economy

1. Afghanistan War Takes a Toll on the U.S. Economy

   Published: January 28th, 2013
   

   

   “The true cost of the [Afghanistan] war is only just beginning,” Joseph Stiglitz and Linda Bilmes recently wrote in Financial Times. “Indeed, the costs after withdrawal may exceed those during the war. Choices made in the past decade mean high costs for years to come – and will constrain other national security spending.”

   Stiglitz, recipient of the 2001 Nobel Prize in economics, and Bilmes, a professor at the Harvard Kennedy School, are no strangers to the concept of hidden and delayed war costs. In 2008 they authored a groundbreaking study showing that the Iraq war, officially counted at $800 billion, would likely cost on the order of $3 trillion.

   The same thing will happen in Afghanistan, the authors of The Three Trillion Dollar War write. The direct cost of the war has already topped $600 billion. Ongoing military operations will bring that total to at least $700 billion through 2014.

   Even after U.S. forces transition from a combat to a training and advising role, the financial burden of the war will continue. Stiglitz and Bilmes highlight some of the big costs, like caring for the veterans of the Afghanistan war (total estimated cost: $1 trillion); supporting the Afghan security forces ($5 billion to $8 billion per year).

   U.S. aid to Afghanistan is also sure to be a significant issue. Congress has already appropriated close to $90 billion — over $50 billion for security assistance and close to $40 billion for economic and humanitarian reconstruction. Despite this significant investment, the Afghan security forces remain largely incapable of operating independently of U.S. and allied trainers. Meanwhile, billions of aid dollars have been wasted on unneeded and unsustainable projects, or simply lost to fraud and corruption.

   Congress is taking small steps to increase transparency and accountability in U.S. aid to Afghanistan. But it may be too little too late.

   “In all of their nation’s history, Afghans have never seen such wealth or experienced such beneficence as the West is providing now,” writes Pulitzer prize winner Joel Brinkley. “But instead of creating a model program of nation building, all of that has badly distorted the economy and the people’s expectations.”

   In Afghanistan, the U.S. strategy has created an aid bubble and made little sustainable progress on the security front. In the U.S., the war has been a drag on the economy, driving up the projected national debt.
   
   “The legacy of poor decision-making from the expensive wars in Afghanistan and Iraq will live on in a continued drain on our economy – long after the last troop returns to American soil,” Stiglitz and Bilmes conclude.

   Is it too late to address the effect the Afghanistan war will have on the U.S. economy? Maybe, there are certainly some steps we can take. The first one is ending the Afghanistan war and developing a new strategy for more effective (and less costly) engagement with Afghanistan. Another essential step is reining in government spending (and the out-of-control defense budget in particular). These won’t be easy steps, but they are crucial if we want to get our fiscal house in order.
   

   
   

   Tags: Afghan security forces, aid, COIN, drawdown, economy, exit strategy, War costs

2. U.S. Taxpayers Pay the Price for Wasteful War Strategy

   Published: November 20th, 2012
   

   

   The U.S. and Afghanistan began talks last week over the U.S. military presence in Afghanistan after 2014, news sources report. The talks, which will tackle thorny questions like immunity for U.S. troops and the number of that will remain in the country, could last up to a year.

   These talks are have important implications for the winding down of U.S. combat operations and the beginning of the next phase of U.S. involvement in Afghanistan. But the U.S.-Afghanistan negotiations are unlikely to make the front page. With so much attention on the Petraeus scandal and Benghazi investigation, the war in Afghanistan will likely continue to go unnoticed.

   Overlooking the war in Afghanistan is a mistake, and one that will cost U.S. taxpayers billions of dollars.

   Many Americans seem to believe that the war in Afghanistan is over. This is an understandable mistake; most policymakers don’t talk about the fact that 68,000 U.S. troops are still fighting in Afghanistan.

   Many also forget about the war because they believe it will end soon. In fact, the U.S. has committed to withdrawing its 68,000 combat troops by the end of 2014, over two years from now. The pace of the drawdown is still undecided, as is the number of U.S. military trainers and special operations forces that will remain after 2014.

   The large U.S. military presence has come at a high price: $13.2 billion per month in 2011, $10.5 billion per month billion in 2012, and an estimated $8.1 billion per month in 2013, according to administration budget figures.

   Experts say sustaining 20,000 troops could cost $25 billion per year. Adding several billion each year for security and economic aid, and annual war costs could reach $30 billion. War costs, already nearing $600 billion, will continue to add up over the next several years.

   Congress will play a key role in reining in wasteful spending in Afghanistan. Already some who previously supported continuing the war have recognized the ineffectiveness of the current strategy and called for an accelerated drawdown.

   Other members of Congress, however, continue to believe that a large military presence will solve Afghanistan’s problems. They equate withdrawal with retreat, believing that more troops and more money will somehow lead to victory.

   In fact, the past eleven years have shown that the U.S. strategy in Afghanistan has been counterproductive. When the U.S. increased troop levels, insurgent attacks increased. When the U.S. poured billions of dollars into unsustainable projects, it created an aid bubble that will burst when international funding dries up.

   If U.S. policymakers don’t step up and fix the wasteful strategy in Afghanistan, U.S. taxpayers will end up paying the price.

   
   

   Tags: aid, COIN, Congress, defense spending, economy, General Petraeus, strategy, War costs

3. Costs of Nation Building

   Published: November 13th, 2012
   

   

   The resignation of CIA Director General David Petraeus as head of the CIA last Friday led many to reflect on the legacy of the man who led U.S. and allied forces in Afghanistan from 2010 to 2011.

   Bing West, assistant Secretary of Defense for President Reagan, had this to say about Gen. Petraeus and Afghanistan:

   “Gen. Petraeus’s concept of nation building as a military mission probably will not endure. Our military can train the armed forces of others (if they are willing) and, in Afghanistan, we can leave behind a cadre to destroy nascent terrorist havens. But American soldiers don’t know how to build Minneapolis or Memphis, let alone Muslim nations.”

   West pinpointed one of the fundamental flaws of nation-building. U.S. troops are most capable in the world, but they are trained for combat, not building roads and distributing food aid.

   There’s another big problem with nation-building in Afghanistan: it is very expensive. And with the a national debt of over $16 trillion, the U.S. cannot afford to spend billions more on the war in Afghanistan.

   War costs ramped up significantly as the U.S. mission in Afghanistan expanded. From 2001 to 2006, spending on the war did not exceed $20 billion per year. In 2010, 2011, and 2012, war costs were over $100 billion per year.

   As U.S. combat troops leave Afghanistan, war funding will decline, but not as much as you might expect. The Pentagon’s request for operations in Afghanistan in 2013 is $85.6 billion, or $1.6 billion per week.

   The U.S. military presence in Afghanistan after 2014 is still unclear. But if 20,000 troops remain, a plan that some members of Congress support, war costs could top $25 billion per year for years to come.

   Meanwhile, the U.S. is facing a fierce budget debate at home. With a national debt of over $16 trillion, finding ways to cut back government spending is critical. The Pentagon is already facing significant budget reductions of $487 billion over the next ten years, plus another $500 billion in automatic, across-the-board cuts if Congress fails to agree on a budget deal before January.

   The war has already cost over $580 billion. Spending billions more on nation-building in Afghanistan, while the U.S. economy is still recovering, doesn’t make sense.

   
   

   Tags: Afghan security forces, aid, defense spending, deficit reduction, economy, General Petraeus, nation building, War costs

4. War Costs, Part 2: The War That Won’t End

   Published: October 19th, 2012
   

   Note: This is the second in a three-part series on the economic costs of the war in Afghanistan. Part one can be found here. Part three is forthcoming.

   
   

   The War That Won’t End

   After eleven years of war in Afghanistan, the U.S. is planning to withdraw its combat troops by the end of 2014 — two years from now. But even after combat operations end, the U.S. policy towards Afghanistan war will continue to cost taxpayers billions each year.

   Afghanistan has become the forgotten war. It has been largely ignored by both presidential candidates. If you listened only to what policymakers are saying about Afghanistan, you might think the war was already over.

   But 68,000 U.S. troops are stationed in Afghanistan today. To sustain the war effort in 2013, the Pentagon has requested over $80 billion. War costs will decline by a lot or a little in 2014  depending on the pace of the drawdown. Still, going by the trend for the past decades of wars, we can expect costs for the next two years to push the total cost of the war in Afghanistan close to $700 billion.

   But the costs of U.S. operations in Afghanistan won’t end in 2014. While the U.S. maintains that it will not seek permanent military bases in Afghanistan, some policymakers have called for leaving a sizeable military force – up to 20,000 troops – in Afghanistan after 2014. Experts estimate that maintaining military presence on this scale could cost $25 billion per year.

   In addition to the possibility of supporting a continued U.S. military presence, the U.S. will likely continue to spend billions on Afghanistan aid each year. Congress has allocated $50 billion in security aid to Afghanistan over the past 10 years. U.S. officials have said its future contribution for Afghan security aid will be around $2 billion per year.

   The Afghan security forces will likely be dependent on foreign donors for quite some time, as the International Monetary Fund estimates that Afghanistan’s economy will not be able to sustain the country’s security operations until 2023.

   In addition to the ongoing costs of operations in Afghanistan, the war has led to indirect costs that will continue for decades. Studies show that caring for the veterans of Iraq and Afghanistan could cost $600 billion to $1 trillion over the next forty years.

   The financial cost of Afghanistan war have already taken a toll on the U.S. economy, and it will continue to do so unless we realign our Afghanistan strategy with U.S. national security interests. A reevaluation of the U.S. policy towards Afghanistan will save billions and support a more effective national security strategy.

   
   

   Tags: Congress, defense spending, drawdown, economy, exit strategy, Public opinion, War costs

5. Billions of aid dollars, no solution to Afghanistan’s security problems

   Published: August 23rd, 2012
   

   “Green on blue” attacks — attacks by Afghan police and military trainees against U.S. forces — are on the rise. In the past two weeks alone, ten U.S. troops have died at the hands of their Afghan allies. Insider attacks accounted for 32% of U.S. fatalities in Afghanistan this month.

   The uptick in insider attacks is just the most recent sign that U.S. efforts to build local security forces in Afghanistan — efforts that cost U.S. taxpayers billions of dollars each year — are foundering.

   Ten years and billions of dollars after the U.S. embarked on efforts to improve Afghanistan’s security forces, corruption is still a big problem. Afghan military and police have been accused of participating in a wide range of criminal activities, from accepting bribes to drug trafficking to selling donor-provided equipment.

   Corruption is just one of many roadblocks for U.S. efforts to build capable security forces in Afghanistan. Low literacy is another. According to LtGen. William Caldwell, head of the ISAF training mission in Afghanistan, the literacy rate for Afghan security force recruits is about 14 percent. Illiterate recruits find performing routine security tasks, like checking IDs, difficult.

   The many obstacles U.S. trainers face in Afghanistan have limited the success of the program. LtGen. Curtis Scaparrotti, the deputy commander of U.S. forces in Afghanistan, has said that few Afghan security units, “probably one percent,” can operate without support from the U.S. and allies.

   Limited evidence of success hasn’t stopped the U.S. from pouring billions into efforts to build up the Afghan security forces. In fact, the U.S. has spent over $52 billion on security aid to Afghanistan from 2002 through 2012.

   Most of that total (about $50 billion) went directly to the Department of Defense efforts to train and equip the Afghan Army and Police. The Department of State also contributes to Afghan security efforts through Foreign Military Financing and International Military Education and Training, programs that cost more than $1 billion over the past ten years.

   Each year, efforts to improve Afghanistan’s security capabilities cost U.S. taxpayers billions of dollars. The U.S. contributed $11.2 billion in 2012. The budget request for 2013 is $5.8 billion. As the ANSF program shifts from building up to sustaining the force, costs will decline further, to an estimated $4.1 billion per year after 2014.

   Even that amount is unaffordable for Afghanistan, which relies on foreign aid for about 90 percent of its budget. the The IMF estimates that Afghanistan will not be able to finance its own security spending until at least 2023.

   Ten years and more than $52 billion later, Americans are realizing that the our Afghanistan policy was based less on an understanding of U.S. strategic interests and more on the belief that by spending billions we could reshape Afghanistan. The only question is whether policymakers will realize it too, or whether they will continue to spend billions of dollars on an unnecessary war while underinvesting in more important national security priorities.

   
   

   Tags: Afghan security forces, aid, drawdown, economy

6. U.S. Commits to Billions in Afghanistan Aid

   Published: July 10th, 2012
   

   

   At the international aid conference in Tokyo there was another sign that the U.S. will continue to spend billions on aid to Afghanistan, despite serious questions about how aid dollars are spent.

   At the conference donor nations pledged $16 billion in non-security aid to Afghanistan over the next four years. The U.S. contribution was not specified, but Secretary of State Clinton said that the administration intends to keep aid to Afghanistan “at or near the levels of the past decade through the year 2017.”

   According to news reports the expected U.S. contribution to Afghanistan aid is $1 billion to $2.3 billion per year for the next five years. Given that U.S. non-security aid to Afghanistan has topped $1.5 billion per year since 2002, future aid levels seems likely to be at the high end of that range. That means total non-security funding will come to some $8 billion over the next four years.

   Of course, that includes only economic and humanitarian aid. Security aid will cost even more. In 2013 the Pentagon requested $5.7 billion to train and equip the Afghan National Security Forces, down from the previous year’s $11.2 billion. After 2014 the U.S. contribution to Afghan security aid will go down even further, possibly to $2.3 billion. Despite the steady downward trend, the four year total for security aid will easily surpass $10 billion.

   The U.S. seems to be making a feeble attempt — very feeble; only in Afghanistan could $18 billion over four years be considered a cut —  to stem the massive flow of aid dollars to Afghanistan. But what’s missing is an attempt to improve accountability in Afghanistan aid.

   At the Tokyo conference donors paid lip service to accountability by making up to 20 percent of the $16 billion contingent on Afghanistan’s efforts to fight corruption and improve accountability. But individual nations direct their own aid dollars, and there is no sign that the U.S., which has poured billions into Afghanistan over the past decade despite evidence of rampant corruption, will change its policy.

   An estimated 85 percent of Afghanistan aid is eaten up in overhead costs or lost to waste and corruption. Instead of taking steps to make aid dollars more efficient, U.S. policymakers keep sending billions to Afghanistan. In 2002, that policy was wasteful and foolish, creating an aid bubble in Afghanistan that will burst when NATO pulls troops and funding. In 2012, pouring billions into Afghanistan aid without ensuring that it is well spent is not just foolish, it is actually dangerous. With a sluggish economy and more important defense priorities, there are better uses for U.S. taxpayer dollars.

   
   

   Tags: aid, defense spending, diplomacy, drawdown, economy, strategy

7. $85 Billion of Aghan Aid Wasted

   Published: May 28th, 2012
   

   The president has requested close to $10 billion for Afghanistan reconstruction next year. If Congress approves the request, that will bring the total amount of U.S. reconstruction aid to Afghanistan to $100 billion since 2002, according to the latest quarterly report from the Special Inspector General for Afghanistan Reconstruction. That averages out to a little over $8 billion each year.

   $8 billion is a lot of money. It’s $2 billion more than Congress needs to find to avoid raising student loan interest rates. It’s more than three times what the Department of Energy spent last year on vital nuclear nonproliferation programs, and it’s four times the amount the Veterans Health Administration spent to provide medical care to recent combat veterans in 2010.

   Some U.S. aid money has been well spent. The literacy rates among the Afghan National Security Forces, for example, has almost tripled since 2009.

   But a lot of the $100 billion U.S. taxpayer dollars spent on Afghanistan aid has been misspent. A former senior auditor for SIGAR estimates that only 15% of aid dollars makes it to the intended recipient. The rest is lost to waste and corruption or eaten up by overhead costs. For the U.S., that means $85 billion has been wasted in Afghanistan.

   Slashing aid to Afghanistan (as the Senate Appropriations committee recently did, cutting the president’s request by 28%) isn’t necessarily the answer. Doing something on a smaller scale does not mean you’re doing it better.

   It’s not simply a matter of changing how much we invest; we must change the way we invest. By making each aid dollar more effective, we will spend less and get real results.

   What does this mean in practical terms? There are a lot of recommendations for making Afghanistan aid more effective. Improving congressional oversight would be a good start. Cracking down on wartime contracting abuses is also essential. And focusing on economic development – promoting investment in local infrastructure, providing subsidies and technical assistance to local agricultural producers, and helping Afghan women directly through micro-lending and education programs – would also be smart.

   $85 billion of U.S. taxpayer dollars has already been wasted. Billions more are at risk, unless the current course changes.

   
   

   Tags: Afghan security forces, Afghanistan government, aid, economy, strategy, War costs

8. Withdraw Troops from Afghanistan but Stay Engaged

   Published: January 4th, 2012
   

   

   Mary Kaszynski
   Afghanistan Study Group Blogger

   The war in Afghanistan has cost a lot. In terms of dollars, it has cost $570 billion since 2001, including over $120 billion budgeted for 2012. Caring for the veterans of Iraq and Afghanistan could cost an additional $700 billion. Afghanistan alone has cost the lives of 1,800 US troops, as well as at least 12,000 Afghan civilians.

   Having spent so much on the war, naturally the American public would like to ensure that we’ve gotten something out of it. This is a favorite refrain of those who oppose an accelerated drawdown. If we withdraw troops now, they say, we might as well be abandoning all our achievements and goals in Afghanistan.

   This argument is deeply flawed, and also dangerous. The flaw is in equating withdrawing troops with ending our engagement with Afghanistan. The danger is in the underlying assumption that the only kind of engagement is military engagement, and the only way to ensure that our troops have not died in vain is by sending more troops.

   Developing a successful strategy for Afghanistan means getting past this idea that “engagement” means “maintain a military presence”. As the Senate Foreign Relations Committee noted in its most recent report, “The U.S. role in Afghanistan is changing, but Washington should repeatedly stress that its engagement is not ending…[after the transition to local security forces] the United States will remain vigorously engaged on security, governance, and economic and social development.”

   Adapting to this new role and developing a new strategy for Afghanistan will not be easy. It will require a realistic assessment of US interests in the region, as well as capabilities and limitations. It will require building the economy, not just providing aid. It will require some kind of near-term political reconciliation and long-term investment in improving governance. It will require commitment from the international community, and it will require working with regional actors.

   The alternative to this approach – continuing to rely on military engagement – is a strategic and economic quagmire. By relying too much on the military arm our foreign policy, we have allowed it to grow too large – larger, and not necessarily more effective. The result is a military footprint that reflects old security interests, but does not address current threats. Lack of strategic discipline has had fiscal consequences as well. US military spending has grown out of control – a staggering 81% since 2001 according to SIPRI. The costs of the two wars alone, at over one trillion, were a main driver of the current deficit.

   Bringing the troops home is not retreat, and it is not abandonment. It is simply the first step towards a more effective Afghanistan policy and a smarter, more responsible defense budget.

   
   

   Tags: continuation, defense spending, drawdown, economy

9. Priorities and Perspective: Are we Reasonably Allocating our Resources in the Af-Pak Region

   Published: December 19th, 2011
   Author: Mary Kaszynski

   Mary Kaszynski
   Afghanistan Study Group Blogger

   
   

   If you had to choose which country is the most strategically important – Afghanistan, Pakistan, or Iran – you might have a hard time deciding.

   On the one hand we have Pakistan: Population 175 million, the sixth largest in the world. An unstable civilian government facing off with a powerful military. A haven for insurgents – not to mention Osama bin Laden – who attack US troops across the border in Afghanistan. The extent to which Pakistani officials are complicit is unclear, although former JCS Chair Adm. Mike Mullen called the ISI “the virtual arm” of the Haqqani network. Comments like these from both countries, combined with incidents like the NATO airstrike that killed 24 Pakistani soldiers, have US-Pakistan relations at an all-time low. Finally, there’s the little matter of Pakistan’s nuclear arsenal, which numbers some 100 weapons.

   On the other hand we have Iran, a smaller country, but arguably more unstable and potentially threatening. Jon Huntsman called Iran’s nuclear ambitions “the transcendent issue of this decade from a foreign policy standpoint.” Hyperbole? Perhaps. But there’s no question that preventing Iran’s pursuit of nuclear weapons is important.

   That leaves Afghanistan. When Newt Gingrich called Afghanistan “the least important of the three countries,” no one remarked –  because everyone is thinking the same thing. The US has already achieved its primary strategic objectives in Afghanistan; it is no longer our fight.

   This leaves us with something of a puzzle. Afghanistan represents little in terms of srategic importance – and yet 90,000 US troops are still stationed there. We have spent over one trillion dollars on the wars, and will spend $100 billion next year. War spending is a main driver of the current financial crisis.

   As one wasteful war winds down, it’s worth thinking about what our national security interests really are. Building our economy – that is vital to our national security. So is preventing Iran from building a bomb as well as preventing the dangerous situation with Pakistan from spiralling out of control. Compared to goals like these, nation-building in Afghanistan seems trivial.

   Look at it another way. An American official told New York Times’ Bill Keller: “If you stand back and say, by the year 2020, you’ve got two countries [Afghanistan and Pakistan]— 30 million people in this country, 200 million people with nuclear weapons in this country, American troops in neither. Which matters? It’s not Afghanistan.”
   In thirty years, will we look back and be glad that we spent $100 billion on Afghanistan in 2012? Or will we regret such vast expenditure in Afghanistan that was not commensurate with regional priorities?

   
   

   Tags: Afghanistan government, defense spending, economy, Iran, Pakistan, strategy

10. The Black Hole of Afghanistan Infrastructure Projects

    Published: December 9th, 2011
    Author: Mary Kaszynski

    

    U.S. Navy sailors attached to Naval Mobile Construction Battalion 5 move K-Span panels to an assembly area at Camp Leatherneck, Afghanistan, on July 25, 2010. Naval Mobile Construction Battalion 5 deployed to Afghanistan to execute general engineering, infrastructure construction and project management in support of Operation Enduring Freedom.

    Mary Kaszynski
    Afghanistan Study Group Blogger

    Two foreign invasions for a total of three decades of war have largely taken their toll on Afghanistan infrastructure – there isn’t much left.  And what remains is only partially usable, according to a 2008 report by the Government Accountability Office (GAO). Building Afghanistan’s infrastructure has been a centerpiece of US efforts, for both security reasons and to encourage economic development.  However, what was there before the U.S. stepped in?

    The GAO estimates that in late 2001 about 16% of Afghanistan’s roads were paved, compared to 80% in neighboring countries.  Approximately 31%, or $16 billion, in US aid to Afghanistan since 2001 has gone towards economic, social, and political development efforts, according to the Congressional Research Service.  As much as 25% of USAID’s Afghanistan budget goes specifically to road construction, to which the DOD has also contributed over $500 million through the Commander’s Emergency Response Program, a flexible fund for small reconstruction projects.

    There are some positive indications in the quest to improve Afghanistan’s infrastructure – for example, as of September 2008, USAID had built or repaired over 1,600 miles of road. However, the challenges are far more numerous.  Lack of transparency and insufficient interagency cooperation have plagued US efforts. Questions have been raised in particular about poor of oversight for the CERP program, which was originally intended for small projects, but has been increasingly used to fund large-scale projects.

    Some construction projects are even counterproductive. For example, the Great Wall of Kandahar.  This infrastructure project may alleniate the local population more than protect it, thus ultimately setting back the war effort and wasting taxpayer dollars.

    The waste will continue after construction is completed, because many of these projects are unsustainable. GAO estimates that 90% of Afghanistan’s budget comes from foreign aid, meaning that the US and other countries will be picking up the tab for building and maintaining Afghanistan’s infrastructure for quite some time.

    Afghanistan estimates they will continue to need outside aid until 2025.  The U.S. taxpayers have already contributed significant funds to Afghanistan infrastructure.  Monies that could have been utilized to help our own lagging economy and crumbling infrastructure.  In this time of necessary austerity how much more can we contribute to Afghanistan without negative consequences here at home?

    
    

    Tags: Afghanistan government, COIN, defense spending, economy, nation building