Nation Building Costs - Estimate Revisions

SUMMARY

For the upcoming update, I don't find a need to dramatically revise the medical costs estimates downward.

For disability, I've changed the estimation methodology to use a run-rate, adjusted by a projection of the ultimate number of unique deployments to Iraq and Afghanistan.

I've taken a 10% haircut to the earlier figures to cut out the costs associated with Afghanistan, leaving just Iraq, which is what some want to look at in isolation.

For medical, my own adjustments come up with a figure of $257bn againt Bilmes $287bn, so I'm not adjusting at this time.

MEDICAL COST ESTIMATES

In comparing estimates, Peter Orzag writes on his blog:

In their higher case, Stiglitz and Bilmes apply to veterans of those recent conflicts the $5,765 average amount that VA spent in 2006 to treat veterans of all eras, including the aging Vietnam-era population. Stiglitz and Bilmes then increase the larger amount in subsequent years at a medical-specific inflation rate equal to twice the rate of general inflation. The VA, though, estimates that it spent less than half that initial amount — an average of $2,610 in 2006 — to treat veterans returning from Iraq and Afghanistan. It may appear surprising to some readers, but veterans of the recent conflicts on average require less medical care from VA than veterans of earlier conflicts such as the Vietnam War do today.

Unfortunately, for FY2009 budget, the VA estimates have climbed to $3,802.

Nevertheless, that's still below the Bilmes estimates.

Yet, one wonders if the VA is using a fully-loaded cost estimate.

Look at the baseline growth in the VA's medical services budget. Adjusting for a 4.5% medical inflation rate, one still gets a climb in baseline VA costs of $2.4 billion dollars, from 2007 to 2009, and $5bn without any adjustment. One has to guess that the lion's share of that is related to the uptick related to OIF/OEF and $5bn is closer to the Blimes estimates than the direct-cost method...

VA Growth	2007	2009	Growth	Adj Growth	Baseline increase
Medical Services	$28.9	$34.0	17.6%	8.4%	$2.4
Med Services Employment	210,702	224,752	6.7%	6.7%	14,050

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Bush's Dereliction, Part III - Straight Talk on Costs

Dereliction, of course, is so harsh a term that it ought to be used with care and consideration.

Much of the war planning qualifies, most likely. The refusal to make tactical changes prior to the 2006 election probably qualifies. There are parts of Rumsfeld's mis-conceptualization of the "war on terror" that are in the running, but may not fit fully. Plausible assurances passed on to Congressman/Senators in bad faith before the AUMF, if any, probably fall under a separate header.

On deck today is the continual avoidance of the DoD to provide complete information on wartime costs. If ever there were clear indications that the Bush-Cheney-Rumsfeld Administration have played power politics with the war, this is it.

Cordesman has released a survey of war cost estimates:

...if anything, the Administration has almost actively sought to make Afghanistan a "forgotten" war. There is no quarterly Department of Defense report similar to the one on Iraq, and no Department of State weekly status report. The Department of Defense has even removed the page on Operation Enduring Freedom from any visibility on its web site.

Moreover, much of the CBO work presented in the briefing is taken from CBO studies that shows that the Department of Defense has failed dismally to control the future cost of military manpower, operations and maintenance, and procurement, research, and development. This work strongly indicate that the next President will face a legacy of a badly managed overall defense program ...

-A. Cordesman, CSIS, April 1, 2008 [a 55 page report]

This is just the softball stuff. Check out:

The war fighting costs [b.k.a. violent nation-building costs] in the Department of Defense budget and FDYP became in incoherent mess under Rumsfeld ...

Projections are one thing. However, pressing for an unlimited engagement ("withdrawal upon 'success'") and failing to update the DoD's cost accounting systems is reprehensible double-speak. Passing out new rules to the field on what can be included in "supplementals" as far as equipment replacement, etc., also is indicative that the Administration is not serious about cost accounting for our prologued, violent, nation-building efforts.

[more on the estimates themselves, later]

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