Stiglitz: $3tn Iraq legacy to hit next President

By Emma Thelwell

The Nobel Prize-winning economist Joseph Stiglitz has warned that America’s next President will inherit the largest ever budget deficit as the cost of the conflict in Iraq escalates.

The former chief economist of the World Bank, who co-wrote the new book The Three Trillion Dollar War, argues that President George W. Bush’s invasion of Iraq has cost just that.

Mr Stiglitz and co-author, Harvard lecturer Linda Bilmes, also claim that the government has covered up the financial and human cost of the war.

In an interview with Telegraph TV, Mr Stiglitz estimates that the conflict will cost a further $500bn over the next 2 years.

The war has fed into the weakness of the wider economy, he said, adding, “To cover that up, the Fed and the regulators flooded the economy with liquidity – giving cheap money to anybody this side of a life support system.”

He said there was a direct correlation between the extent of the current crisis in financial markets and the cost of the conflict.

The new occupant of the White House will inherit a US that is “living on borrowed time and borrowed money”, said Mr Stiglitz.

There is also evidence that the US government tried to cover up the cost of the war, the former chief economic adviser to Bill Clinton claimed.

He said: “We had to use the freedom of information act to uncover things that we never would have known.”

Pointing to the number of injured servicemen, he added: “The official website figure was less than half of the total”.

In 16-years time, the US will face a $4bn annual bill for disabled servicemen, said Mr Stiglitz, who estimated that around 40pc of the 2m currently fighting in Iraq will return home severely disabled.

The colossal healthcare costs for former servicemen with spinal injuries or brain defects will linger for decades, he warned.