Who Will Profit From the Wars in Iraq and Syria?

-Even as we debate the wisdom of the new

Last Updated on October 3, 2014.

By Stephen Miles and William Hartung

If there’s one thing we should have learned over the past 13 years of war, it’s that war is good business for those in the business of war. Unfortunately, while profits for the Pentagon’s contractors increase, so does the cost to taxpayers in billions in waste, fraud, and abuse. As America embarks on yet another war in the Middle East, Congress needs to act now to stop this unjustified bonanza for the Pentagon’s contractors.
The most recent wars in Iraq and Afghanistan offer an ominous example about what can happen when the rush to war is met with sharp spending increases coupled with little to no oversight or fiscal restraint. The Commission on Wartime Contracting — a bipartisan congressional body — estimates that there was $30 to $60 billion in waste, fraud and abuse associated with the wars in Iraq and Afghanistan — a total of $12 million per day. Even worse, at least $6 billion is completely missing, never accounted for, gone forever. That is a stunning amount of taxpayer dollars — yours and mine — to simply disappear into the wind.
Among the most egregious examples of corporate and governmental malfeasance during the wars in Iraq and Afghanistan was a multibillion-dollar no-bid contract for Halliburton’s Kellogg, Brown and Root (KBR) division to rebuild and operate Iraqi oil fields. Halliburton was found guilty of price gouging on everything from the supply of oil for military vehicles to feeding the troops; shoddy workmanship that resulted in scores of unfinished buildings and inadequate supplies of electricity; and life-threatening situations like defective showers that electrocuted a soldier. A long list of other examples is available in the reports of the Special Inspector General for Iraq Reconstruction, whose investigations helped spur the convictions of 82 companies and individuals of illegal activities connected to contracting in Iraq.
A recent estimate of the likely costs of our latest war in Iraq and Syria by the Center for Strategic and Budgetary Assessments ranges from $2.4 billion to over $22 billion per year, depending on whether significant numbers of ground troops become involved. Gordon Adams, the former deputy director of the White House Office of Management and Budget in charge of national security spending, suggests that a full accounting of the costs of operations, replacement of equipment, training and aid to other members of the coalition, and a doubling or tripling of the current level of 1,600 U.S. troops in Iraq could put the annual price of the wars in Iraq and Syria at $15 to $20 billion. While these sums are less than the costs for the wars in Iraq and Afghanistan, the potential for wasteful spending remains enormous. Our latest war represents a welcome new source of profits for arms makers like Boeing (Joint Direct Attack Munitions) Raytheon (cruise missiles), and Lockheed Martin (Hellfire missiles), whose weapons systems have already been heavily used in Iraq and Syria. This is particularly true if the conflicts drag on for years, as administration officials have suggested.
There’s a chance that the costs of the current wars could spiral out of control, resulting in an even heftier flow of revenue to Pentagon contractors. We shouldn’t forget that the Bush administration initially pegged the cost of its Iraq intervention at $50 billion, a figure that grew to more than 20 times that amount over the course of the conflict.
The stock prices of the Pentagon’s top contractors have hit all-time highs since the recent wars in Iraq and Syria started two months ago, as Dan Froomkin of the Intercept has pointed out. This windfall for weapons makers may pale in comparison to the billions that are likely to go to private contractors like Dyncorps and Triple Canopy that will be enlisted to help train Iraqi police and security forces. The market is clearly betting that the brief age of fiscal restraint at the Pentagon is over.
Beyond simply wasteful spending, wars are a prime opportunity for outright corruption and malfeasance. This was was underscored in a recent case in which Dyncorps was accused of letting a subcontractor solicit kickbacks from its employees as a condition of keeping their jobs. The State Department dropped the probe in the face of fierce resistance from the Iraqi government — not a good sign for oversight of the billions in new contracts that will pour into Iraq as part of the current war effort.
The direct costs of the wars in Iraq and Syria may only be a small part of the new business that will flow to Lockheed Martin and its cohorts in the next few years. The new wars will almost certainly extend the life of the Pentagon’s war budget, known more formally as the Overseas Contingency Operations (OCO) account. For the past few years, OCO has served as a slush fund to pay for Pentagon projects that have nothing to do with fighting any war. In its most recent effort to raid the OCO account, the Pentagon has proposed using it to fund eight costly F-35 combat aircraft that haven’t even been certified for combat yet. There will be a strong temptation on the part of the Pentagon to continue padding this slush fund to levels far beyond anything being spent in Iraq or Syria.
Last, but not least, the arms industry will join with the Pentagon and hawks on Capitol Hill to use the current Middle East crisis as leverage to lift the caps on the Pentagon’s base budget that exist under current law. If they are successful, it could mean tens or even hundreds of billions of new business for Pentagon contractors over the next decade.
As Linda Bilmes of Harvard’s Kennedy School of Government — the co-author of with Joseph Stiglitz of “The Three Trillion Dollar War,” a comprehensive costing of the wars in Iraq and Afghanistan — has noted, “Despite two failed wars it seems the country hasn’t learned the lessons about the huge cost of military adventures and the limits to what military intervention alone can do to solve complex foreign policy challenges.”
The real test of the Obama administration’s policy in Iraq and Syria will be whether it makes the United States safer and the region more stable. Neither of these outcomes is likely if the current militarized approach continues. But even as we debate the wisdom of the new wars, we must also ensure that they don’t spawn a new round of wasteful spending that costs taxpayers billions of dollars while doing nothing to make us safer.

October 3, 2014