What's the true cost of the war in Iraq? The total, long-term cost of everything from tanks and jet fuel and the interest on the money Washington is borrowing to the cost of caring for a double amputee for 40 years? It's probably a lot higher than you think, but try about $3 trillion. That's the round, stunning figure economist Joseph Stiglitz and Harvard public finance professor Linda Bilmes came up with after several years of digging up and crunching the official government numbers, which were buried or scattered in the Pentagon's impossibly sloppy accounting books. The gruesome details can be found in their new book, "The Three Trillion Dollar War." I talked to Professor Bilmes on Wednesday by phone from Boston:

Q: What is your 60-second synopsis of your book and why did you write it?

A: We basically wrote the book for two reasons. First was to explain the full costs of the war, including the costs that are yet to come. Secondly, we wrote the book to show how the veterans have been shortchanged and to offer recommendations that would fix that. We really go through in the book the major cost categories and show how the war is affecting the economy. This is a book about the budgetary and economic costs of the war. But we also have three chapters about veterans’ issues, which I have been deeply involved in. We are donating 10 percent of the proceeds to veterans’ organizations. One of the purposes of the book was to really call attention to the veterans’ issues. The veterans’ issues in particular are fixable. When you think about the problems of Iraq, and some of them seem somewhat intractable and out of our control, that is a source of frustration for many Americans. But when you look at some of the situations of the returning veterans, that is something that is entirely within our ability to fix. So we were trying to call attention to those issues and how we could fix them.

Q: What does that $3 trillion price tag include?

A: It includes the cash costs of the war, which is the $600 billion that people are familiar with, which is basically the cost that we have spent to date of operations, as well as the long-term cost that we would have to spend even if we were to withdraw quickly; those include the cost of taking care of veterans, both the medical care and disability compensation over their lives; the cost of military reset, which includes both the cost of replacing all of the military and National Guard equipment and the cost of restoring the personnel forces to their prewar strength; and the cost of the interest on all of the money which we have borrowed, which is all the money paying interest on the debt.

The way that we look at it to reach $3 trillion, there are two approaches: There is a budgetary approach or an economic approach. If you look at it from a budgetary approach you would count the operating costs, as well as future operating costs, as well as the veterans long-term costs, the military reset cost and the interest cost. If you look at it from an economic perspective, we don’t count the interest costs because those are considered transfer payments. But we do include the social costs, which are the costs to the economy that the government doesn’t pay, and the macroeconomic costs, which are overall economic loses to the economy. Either way, you quickly get to $3 trillion.

Q: This also includes Afghanistan?

A: We include Afghanistan in some areas and in some areas we don’t. It’s very difficult to separate out the accounts between Iraq and Afghanistan. We have tried to estimate how much is Iraq and how much is Afghanistan. But particularly on the veterans cost, the VA doesn’t actually break out the Iraq vs. Afghan veterans. The way the military allocates its accounts, it’s difficult to follow exactly where the money is being spent.

Q: Where did you go to dig up this information?

A: It was a huge amount of work, a really, really huge amount of work to write this book and to dig up the information. We used all government sources, some of which were publicly available and much of which we needed to secure under the Freedom of Information Act, which the veterans groups did on our behalf. Basically, through a combination of information from the Congressional Research Service, the GAO, the Congressional Budget Office, the budget accounts, the Inspector General reports, congressional testimonies, audit reports -- all kinds of government records, as well as some other kinds of established, reputable studies from medical sources.

Q: What are some of the big-ticket items that particularly surprised, shocked or enraged you?

A: Well, I’d say that pretty much every week we were working on this book we had one of those kinds of moments where there would be something unbelievable. Some of them were big-ticket items; some of them were small-ticket items. Some of the things that stunned us, in no particular order, were the fact that we now pay enlistment bonuses of $25,000 to $40,000 for new recruits and up to $150,000 for re-enlistment bonuses. We found that if you were injured during your enlistment period, you were asked to repay your enlistment bonus on a prorated basis. So somebody who comes back without a leg is then asked to repay their bonus.

Another thing that stunned us was the fact that KBR, which is the largest contractor in Iraq, has been evading hundreds of millions of dollars a year in payroll taxes -- Social Security and Medicare taxes -- by employing its contractors through shell companies in the Cayman Islands. Another thing that stunned us was when we looked at the cost outside of the Defense department and the Veterans department. We found a number of significant costs. For example, the very significant cost of Social Security disability compensation, which is another big chunk that typically doesn’t get included. Another cost is the fact that the Department of Labor actually pays the insurance cost for contractors who are employing contractors in Iraq, both for the U.S. and foreign nationals.

If you are Halliburton, in order to do business anywhere, you have to have worker compensation insurance. Because that insurance is considered too risky and the cost would be too high, the government pays for it. The contractor doesn’t have to pay any insurance costs. But then the insurance company also doesn’t want to provide the insurance or the benefits, because they say it would be too risky for an act of war. So if someone is injured, the Department of Labor also pays the benefits. When we found this out, we thought, “This cannot be true.” But it is true. There is a GAO report on it where they were also stunned. There are many lawsuits that are going on now because the whole issue about whether the government is paying out to these contractors or not has to do with whether or not they were injured in an act of war.

But overall, the thing that really struck me was simply the scale of the war. There have already been 1.7 million service men and women deployed, which I think is not really understood, because people tend to think about the 140,000 who are serving at this point in time. And the scale of the injuries and the survival rates are much higher now than in previous wars. In Vietnam and Korea, there were about 2.3 or 2.5 injuries per fatality. Now if you look at just the in-combat injuries, it’s 7-1. The number of people who have actually been treated already in VA hospitals and clinics is already 300,000. The number of wounded, if you include the battlefield and the non-battlefield, is over 70,000 people who have been evacuated from the theater for medical problems.

So simply understanding just how much larger the scale is than we had realized was I think the thing that surprised me the most -- and the fact that the government has really tried very hard to conceal this scale of injuries by suppressing the availability of the information about how many injuries there are and by making it very difficult to get hold of the information to basically understand all of this.

Q: Have the media -- the mainstream media, mainly -- been asleep on this issue of the true cost of the war?

A: Overall, I think, the media have been asleep at the wheel in terms of the cost of the war. They have unblinkingly reported the $600 billion figure of the cost of the war. They have unblinkingly reported the wounded in combat without looking beyond that. They have unblinkingly reported on the veterans’ problems. But there are major exceptions to that. In addition to the most well-known one, The Washington Post expose on the Walter Reed Hospital scandal, there also has been some really excellent reporting done in various places. Here in Boston … and in Charlotte.... Early on, there was an excellent piece done in U.S. News & World Report by Linda Robinson on the discrepancy between disability ratings in the military and the VA. There has been a lot of excellent reporting done by individuals. But despite that, overall, you keep seeing again and again some of the same mistakes repeated in the mainstream media.

Q: There’s no chance that the total cost of the war was unknown merely because the Pentagon is a big dumb bureaucracy and it never put a rope around the total cost -- as opposed to the cost being deliberately hidden for political reasons? Continued...