Burn Rate in Iraq: $10 Billion a Month

In the news today is a new report from CRS to congress. It states:

"The $12 billion a month "burn rate" includes $10 billion for Iraq and almost $2 billion for Afghanistan, plus other minor costs. That's higher than Pentagon estimates earlier this year of $10 billion a month for both operations. Two years ago, the average monthly cost was about $8 billion."

Back in December of 2006, I tried to calculate the cost of the "troop surge". In that post, I wrote:

"When you consider that the population of Iraq is only 26,074,906 people, by adding 40,000 soldiers, we will be spending an additional $1,066 per person to provide them with security for a year or $5,116 total. GDP per capita is only $1,800. So we will be spending roughly 3 times as much as the entire Iraqi GDP to provide security, which clearly isn't very secure."

The troop surge seems to have been a bit of a dud, looking at these numbers from globalsecurity.org.

  • 2006 November: 152,000
  • 2006 December: 140,000
  • 2007 January: 132,000
  • 2007 February: 137,000
  • 2007 March: 142,000
  • 2007 April: 150,000
  • 2007 May: 155,000
  • 2007 June: 162,000

    It looks like we've really only managed to increase boots on the ground by 10,000 men. Not very impressive. But somehow, we've managed to REALLY increase the spending. In my previous post, I cited a Wall Street Journal article from March 8, 2006. It states:

    "WASHINGTON -- As the U.S. enters its fourth year in Iraq this month, the annual cost of military operations is growing -- even as the Pentagon assumes the number of troops there will shrink. Monthly expenditures are running at $5.9 billion; the U.S. commitment in Afghanistan adds roughly another $1 billion. Taken together, annual spending for the two wars will reach $117.6 billion for the fiscal year ending Sept. 30 -- 18% above funding for the prior 12 months."

    So a year ago, the Iraqi burn rate was $5.9 billion per month. Now it is $10 billion per month.

    Let's look at some updated numbers on Iraq from the handy CIA world factbook.

    Area: total: 437,072 sq km
    Population: 27,499,638 (July 2007 est.)
    GDP (purchasing power parity): $87.9 billion (2006 est.)
    GDP (official exchange rate): $40.66 billion (2006 est.)
    GDP - real growth rate: 2.4% (2006 est.)
    GDP - per capita (PPP): $2,900 (2006 est.)
    Inflation rate (consumer prices): 64.8% (2006 est.)
    Budget: revenues: $33.4 billion
    expenditures: $41 billion (2006 est.)

    Now let's run a few numbers.

    We're spending $10 billion a month or $120 billion a year on 27.5 million people. That works out to $4,363.64 per person - which is pretty far off from my earlier flawed estimate of $5,116 per person. But hey - I was using a lower population number and trying to figure it out as proportionate to the number of troops on the ground.

    The real GDP of Iraq is roughly 1/3 of what we are spending. Per capita, Iraqi's are only making ~$1500 USD per person - although this apparently has the buying power of $2900 using PPP.

    It's interesting to look at the revenues and expenditures of the government. The entire GDP is only $40.66 billion, but they are SPENDING $41 billion. Some of this money is obviously coming from the United States.

    One other interesting feature is the land area of 437K square kilometers. We currently have 1 soldier for every 2.7 square kilometers of area of the country. There are approximately 63 Iraqis in each of these square kilometers. We're spending $22,879 per square kilometer on the war effort.

    You would think that by spending such an enormous amount of money that we'd somehow be able to keep inflation in check. Nope - it's running at almost 65%. Meaning that if you have $100 worth of Dinars in the morning, by the next day it's only worth $99.86. And it keeps compounding like this 365 days a year.

    Given the amount of money spent, the time given, and the effort expended by the most powerful military on earth by far, I have come to the conclusion that we can not turn Iraq into a functioning country. The people simply don't want it to happen, or they'd be damned nearly rebuilt by now. The currrent low level civil war probably needs to be allowed to run it's course until the Iraqis are tired of fighting and are ready to settle down in peace.