Joint Hearing of the Committee on Homeland Security and Governmental Affairs of the U.S. Senate and the Committee on Veterans’ Affairs of the U.S. House of Representatives at 1:00 p.m. CDT.
Hearing Transcript on The True Cost of the War
THE TRUE COST OF THE WAR
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SEPTEMBER 30, 2010
SERIAL No. 111-103
Printed for the use of the Committee on Veterans' Affairs
U.S. GOVERNMENT PRINTING OFFICE
For sale by the Superintendent of Documents, U.S. Government Printing Office
COMMITTEE ON VETERANS' AFFAIRS
CORRINE BROWN, Florida
STEVE BUYER, Indiana, Ranking
Malcom A. Shorter, Staff Director
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Veterans' Affairs are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.
C O N T E N T S
September 30, 2010
The True Cost of the War
Batiste, Major General John, USA (Ret.), Rochester, NY
Prepared statement of General Batiste
Bilmes, Linda J., Daniel Patrick Moynihan Senior Lecturer in Public Policy, John F. Kennedy School of Government, Harvard University, Cambridge, MA
Prepared joint statement of Ms. Bilmes and Dr. Stiglitz
Disabled American Veterans, Joseph A. Violante, National Legislative Director
Prepared statement of Mr. Violante
Gibson, Corey, Terre Haute, IN
Prepared statement of Mr. Gibson
Knight-Major, Lorrie, Silver Spring, MD
Prepared statement of Ms. Knight-Major
Nash, Major General William L., USA (Ret.), Washington, DC
Prepared statement of General Nash
Stiglitz, Joseph E., Ph.D., University Professor, Columbia University, New York, NY
Prepared joint statement of Dr. Stiglitz and Ms. Bilmes
Van Derveer, Lieutenant Colonel Donna R., USA (Ret.), Ashville, AL
Prepared statement Colonel Van Derveer
Veterans for Common Sense, Paul Sullivan, Executive Director
Prepared statement of Mr. Sullivan
Veterans' Outreach Center of Rochester, NY, Colonel James D. McDonough, Jr., USA (Ret.), President and Chief Executive Officer
Prepared statement of Colonel McDonough
SUBMISSION FOR THE RECORD
Swords to Plowshares, statement
THE TRUE COST OF THE WAR
Thursday, September 30, 2010
U. S. House of Representatives,
Committee on Veterans' Affairs,
The Committee met, pursuant to notice, at 10:00 a.m., in Room 334, Cannon House Office Building, Hon. Bob Filner [Chairman of the Committee] presiding.
Present: Representatives Filner, Mitchell, Teague, Rodriguez, McNerney, and Space.
Also Present: Representatives George Miller of California, Jones, and Moran of Virginia.
The CHAIRMAN. Good morning. Welcome to this hearing of the House Veterans' Affairs Committee.
Let the record show that Members in attendance besides the Chair are Mr. Mitchell of Arizona; Mr. Teague of New Mexico; Mr. Rodriguez of Texas; and Mr. McNerney of California.
And I would ask unanimous consent that our colleague, the gentleman from North Carolina, Mr. Jones, be allowed to sit at the dais and participate as a Member of the Committee for this hearing.
Hearing no objection, Mr. Jones, thank you for joining us. We know of your great interest and leadership on the issues we are discussing. Thank you again for being here today.
We have titled the hearing "The True Cost of the War." It struck me, as I looked at a lot of the facts and data that we see across our desk, that, as a Congress and as a Nation, we really do not know the true cost of the wars we are fighting in Iraq and Afghanistan.
I also want the record show that Mr. Space from Ohio is here.
I ask unanimous consent that Mr. Moran from Virginia be allowed to sit at the dais and participate as a Member of the Committee for today. Hearing no objection, so ordered.
Thank you very much, Mr. Moran, for your leadership and interest on these issues.
We all look at the data that comes from these wars. It struck me one day that the official data for the wounded is around 45,000 for both wars; and, yet, we know that 600,000 or 700,000 of our veterans of these wars, of which there are over a million already, have either filed claims for disability or sought health care from the U.S. Department of Veterans Affairs (VA) for injuries suffered at war—45,000 versus 800,000. This is not a rounding error. I think this is a deliberate attempt to mask what is going on, in terms of the actual casualty figures.
We know there is denial of post-traumatic stress disorder (PTSD). It is considered a weakness among Marines and soldiers to admit mental illness, so we don't even have those figures until it is possibly too late.
We all know that women are participating in this war in a degree never before seen in our Nation's history, and yet, an estimated half or two-thirds have suffered sexual trauma. The true cost of war.
We know that over 25,000 of our soldiers who were originally diagnosed with PTSD got their diagnosis changed—or their diagnosis was changed as they had to leave the Armed Forces, changed to personality disorder. Now, not only does that diagnosis beg the question of why we took people in with a personality disorder, it means that there is a preexisting condition and we don't have to take care of them as a Nation. It is the cost of war.
There have been months in this war where the suicides of active-duty members have exceeded the deaths in action. Why is that? When our veterans come home from this war, we say we support troops, we support troops, we support troops, but there is a 30-percent unemployment rate for returning Iraq and Afghanistan veterans. That is three times an already-horrendous rate in our Nation. Guardsmen find difficulty getting employment because they may be deployed.
Now, a democracy has to go to war sometimes, but people have to know what is the cost? They have to be informed of the true nature not only in terms of the human cost and the material cost but hidden costs that we don't know until after the fact, or don't recognize.
Why is it that we don't have the mental health care resources for those coming back? Is it because we failed to understand that the cost of serving our military veterans is a fundamental cost of the war? Is it because we sent these men and women into harm's way without accounting for and providing the resources necessary for their care if they are injured, wounded, or killed?
Every vote that Congress has taken for the wars in Iraq and Afghanistan has failed to take into account the actual cost of these wars by ignoring what will be required to meet the needs of our men and women in uniform who have been sent into harm's way. This failure means that soldiers who are sent to war on behalf of their Nation do not know if their Nation will be there for them tomorrow.
The Congress that sends them into harm's way assumes no responsibility for the long-term consequences of their deployment. Each war authorization and appropriation kicks the proverbial can down the road. Whether or not the needs of our soldiers injured or wounded in Iraq and Afghanistan will be met is totally dependent on the budget priorities of a future Congress, which includes two sets of rules: one for going to war and one for providing for our veterans who fight in that war. We don't have a budget for the VA today, as we are about to enter the new fiscal year.
We are trying to provide for those involved in atomic testing in World War II, even after we were told there would be no problems, and yet they can't get compensation for their cancer. This Committee and this Congress has a majority of people who believe that we should fully compensate the victims of Agent Orange for injuries in Vietnam. Yet we have a PAYGO rule on bills coming out of this Committee. They say it is going to cost roughly $10 billion or $20 billion over the next 10 years but we don't have it—why don't we have it? They fought for this Nation. We are still trying to deal with Persian Gulf War illness, not to mention all the casualties from this war.
We have to find a PAYGO offset, but the U.S. Department of Defense (DoD) doesn't have to. The system that we have for appropriating funds in Congress is designed to make it much easier to vote to send our soldiers into harm's way than it is to care for them when they come home.
This Committee and every one of the people here has fought tooth and nail to get enough money for our veterans. We have to fight for it every day. We have been successful in the last few years, but we won't if that rate of growth continues.
This is morally wrong, in my opinion, and an abdication of our fundamental responsibility as Members of Congress. It is past time for Congress to recognize that standing by our men and women in uniform and meeting their needs is a fundamental cost of war. We should account for those needs and take responsibility for meeting them at the same time we send these young people into combat.
Every Congressional appropriation for war, in my view, should include money for what I am going to call a Veterans Trust Fund. The Fund will assure the projected needs of our wounded and injured soldiers are fully met at the time they're going to war.
It is not a radical idea. Businesses are required to account for their deferred liability every year. Our Federal Government has no such requirement when it comes to the deferred liability of meeting the needs of our men and women in uniform, even though meeting those needs is a moral obligation of our Nation and a fundamental cost. It does not make sense fiscally; it does not make sense ethically.
If, in years past, Congress had taken into account this deferred fiscal liability and moral obligation of meeting the needs of soldiers, we would not have the kind of overburdened delivery system that we have today in the Department of Veterans Affairs. Would veterans and their advocates on Capitol Hill have to fight as hard as they do every year for benefits that should be readily available as a matter of course? Would they have to worry as much as they do today that these benefits will become targets in the debate over reducing the Federal budget?
Listen to this statement by the Co-chair of the National Commission on Fiscal Responsibility that is trying to figure out how we balance our budget. Former Senator Simpson said, "The irony is that veterans who saved this country are now, in a way, not helping us to save the country in this fiscal mess." That is, they should defer their health and welfare needs because of a budget problem.
So we are going to examine this. I thank the gentlemen who are here today. The Congress did adjourn early this morning, and it is good to have you all here on this important issue.
[The prepared statement of Chairman Filner appears in the Appendix.]
The CHAIRMAN. Would anybody like to make opening remarks?
Mr. RODRIGUEZ. Yes, Mr. Chairman, let me first thank you for allowing us to be here. As you indicated, we have adjourned, and I first have a flight I am going to be taking, but I do want to thank you for focusing our attention on this major issue.
I also want to mention that this might be probably the last time we meet this year, and I want to just thank you for your leadership in the last 4 years in making a huge difference to our veterans. Having served on this Committee probably, of the ones that are here today, the longest, next to you—I know that we have had some frustrating situations, and the last 4 years has been very rewarding to at least make some inroads into some of the problems. And I am hoping that, as we move forward, that you will continue to bring up the importance of reaching out to these veterans.
I know that one issue that I just want to again mention is the one where we dealt with Project 112, which was the studies that were done in the 1960s and 1970s, and where at first, the Department of Defense denied having even done the studies. Later on, we found that there was about 20-something studies, and then there was 30-something. I guess the last figure was about 50-something studies in the 1960s and 1970s where we used nerve gas and used specially other things on our own soldiers and then actually experimented with them, a lot of the Marines and people in the Navy. And still we haven't done the right thing with a huge number of them.
And so I am hoping that, as we move forward, we do the right thing for those veterans who suffered. Our veterans were there for us, and we need to be there for them now as they reach their twilight years.
Thank you very much for your leadership in this area.
The CHAIRMAN. Thank you, Mr. Rodriguez.
Mr. Jones or Mr. Moran, any opening remarks?
Mr. JONES. No, thank you, Mr. Chairman. I am just anxious to hear from the witnesses—
The CHAIRMAN. Great. We are going to hear from them after I give another hour of opening remarks.
We are going examine these questions today. We are pleased and honored to have with us Nobel Laureate Joseph Stiglitz of Columbia University, Linda Bilmes of Harvard, the authors of "The Three Trillion Dollar War," which was a groundbreaking book that brought a healthy but sobering dose of reality into our public debates about the wars in Iraq and Afghanistan and the long-term consequences of those decisions.
We are also, in the following panels, going to have distinguished military leaders, veterans of the wars in Iraq and Afghanistan, veterans advocates, and families of veterans to help us put into focus this question of how we deal with our veterans who have served us.
It is time for open and honest discussion about the moral obligations for our Nation. It is time to reflect on the need to reform a process that systematically denies the connection between fighting a war and meeting the needs of those we send into harm's way. Our veterans deserve better.
Professor Bilmes joins us from Harvard University. Dr. Stiglitz joins us from Columbia University, and Dr. Joe Violante—I have just given you an honorary doctorate—is here representing the Disabled American Veterans (DAV).
Thank you for being here today.
Dr. Stiglitz, are you first up? We will include all of your written statements in the record.
I don't know who is first, Dr. Stiglitz or Ms. Bilmes? Okay, Dr. Stiglitz, proceed please.
STATEMENTS OF JOSEPH E. STIGLITZ, PH.D., UNIVERSITY PROFESSOR, COLUMBIA UNIVERSITY, NEW YORK, NY (NOBEL LAUREATE); LINDA J. BILMES, DANIEL PATRICK MOYNIHAN SENIOR LECTURER IN PUBLIC POLICY, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY, CAMBRIDGE, MA; AND JOSEPH A. VIOLANTE, NATIONAL LEGISLATIVE DIRECTOR, DISABLED AMERICAN VETERANS
Dr. STIGLITZ. Well, thank you very much, Chairman Filner, Members of the House Veterans' Affairs Committee. Thank you for convening this hearing today and for inviting us to testify on the true cost of the war.
Congressman Filner outlined some of the costs of war, the human costs, that go beyond the budgetary costs that so much of the attention has been focused on. I want to thank you for your commitment to deal with these problems.
There is no such thing as a war for free. The repercussions of war and the costs of war persist for decades after the last shot is fired. As Congressman Filner mentioned, the inevitable costs, the economic consequences, and the long-term welfare of the troops are seldom mentioned at the start of a conflict.
The budgetary problems facing the United States today remind us that even the richest country in the world faces constraints and must make choices. Limitations of resources, both budgetary and military, have to be confronted. But we can only make intelligent choices if we have the relevant information. Analysis of costs and benefits provide some of the critical pieces of information.
Today, we have a better view of both the benefits and the costs of war than we did at the outset. The benefits of the war center on the value of additional security obtained by the war. This is a subject on which reasonable people may disagree. It requires assumptions typically unverifiable about what would have happened in the absence of the conflict.
Estimating the cost of the war is more straightforward. There is no doubt that wars use up resources. The question is how to estimate the full magnitude of the resources used and assign values to them. Any estimates have to be comprehensive, not only the direct budgetary cost today but the long-term budgetary cost, some of which are felt outside of the Department of Defense, as well as the overall cost to our economy and our society.
Looking at the long-run cost for war is especially important because the cost lasts so long. For instance, disability claims for World War I veterans did not peak until 1969.
It is obvious now that the wars in Iraq and Afghanistan have been far more costly, both in terms of blood and treasure, than its advocates suggested at the outset. The absence of reliable estimates meant there was no opportunity for a meaningful debate before we embarked on this war of choice.
Two years ago, we published "The Three Trillion Dollar War: The True Cost of the Iraq Conflict," in which we estimated that the total cost to the U.S. through 2017, including lifetime health care and disability costs for returning troops, as well as the economic impacts to the country, would be $3 trillion. This price tag dwarfed previous estimates, but subsequent investigations by both the Congressional Budget Office (CBO) and the Joint Economic Committee of Congress found our estimate to be broadly correct.
This morning we will focus on three issues. First, we will discuss some of the costs that the war has imposed on the U.S. economy.
Second, we will provide an updated estimate for the single-biggest long-term budgetary cost of the current war, which is the cost of providing medical care, disability compensation, and other benefits to veterans of the Iraq and Afghanistan conflicts.
Thirdly, we will argue that such costs are inevitable and can be estimated, to some extent, in advance. This means the U.S. should be making provisions for its war veterans at the time we appropriate money for going to war. We will recommend steps that can be taken to address this unfunded financial liability.
Before turning to the cost to the U.S. economy, let me make a few introductory comments about the difficulties of estimation. What makes this analysis challenging is that government accounting systems do not document most items in a way that would enable an easy assessment of the resources directly used or the full budgetary impact. Congressman Filner has pointed out the discrepancies between the 45,000 casualties and the number of individuals making use of our VA medical facilities and claiming disabilities.
The way we account for our troops is an essential example of the way economic costs typically exceed budgetary costs. For example, from the sole perspective of military accounting, the cost of a soldier's life is valued at $500,000. This doesn't include the cost to the military of recruiting and training a replacement troop and the impact on morale and mental health of the rest of the unit. It also does not reflect the economic loss of a young man or woman. By contrast, when civilian agencies, such as the Environmental Protection Agency and the Food and Drug Administration, are evaluating proposed regulation, when they compare the cost of imposing a regulation to the potential life saved, they estimate the value of a life between $6 million and $8 million.
In addition to the known cost of conducting current and future military operations and caring for war veterans, which Linda will discuss later, the most sobering costs of the conflict are in the category of "might have beens," what economists call opportunity costs.
Specifically, in the absence of the Iraq invasion, would we still be mired in Afghanistan? Would oil prices have risen so rapidly? Would the Federal debt be so high? Would the economic crisis have been so severe? Arguably, the answer to all four of these questions is "no."
Between 2003 and 2006, we have spent five times as much money in Iraq as in Afghanistan. The Iraq invasion diverted our attention from Afghanistan, a war that is now entering its 10th year and which threatens to destabilize nuclear-armed Pakistan. While success in Afghanistan might always have been elusive, we would probably have asserted control over the Taliban and suffered less expense and loss of life if we had maintained our initial momentum and not been sidetracked in Iraq.
The second cost is the higher price of oil, which has had a devastating effect on our economy. When we went to war in Iraq, the price of oil was under $25 a barrel, and future markets expected it to remain around that level. With the war, prices started to soar, by 2008 reaching $140 a barrel.
In our conservative $3 trillion estimate, we attribute only $5 to $10 of the per-barrel-price increase to the war. However, we now believe that a more realistic estimate of the impact of the war on the oil price over a decade is at least $10 to $15 per barrel. That translates into at least an additional $250 billion increase in the cost of war above the numbers in our book.
Thirdly, the war added substantially to the Federal debt. It is the first time in America's history where a government cut taxes as it went to war, even in the face of continued government deficits. When the crisis began, the global financial crisis, the debt reduced our room to maneuver. It does so even more today, with the results of a deeper and longer recession.
But the link between the war and the crisis is even stronger than that. The crisis itself was, in part, due to the war. The increase in oil prices reduced domestic aggregate demand. Money spent buying oil abroad was money not available for spending at home, for instance. Loose monetary policy and lax regulations kept the economy going through a housing bubble, whose breaking brought on the global financial crisis.
Counterfactuals, what might have happened if we had not gone to war, are always difficult, and especially so with complex phenomena like a global financial crisis with so many contributing factors. What we do know is that one of the true costs of the war is its contribution to a worse economic recession, higher unemployment, and larger deficits than might have otherwise occurred.
Let me conclude with a few general observations. The large disparity between budgetary and the full economic cost of war means that there is a need for a comprehensive reckoning to the cost of the economy as a whole. The fact that we have been able to construct estimates underlines the fact that this exercise can be done once there is a will to do it.
Without good information, there cannot be good decisions about going to war, about exiting the war, and about the conduct of the war. But even more is at stake, as we face intense budgetary pressures in coming years. We have an implicit contract with our veterans, who have served their country so well.
But the way the political and budgetary process is conducted today fails to recognize this. Veterans expenditures are subject to the same PAYGO rules as any other expenditure. This puts our commitments to veterans in jeopardy. This is even more important as these costs soar in response to this war.
Professor Bilmes will discuss these costs and the reforms that are necessary to ensure that we fulfill our commitments.
The CHAIRMAN. Thank you.
Ms. BILMES. Chairman Filner, Members of the Committee, thank you for inviting us to testify today.
My father was a World War II veteran who served in the Army and earned his college and graduate degrees under the GI Bill. I am grateful to our country for honoring its commitment to him.
I would like to discuss two issues in my statement. First, I will explain our revised cost estimates for veterans' medical care and disability benefits. Second, I will recommend that we develop a financial strategy for meeting this obligation.
The largest long-term budgetary cost of the wars is providing medical care and disability benefits to veterans who have served in Iraq and Afghanistan. As of this month, 5,700 U.S. servicemen and women have died, and over 90,000 have been wounded in action or injured seriously enough to require medical evacuation. A much larger number, over 565,000, have already been treated in VA medical facilities.
The evidence from previous wars shows that the cost of caring for war veterans peaks in 30 to 40 years or more after a conflict. The costs rise over time as veterans get older and their medical needs grow.
Two and a half years ago, we estimated the likely cost of providing medical care and disability benefits to Iraq and Afghanistan veterans based on historical patterns. We now have the actual record of 400,000 recent veterans, and we have revised our estimates based on this new information.
The most striking finding is that veterans from the recent wars are utilizing VA medical services and applying for disability benefits at much higher rates than in previous wars. The higher medical usage is the result of several factors, including higher survival rates for seriously wounded troops, higher incidence of post-traumatic stress disorder and other mental health problems, more veterans who are willing to seek treatment for mental health ailments, more generous medical benefits, more presumptive conditions, and higher benefits in some categories.
The high incidence of PTSD means that the medical cost of current conflicts will continue to rise at a rapid rate for many decades. This was the experience with Vietnam veterans diagnosed with PTSD.
And recent studies have documented that PTSD sufferers are at a higher risk for heart disease, rheumatoid arthritis, bronchitis, asthma, liver, and peripheral arterial disease. PTSD sufferers are 200 percent more likely to be diagnosed with a disease within 5 years of returning from deployment. Veterans with PTSD utilized non-mental health care services, such as primary care, ancillary services, diagnostic tests and procedures, emergency services, and hospitalizations, 71 to 170 percent higher than those without PTSD.
Research has also shown that traumatic brain injury, which is estimated to affect some 20 percent of Iraq and Afghanistan veterans, often in conjunction with PTSD, places sufferers at higher risk for lifelong medical problems such as seizures, decline in neurocognitive functioning, dementia, and chronic diseases.
The high number of claims among recent veterans is due both to the health problems I described and also to better outreach and capacity at the VA and greater availability of information on the Internet and greater outreach by veterans service organizations.
Since our book was written, a number of recommendations that we and others urged have been adopted, including that VA has expanded the Benefits Delivery at Discharge Program and Quick Start; increased the number of conditions that are presumptive in favor of the veteran; liberalized the PTSD "stressor" definition and increased some categories of benefits; provided 5 years of free health care instead of 2; and is in the process of restoring medical care to 500,000 moderate-income Priority 8 veterans.
VA has also hired more medical and claims personnel and invested heavily in information technology (IT) upgrades to the claims process. All of these factors contribute to the rising cost estimates I will describe.
Our model for projecting long-term budgetary cost is based entirely on government data. We based our projections for troop levels on estimates by the Congressional Budget Office and the Congressional Research Service. And we used rates of average disability compensation, Social Security Disability benefits, and medical costs on information from the Veterans Benefits Administration (VBA), the Veterans Health Administration, Social Security Administration, and government economic indicators.
The projections cover the period for the 1.25 million servicemembers who have been discharged from Iraq and Afghanistan and become veterans from 2001 to the present, as well as estimates for military members who will become veterans by 2020.
In our earlier work, we estimated that the long-term cost of providing medical care and disability compensation for these veterans would be between $400 billion and $700 billion, depending on the length of and intensity of the conflict and future deployment levels. We now expect the cost range to be between $589 billion and $934 billion, depending on these factors. I believe there is a chart, which has been posted here, which shows our earlier estimates as well as our current estimates.
About three-quarters of this increase is due to higher claims activity and higher medical utilization of Iraq and Afghanistan veterans. And about 18 percent is due to the higher number of troops deployed. Six percent is due to the difference in projecting through 2020 instead of 2017.
In terms of disability cost projections, in 2008, we had projected that between 366,000 and 398,000 returning Iraq and Afghanistan veterans would have filed disability claims by this point, by 2010. In fact, more than 513,000 veterans have already applied for VA disability compensation. We now estimate that the present value of these claims over the next 40 years will be from $355 billion to $534 billion.
In addition, veterans who can no longer work may apply for Social Security Disability benefits. We estimate that the present value of lifetime Social Security Disability benefits for these veterans will range from $33 billion to $52 billion.
In terms of medical cost projections, in our earlier analysis, we had anticipated that 30 to 33 percent of returning veterans, which would be fewer than 400,000, would have been treated in the VA medical system by 2010. The actual number is running at more than 565,000 veterans, that number is from April, so it is probably approaching 600,000 veterans now, which is about 45 percent of discharged troops. In our earlier work, we had projected that the VA would not reach this level until 2016.
We now estimate that the present value of medical care provided by the VA to veterans from Iraq and Afghanistan over the next 40 years will be between $201 billion and $348 billion, depending on the duration and intensity of military operations.
These estimates do not include a range of additional costs that will be paid by departments across government, including veterans' home loan guarantees, veterans' job training, concurrent receipt of pensions, higher costs to Medicare and TRICARE for Life by veterans who are not enrolled in the VA system, costs to State and local governments, or the GI Bill, which is an investment that will yield significant economic benefits but will also add budgetary costs.
Taking these costs into account, the total budgetary costs associated with providing for America's war veterans from Iraq and Afghanistan approaches $1 trillion.
I also want to emphasize that the true cost goes beyond the budgetary costs. There are much larger social and economic burdens that are not paid by the Federal Government but nonetheless represent a real burden on society. These include the loss of productive capacity by young Americans who are killed or seriously wounded; lost output due to mental illness; the burden on caregivers who have to sacrifice paid employment in order to take care of a veteran; the cost of those, particularly among Reservists and Guards, who were self-employed and have lost their livelihood. For many veterans, there is simply a diminished quality of life, the costs of which is borne by individuals and families.
Women troops have been especially hard-hit. They make up 11 percent of the force. Divorce rates are three times higher for female than for male troops. And more than 30,000 single mothers have deployed to the war zone.
The military has also employed several hundred thousand contractors, who have become indispensable to the war effort. These contractors have also suffered from high rates of casualties, injuries, and mental health problems. These impose both budgetary costs—through government subsidies to worker compensation and insurance companies—and social costs in all of the areas mentioned for troops.
In our book, we attempted to quantify the monetary value of some of these costs, although some cannot be quantified. At that time, we estimated that these social costs would reach between $295 billion and $400 billion in excess of the budgetary costs. Given the high number of casualties and the high incidence of mental illness, we expect that this cost will be even higher.
Let me now turn to the issue of financial liability. The scale of our financial commitment to providing for veterans is enormous, and we have estimated that the cost of Iraq and Afghanistan will add at least another half-trillion dollars onto that debt.
But, at present, the U.S. has no financial strategy for how it will pay this growing liability. The financial statements of the United States on the statement of net cost shows that providing for veterans is the fourth-largest cost to the U.S. Treasury.
In terms of accrued long-term liability, the balance sheet of the United States lists $1.3 trillion in veterans' compensation and burial benefits and a liability for $220 billion in veterans' housing loan guarantees. Just to be clear, that is $1.3 trillion in deferred veterans' compensation. This does not take into account, however, the accrued liability for providing medical care or veterans' pensions. And we also believe it significantly understates the obligations for the current war.
We now have no financial plan for meeting this obligation. There is no dedicated mechanism through which taxpayers who are not in military service contribute directly to caring for war veterans. Funding must come from general revenues, competing with a myriad of other demands.
The consequence of ignoring this cost is threefold. First, it understates the true cost of going to war.
Second, from a economic perspective, it is poor financial management. We should not be financing a 40-year-long pension and benefit obligation from annual budget revenues. We are essentially asking VA to fund mandatory benefits using discretionary appropriations.
Third, it leads to the possibility that veterans' needs will not be funded. The VA has the responsibility to determine the availability of VA care based on appropriations levels. But even with the best will in the world and with a strong management team, this may result in insufficient funding. VA ran short of funds in 2005 and 2006. And, in January 2009, the U.S. Government Accountability Office found that VA's assumptions about its costs of long-term care were unreliable because they assumed cost increases were lower than VA's actual recent spending experience.
VA is now facing the additional challenge of estimating demand for 2 years in advance appropriations. However, this is proving challenging because, using its current model, VA cannot determine precise operating needs 2-1/2 years in advance, yet it is being asked by appropriators and by the Office of Management and Budget to do this.
We recommend a different funding model that would include a mandatory component. I would personally—I have long advocated mandatory funding for VA medical care, particularly in light of the long-term infrastructure needs of the VA medical system.
Another way to accomplish creating a mandatory component would be to establish a Veterans Trust Fund that would be funded as obligations occur. Although we cannot estimate precisely the magnitude of long-term demands, it should be possible to develop a framework for setting aside some funding at the time war money is appropriated.
Secondly, in order to facilitate this, we need to improve the actuarial capacity of the VA. The Department should be directed to work with the Institute of Medicine to develop a better system of forecasting the amounts and types of resources needed to meet veterans' needs in 30 years or more, when their needs are likely to peak.
I will stop here. And thank you, again, very much for bringing attention to this important issue.
[The prepared joint statement of Dr. Stiglitz and Ms. Bilmes appears in the Appendix.]
The CHAIRMAN. Thank you, Professor Bilmes.
Mr. VIOLANTE. Mr. Chairman and Members of the Committee, thank you for inviting me to testify today on behalf of Disabled American Veterans. With 1.2 million Members, all of whom were disabled during wartime, no organization understands the true costs of wars better than the DAV.
Mr. Chairman, war leaves a legacy of pain and hardship, borne by the men and women who suffer the wounds and bear the scars, as well as families who suffer the loss of a loved one and family members who care for disabled veterans. The true cost of war also includes the cost of peace, because all who defend our Nation have earned the rights to the benefits.
In order to cover all these costs today and in the future, there are a number of actions that Congress can take.
First, Congress must ensure that all benefits for disabled veterans are paid in full, not offset against other Federal benefits, eroded by inflation, nor whittled down by budget gimmicks such as rounding down our cost of living adjustments. And it is time to fully eliminate the prohibition on concurrent receipt of disability compensation and military retirement pay.
Second, we must fully compensate disabled veterans for their sacrifice and loss, which must include compensation for noneconomic loss and loss of quality of life, not just loss of earning capacity. Both the Institute of Medicine and the Congressionally authorized Veterans' Disability Benefits Commission made this recommendation.
Third, Congress must ensure that existing veterans' benefits are paid accurately and timely to effectively fulfill their intended purpose. Unfortunately, everybody today recognizes the VA benefits claims-processing system is broken. VA must focus on the goal of getting claims done right the first time and not just, quote, "breaking the back of the backlog," end quote.
Mr. Chairman, in November, VBA will roll out its new IT system as a pilot program. At the same time, they are continuing to experiment with more than 50 pilots across the country. It is imperative that Congress provide strong oversight and leadership to ensure that each pilot is judged first and foremost on its ability to help the VA get claims done right the first time.
Fourth, we must fully support veterans' families and survivors. We are grateful that Congress approved the "Caregivers and Veterans Omnibus Health Service Act of 2010," but the law did not go far enough. Congress must extend these benefits to family caregivers of disabled vets from all conflicts and eras. Congress should also eliminate the offset for Survivor Benefit Plan and for those widows receiving Dependency and Indemnity Compensation (DIC).
Fifth, we must ensure that veterans receive high-quality, comprehensive health care from a robust VA health care system. And that requires VA to have sufficient, timely, and predictable funding.
While we remain grateful for the bipartisan support that made advanced appropriations a reality, we are concerned Congress and VA appear to be falling short of the promise of the law. With the new fiscal year beginning tomorrow and no Federal budget in sight, the fact that advanced appropriations for VA's fiscal year 2011 medical care budget is already in place demonstrates the importance and effectiveness of this new funding mechanism. However, Congress's failure to approve the regular fiscal year 2011 VA appropriations before adjournment also means that there is no fiscal year 2012 advanced appropriations approved for next year.
Furthermore, in a July 30th report to Congress, Secretary Shinseki stated that the level of funding contained in VA's fiscal year 2011 advanced appropriations was no longer projected to be sufficient, yet he did not recommend any additional funding. Instead, he talked about reprogramming existing funding from lower-priority areas, which is contrary to the purpose of advanced appropriations.
When VA reports funding requirements have changed due to unforeseen circumstances, the Secretary must request supplemental funding and Congress must provide such funding to fully meet their obligation.
Finally, we must ensure that our Nation never backs away from its obligations to veterans because of our government's inability to keep its fiscal house in order. Any Nation that fails to meet its obligation to those who served, sacrificed, and suffered is a country already morally bankrupt. As such, any recommendations that seek to balance the budget on the backs of disabled veterans must be rejected.
Mr. Chairman, the true cost of defending our Nation includes the full cost to compensate and care for all veterans as well as to support their family caregivers and survivors. Disabled American Veterans stands ready to work with this Committee and Congress to meet these sacred obligations to America's veterans, especially disabled veterans.
That concludes my testimony, and I would be happy to answer any questions. Thank you.
[The prepared statement of Mr. Violante appears in the Appendix.]
The CHAIRMAN. Thank you, Mr. Violante.
Mr. Mitchell, do you have any questions?
Mr. Jones, you are welcome to participate.
Mr. JONES. Mr. Chairman, I will be brief.
I want to thank the professor and the doctor for the book, "The Three Trillion Dollar War." I bought it 2 years ago.
I have Camp Lejeune down in my district—60,000 retired veterans, and the numbers are growing. I want to thank the Chairman for not only this hearing but to bring to the attention of this Congress that we cannot continue to take care of our veterans with the same process. And you have said this, and you have made it very clear. If we don't look at alternatives, the DAV and all these other veterans service organizations are going to wonder, "Why were we cheated out of our benefits?" The shell game, Mr. Chairman, has to stop. That is why, again, this is so critical.
And I hope that, after the elections, whatever happens in November, that this issue—and I am a Republican, and I am not on this Committee, but I want to make this pledge to you and to the veterans of this country. This needs to be one of the number-one priorities for the Congress to figure out what we are going to do, because the collapse is on the way. And I think that the Veterans Trust Fund is the way to start the debate as to what can we do to ensure that we keep our promise to those who have served this country and deserve every benefit that they have earned.
And that is just a general statement. I don't really have a question, but I feel frustrated when I sit here. I have seen it for years. I have seen it for years. I see those kids at Walter Reed with their legs blown off. I see the moms crying, the wives crying. The kids are 19, 20, 21 years old. And, as you said, it is 30 years from now that we really have to be careful.
But, Mr. Chairman, please know that you have my commitment to join in whatever effort we move forward on. Because we are not being honest; we are cheating the veterans if we don't do what is necessary today.
I yield back.
The CHAIRMAN. Again, I thank you for your leadership on the other side of the aisle.
By the way, we can attribute Mr. Jones'—what shall I say—more expansive understanding to the fact that his father was a Democratic Congressman. He doesn't like for us to know that, but thank you.
Mr. Moran, again, thank you for your interest. Most people don't realize that when Members attend another Committee hearing, it is very unusual in this Congress, and very much appreciated.
Mr. MORAN OF VIRGINIA. Thank you, Chairman Filner. Thank you for your leadership.
And I know that the folks in this audience know that Chairman Filner has taken on this responsibility not just as a professional duty but as a personal moral commitment.
We have Mr. Miller entering the room, as well.
And it is nice to see you, George.
Speaking of Chairmen, Mr. Miller Chairs the Education and Labor Committee, which is very much involved in what we are talking about. That is one of the questions I want to ask.
But the first one: Mr. Obey, myself, Mr. Murtha, I think Mr. Rangel, perhaps Chairman Filner, we voted for an amendment that went nowhere, but we did it for 2 or 3 years running—it was Mr. Obey's idea—to have a surcharge to pay for the war. If we were going to pursue the Iraq War, let's just figure out what the cost is and pay for it, rather than making that decision to go to war but passing on the cost to our children and grandchildren to pay for it.
It went down. I think there were more than 400 people who voted against the concept. But it doesn't mean it wasn't a legitimate issue to raise, and I think it would have been the responsible thing to do.
So my first question of two would be, would you have been able to estimate what that kind of surcharge would have been when we were actually making the decision? Is that consistent with the thrust of your testimony, that that is how we should go about making the decision whether or not to go to the war in the future?
Dr. STIGLITZ. Yes, I think it is an excellent idea for a number of reasons.
First, I think it is very important to have transparency and accountability in government, that you ought to know what you are doing and what it costs, and citizens ought to know that, if you want to get something, you have to pay for it, you know, just like shopping, anything.
Secondly, we can calculate it. That is the point that we have been making. You know, you can't estimate it perfectly, but you can't estimate Social Security perfectly. But you can get a fairly reliable estimate that would be the basis of a surcharge. And whether you express it as a percentage of the defense appropriations or as a tax, a separate tax, you know, you could express it in a number of different ways. It would be very easy, actually, to do that.
And the third point is the point that Professor Bilmes made and the Congressman made, which is, by doing that, you would be setting aside money into a trust fund, and that is the only way that you can insulate this money against what I see as the increasing budget stringency that our country is going to be facing. And we should recognize that, for the next 20, 30 years, we are going to be facing very difficult budgetary problems. I mean, they are not going to go away. And there is no easy way—I mean, I have some views about how you could do it, but there is no easy way out of that.
And the reality, then, is that, under the PAYGO current framework, supporting these obligations that we have undertaken to our veterans has to compete with every other expenditure. And there will be pressure. And the reference to the Debt Commission, the reference to former Senator Simpson's testimony, is evidence of that kind of pressure that will be put on veterans' expenditures.
Mr. MORAN OF VIRGINIA. Well, thank you, Professor.
You mentioned in your testimony, and Professor Bilmes has as well, the fragmented cost of war. Just one example, in the Defense Appropriations Committee, we put $900 million just for traumatic brain injury, and then in this Continuing Resolution, I don't think there are two or three Members who are aware that we added another $300 million—it was a reprogramming of money for something else—bringing it up to $1.2 billion just for traumatic brain injury just for 1 year, fiscal year 2010.
But the other question I wanted to ask—and then I will yield back the time. And I thank the Chairman. Senator Webb and others in both the House and Senate strongly supported, and was passed, a GI Bill of Rights. The idea was to basically create a middle class again in the way that we did after World War II, by enabling returning veterans to get higher education and be able to lead to fuller, better employment prospects. Because, as you said, 30 percent of our veterans returning home are unemployed. But this also extends to the family, the wives and spouses.
Do we have an estimate of the cost of that? And I know that Chairman Miller would be very much interested, as well. What are we paying for that portion of higher education out of the same Federal budget?
Ms. BILMES. I don't have, an estimate for that, but I think it is a good question. And I think it is, like all of these numbers, a number that could be calculated.
One of our overall points throughout the process of working on these issues has been that there is actually very little attention to getting robust estimates in the veterans field. And when you compare the amount of effort, for example, that goes into studying the Social Security system compared with the amount of effort that goes into studying the long-term cost of veterans, whether it is the educational, the Transition Assistance Program, the research funding, the benefits, et cetera, it is a tiny fraction, not in scale with the, you know, actual, absolute size of the liability.
But, unfortunately, I don't have that particular number.
Mr. MORAN OF VIRGINIA. No, but it would be interesting to calculate.
Dr. STIGLITZ. Can I just make one further comment about the importance of providing the kind of benefit, the GI benefits? As we move to the All-Volunteer Army, we are recruiting particular socioeconomic groups into the Army and other military services. And these are often among the parts of our society that are less privileged. And, unless we do that, we will continue to have the problems of the 30 percent unemployment, which is a long-run problem for our society.
And there has been reference made to high suicide rates, high problems of family. Those problems are all compounded when people can't get a job. And when people don't have the adequate education, in a modern economy it is very difficult to get the jobs.
So I view this as part of our social obligation to those who fought for us which we are now not really fulfilling.
Mr. MORAN OF VIRGINIA. Absolutely. And one cost that—a very substantial cost that we don't factor in is the burden on local municipal human service programs. Because these folks, a large number go back into the community but still have mental health adjustment problems, domestic abuse problems and so on related to their combat experience. And it is a municipality's responsibility to care for them, and we don't calculate that cost, let alone add it to the full cost of the war. And I appreciate it.
Chairman Filner, thank you so much for having this hearing and thank you for your commitment to this issue.
The CHAIRMAN. Thank you, Jim. We appreciate your testimony today.
This should not be radical, as I said in my remarks. This deferred liability is a common, accepted practice, and yet your testimony is mind boggling. The things that we have to take into account and that we can take into account, Professor Bilmes, we don't. It is not rocket science as you are pointing out, that we do it.
By the way, before I go further, I am not sure this hearing would have taken place without the incredible work of a former Congressman who is with us today, Tom Andrews from Maine. Tom, thank you for helping us do this and your persistence and understanding of the breadth of these issues. Thank you so much, Tom Andrews.
Politicians and journalists like to get a headline out of this. You wrote the book, "The $3 Trillion War." What would the title say if you were doing it now? Could I say $4 trillion? Could I say $5 trillion? Could I say $4 to $6 trillion? We Congressmen like a quick headline. I know you guys don't, but help us out.
Dr. STIGLITZ. When we originally did the book, the real numbers were $3 to $5 trillion. The reason we chose the title $3 trillion is not because we thought that was the most accurate number, but, at that time, if we had used one of the larger numbers, we would have lost credibility.
The interesting thing is that after—as I said in my testimony, after we came out with the number $3 trillion, the CBO went and looked at it and the Joint Economic Committee, and they said we were basically right.
There is an interesting point here, which is that we had a little bit of a scrap with the CBO on a few numbers, actually, on these numbers that are talking about—that we have been talking about, the veterans' cost, the disability and medical costs. They said that we had overestimated those. We felt very confident that we had underestimated them.
And I don't want to crow. You shouldn't take pride in this kind of thing. But the fact was that we had underestimated them, and they had vastly underestimated those costs. If you look at those numbers there, what you see is that the revised numbers are 25 percent or more greater than our original numbers. So they are a substantial increase.
I suppose if our original book had been called "The $3 to $5 Trillion War," it would not have sold as well. The new book should be called "The $4 to $6 Trillion War and Increasing."
But I think what is clear—and we will be getting a full assemblage of numbers for a paper we will be presenting at the American Economic Association meetings in January. But what is clear from what we have already said is that the total cost is substantially higher than "The $3 Trillion war."
Ms. BILMES. I just want to say that I am very conservative and I had strongly favored when we wrote the book calling it "The $3 Trillion War." Because no matter which way you counted it up, if you looked at just the economic cost or just the budgetary cost, it always reached $3 trillion. So we didn't want to add anything that could even conceivably be construed as double counting.
I think what we know now is the long-term veterans' costs are, as of now, beginning to approach the size of what we have already spent in actual combat operations, and that is the really startling thing. Because the tail of this war, the tail of all wars, is very, very long; and this tail in terms of cost is likely to be longer than others. And we know that at least the minimum we can say is that the veterans' costs wi