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Chapter 1: What is the main question surrounding the U.S. conflict with Iran?
Quick note before we start the show, we are doing an AMA. That's an Ask Me, I'm the proverbial me in this, Ask Me Anything on the Search Engine subreddit. This is going to be Friday, April 24th at noon Eastern. Don't feel like you have to ask me anything. It's more like we've done a bunch of recent episodes that people have emailed a lot of questions about.
There was our big series on driverless cars. There was our episode about GLP-1s. There was our episode about Anthropic, the company behind Quad. And these are just things that generated a lot of questions from people.
And we wanted to say, if there's something that we've published recently that you wanted to know more about, or if you wanted to know why we did something or how we did something, or even if you just have general questions about how the show works, we're doing an Ask Me Anything. I guess, yeah, anything. Anything you want. Again, April 24th, Friday.
This will be in the Search Engine Podcast subreddit at noon Eastern time. Welcome to Search Engine. I'm PJ Vogt. No question too big, no question too small. I think almost any other time in American history, this would be a very naive thing for me to admit out loud.
But genuinely, if you were to ask me, PJ, explain why the United States is currently at war with Iran, I would have to answer, I don't know. I do read the newspapers, so I know Trump said he wanted to hit Iran's nuclear program. I know Netanyahu was pushing for strikes.
I also know that after quickly deposing Maduro in Venezuela, Trump seemed to walk away with the belief that regime change was just something you could do conveniently from home. Door dash, but with armed drones. But like, what is the case for the Iran strikes other than they're emotionally satisfying for the president? What is the argument for why this is in the national interest?
I genuinely don't know. I'm not alone. Two-thirds of Americans polled by CBS, YouGov said they don't understand the reason for our current war. They don't get it. Like, it's a too challenging David Lynch movie. The most disturbing possibility might be that there just is no underlying reason, that this is confusing because it actually doesn't make sense.
But if the benefits of the war don't add up, the one thing we should still be able to understand are the costs. Obviously, war has an incalculable moral cost. The deaths of civilians, the deaths of soldiers, the cost to America's moral standing in the world. But that's not the part I wanted to understand this week. I wanted to understand something much more literal. The price tag.
So this week, Search Engine called someone who actually tries to put prices on American conflicts. So first off, can you just say your name and what you do?
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Chapter 2: How does the government obscure the costs of war?
And in fact, the day before 9-11, Donald Rumsfeld, the then Defense Secretary, gave a speech about how the Pentagon needed to get a grip on its accounting failures and how important it was to account for where taxpayer money went. Our financial systems are decades old. According to some estimates, we cannot track $2.3 trillion in transactions.
Then, of course, 9-11 happened, and here we are 25 years later, and we still don't have any kind of accountability for where taxpayer money is spent in the Department of Defense, or now Department of War. I mean, I teach cost accounting. I happen to believe that accounting for assets matters.
And if the Pentagon were a private sector organization, there would be extreme penalties for failing assets. to be able to account for spending and where the spending goes. And this is separate from the relatively small portion of the defense budget, which is so-called secret.
So it's not, because the explanation my brain would supply is, well, the Pentagon is a bunch of spies, and the spies aren't going to tell you where the spies are spending money because it's top secret. You're saying, no, no, no, no, no, forget about that. It's a small proportion of the money they spend. This is just...
Like, we do not know, they do not account for American taxpayer money that they are spending on things that are not secret, things like conflicts.
I think it's because it's a very far-flung, complex organization. The Army, the Navy, the Air Force have different mechanisms. They have different units that account for things in different ways, and they have not been able to reconcile them. So there are certainly portions of the Pentagon that can account for their assets, but there are others that can't, and they can't reconcile how they do it.
And so in that environment in which war is expensive but hard to measure, like one of the reasons you would want war to be more transparently measured is because, in theory, the American public, in theory, Congress, should be able to make decisions about whether we want to go to war and the cost of war is part of it. In this context, how price sensitive are U.S. presidents to wars?
Like how much does their estimation of the possible price tag influence their calculation to go in or not go in?
Well, I think it's important to look at the historical context of this because in U.S. history, we always paid for wars through a combination of tax increases and non-war budget cuts. So from the War of 1812 through the Civil War, through the Spanish-American War, World War I, World War II, the Korean War, the Vietnam War, this issue of how we were going to pay for the war
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Chapter 3: What insights does Professor Bilmes provide about war spending?
So when we went into Iraq in 2003, at that time, the national debt held by the public was less than $4 trillion. And now that number is $31 trillion. And we borrowed a lot of money at low rates that we are now paying back at much, much higher rates. So... We paid at that time about 6%, 7% of our total budget on interest, and now we're paying 15% of the budget on interest.
That's not all because of the wars, but a lot of it is because of the combination of tax cuts at the same time that we were increasing spending. But that kind of set the tone of...
being able to pay for these wars through debt, in addition to the low interest rates and in addition to the budgetary dysfunction, there were a number of reasons internally within the Defense Department that made it very advantageous for them to have money that was provided in this way. First of all, the money went into a more flexible account, so they got more discretion over how to spend it.
This was happening at the same time that the department and the country was increasing its reliance on contractors. So we had far, far, far more contractors involved in the Iraq and Afghanistan wars than we had in any previous wars. It was much easier to pay the contractors and so forth with this funding. It also meant that it was more protected from the budgetary dysfunction.
So if there was a shutdown or an almost shutdown or, you know, some other budgetary crisis, it could continue to pay contractors who often don't get paid during government funding lapses.
What ended up being the total bill of Iraq and Afghanistan?
Well, Joe Stiglitz, my co-author on the $3 trillion war, and I, we had estimated it in 2008 that the absolute minimum that the Iraq war could cost was $3 trillion. And this was on the basis of what Joe called excessively conservative. Now, we had estimated at that time that the war would be done by 2015.
So if you look at what actually happened and based on our methodology, it cost between five and six trillion, the Iraq and Afghanistan wars together. Now, my colleagues at the Brown University Cost of War Organization estimated at eight trillion. So it's somewhere in that range. Expensive. It's expensive.
That absolute highest estimate you heard, $8 trillion, the top estimate from the Brown University Cost of War Project, that's for every part of Operation Enduring Freedom. It includes everything that sprung from 9-11. Iraq, Afghanistan, the spillover military operations that took place at the time in Pakistan and Syria. But that war, which every major U.S.
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Chapter 4: How are the costs of the current Iran conflict being calculated?
increase even before all this happened, a 50% increase in the defense budget, which would take it from $1 trillion to $1.5 trillion. Oh, my God. And Congress was kind of super lukewarm to this idea before this war. But I think that the president will be able to get a higher increase.
He won't get 1.5, but maybe on top of the $200 billion of emergency money for replacing inventory and everything, we'll get a higher long-term increase to the Defense Department. And once you get that increase in the base, that goes on and on.
Right, they don't give the money back next year. They didn't need it. The other thing I didn't understand about that announcement, In theory, the president goes to Congress to fund a war. He had chosen not to do that. Why at this point are they telling us the price tag of a thing when they are just spending money as they want to?
Well, almost everybody who looks at this is concerned about the inventory levels. The U.S. had a finite number of particularly these interceptors. These are the things that intercept incoming drones. And The Iranians produce very cheap drones for $20,000, maybe $30,000. And we use $2 million, $3 million interceptors to down these drones. So this is highly asymmetric and really...
just kind of shows why the Iranians have been able to severely damage us, if not so much in terms of the human loss, but economically. We've taken a major hit because so much of our inventory has been used up on this.
And there are many people within the military in particular who are concerned about the fact that this means our overall inventory of all of these weapons, many of which are defensive, intercepting weapons, are therefore depleted. So we already depleted about 20% of our weapons. high-altitude interceptor drones last summer in the 12-day operation Midnight Hammer with Iran.
So now we further depleted them. So there was a huge rush to, we've got to spend the money, we've got to get these big contracts out so that we can replenish the inventory and more.
And is that unusual to spend out our inventory in such a way? Like, is that sort of specific Trump planning or is that something that happens routinely?
I think that We have seen now in Ukraine, Russia, and now again that the nature of warfare has changed somewhat. So even at the beginning and midway through the Iraq and Afghanistan wars, we were... not in the era yet of these sort of advanced, hypersonic, AI-driven weaponry that we are now. And we see now a war going on between largely unmanned weapons that are attacking targets.
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