bilmes believe that the Iraq conflict alone cost that much. They peg the total economic costs of both wars at $4 trillion to $6 trillion, Bilmes says. That includes fallout from the sharp increase in oil prices since 2003, which is largely attributable to growing demand from developing countries and current unrest in the Middle East but was also spurred in some part by the Iraq and Afghanistan conflicts. Bilmes and Stiglitz also count part of the 2008 financial crisis among the costs, theorizing that oil price hikes injected liquidity in global economies battling slowdowns in growth—and that helped push up housing prices and contributed to the bubble.
Most important, the fight against bin Laden has not produced the benefits that accompanied previous conflicts. The military escalation of the past 10 years did not stimulate the economy as the war effort did in the 1940s—with the exception of a few large defense contractors—in large part because today's operations spend far less on soldiers and far more on fuel. Meanwhile, our national-security spending no longer drives innovation. The experts who spoke with National Journal could name only a few advancements spawned by the fight against bin Laden, including Predator drones and improved backup systems to protect information technology from a terrorist attack or other disaster. "The spin-off effects of military technology were demonstrably more apparent in the '40s and '50s and '60s," says Gordon Adams, a national-security expert at American Univeristy.
Another reason that so little economic benefit has come from this war is that it has produced less—not more—stability around the world. Stable countries, with functioning markets governed by the rule of law, make better trading partners; it's easier to start a business, or tap national resources, or develop new products in times of tranquility than in times of strife. "If you can successfully pursue a military campaign and bring stability at the end of it, there is an economic benefit," says economic historian Joshua Goldstein of the University of Massachusetts. "If we stabilized Libya, that would have an economic benefit."
Even the psychological boost from bin Laden's death seems muted by historical standards. Imagine the emancipation of the slaves. Victory over the Axis powers gave Americans a sense of euphoria and limitless possibility. O'Hanlon says, "I take no great satisfaction in his death because I'm still amazed at the devastation and how high a burden he placed on us." It is "more like a relief than a joy that I feel." Majewski adds, "Even in a conflict like the Civil War or World War II, there's a sense of tragedy but of triumph, too. But the war on terror … it's hard to see what we get out of it, technologically or institutionally."
BIN LADEN'S LEGACY
What we are left with, after bin Laden, is a lingering bill that was exacerbated by decisions made in a decade-long campaign against him. We borrowed money to finance the war on terrorism rather than diverting other national-security funding or raising taxes. We expanded combat operations to Iraq before stabilizing Afghanistan, which in turn led to the recent reescalation of the American commitment there. We tolerated an unsupervised national-security apparatus, allowing it to grow so inefficient that, as The Washington Post reported in a major investigation last year, 1,271 different government institutions are charged with counterterrorism missions (51 alone track terrorism financing), which produce some 50,000 intelligence reports each year, many of which are simply not read.
We have also shelled out billions of dollars in reconstruction funding and walking-around money for soldiers, with little idea of whether it has even helped foreigners, much less the United States; independent investigations suggest as much as $23 billion is unaccounted for in Iraq alone. "We can't account for where any of it goes—that's the great tragedy in all of this," Hellman says. "The Pentagon cannot now and has never passed an audit—and, to me, that's just criminal."
It's worth repeating that the actual cost of bin Laden's September 11 attacks was between $50 billion and $100 billion. That number could have been higher, says Adam Rose, coordinator for economics at the University of Southern California's National Center for Risk and Economic Analysis of Terrorism Events, but for the resilience of the U.S. economy and the quick response of policymakers to inject liquidity and stimulate consumer spending. But the cost could also have been much lower, he says, if consumers hadn't paid a fear premium—shying away from air travel and tourism in the aftermath of the attacks. "Ironically," he says, "we as Americans had more to do with the bottom-line outcome than the terrorist attack itself, on both the positive side and the negative side."
The same is true of the nation's decision, for so many reasons, to spend at least $3 trillion responding to bin Laden's attacks. More than actual security, we bought a sense of action in the face of what felt like an existential threat. We staved off another attack on domestic soil. Our debt load was creeping up already, thanks to the early waves stages of baby-boomer retirements, but we also hastened a fiscal mess that has begun, in time, to fulfill bin Laden's vision of a bankrupt America. If left unchecked, our current rate of deficit spending would add $9 trillion to the national debt over the next decade. That's three Osamas, right there.
Although Bin Laden is buried in the sea, other Islamist extremists are already vying to take his place. In time, new enemies, foreign and domestic, will rise to challenge America. What they will cost us, far more than we realize, is our choice.
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