The Ghost Budget: How U.S. war spending went rogue, wasted billions, and how to fix it

HKS Senior Lecturer Linda Bilmes, an expert on public finance who has studied post-9/11 war costs for the past 20 years, says their staggering $5 trillion cost was enabled by what she calls “The Ghost Budget.” Using an unprecedented combination of borrowing, accounting tricks, and outsourcing, presidential administrations, Congress, and the Pentagon were able to circumvent traditional military budget processes in a way that kept war costs out of the public debate and resulted in trillions being spent with minimal oversight. The result: corporations and wealthy investors raking in huge profits, massive waste and fraud, and—combined with the Bush and Trump tax cuts—a shifting of the burden of the costs of war away from the wealthy and onto middle- and lower-income people and future generations. Of course by any metric, the United States-led wars in Afghanistan and Iraq were costly. Human life? At least 430,000 Iraqis, Afghans, and Pakistani civilians dead, along with more than 7,000 U.S. military personnel and thousands of civilian contractors. Democratic progress? Afghanistan is once again an authoritarian theocracy under the Taliban, and instead of transforming Iraq and the region, the U.S. invasion and occupation undermined popular sentiment toward democracy, unleashed sectarian violence, and strengthened autocratic regimes. But the budgetary problems are something we can address now, Bilmes says, with congressional reforms and planning prudently for the long-term costs of the wars, including caring for veterans. “The Ghost Budget” is also the title of Bilmes’ next book, which will be published next year.

Linda Bilmes’ Policy Recommendations

Create a veterans trust fund with an oversight board to pay for the long-term costs of caring for military personnel who served in Afghanistan and Iraq, costs which will not peak for as much as 50 years.Amend existing laws to automatically cover Iraq and Afghanistan veterans for toxic exposure to burn pits.Pass legislation requiring a set aside of a certain amount of funding long-term veterans care for every dollar appropriated for war spending.Restrict the ability of the White House and Congress to use the emergency and OCO (Overseas Contingency Operations) funding mechanisms to spend money on conflicts and to move war spending back into the main defense budget process.Address budgetary dysfunction in Congress by strengthening and empowering the House and Senate budget committees and streamlining their complicated and confusing budget subcommittee structures. 

Episode Contributors:

Linda J. Bilmes, the Daniel Patrick Moynihan Senior Lecturer in Public Policy at the Harvard Kennedy School, is a leading expert on budgetary and public financial issues. Her research focuses on budgeting and public administration in the public, private and non-profit sectors. She is interested in how resources are allocated, particularly defense budgets, costs of war, veterans, sub-national budgeting and public lands. She is a full-time Harvard faculty member, teaching budgeting, cost accounting and public finance, and teaching workshops for newly-elected Mayors and Members of Congress. Since 2005, she has led the Greater Boston Applied Field Lab, an advanced academic program in which teams of student volunteers assist local communities in public finance and operations. She also leads field projects for the Bloomberg Cities program. She served as the Assistant Secretary and CFO of the U.S. Department of Commerce under President Bill Clinton.  She currently serves as the sole United States member of the United Nations Committee of Experts on Public Administration (CEPA), and as Vice-chair of Economists for Peace and Security. She serves on the Board of Directors of the Institute for Veterans and Military Families at Syracuse University. She was a member of the National Parks Second Century Commission and served on the U.S. National Parks Service Advisory Board for eight years. 

She has testified to Congress on numerous occasions and has authored or co-authored numerous books, including the New York Times bestseller “The Three Trillion Dollar War: The True Cost of the Iraq Conflict” (with Joseph E. Stiglitz)  and “The People Factor: Strengthening America by Investing in Public Service” (with W. Scott Gould). She was also featured in the Academy-award nominated documentary "No End in Sight," and was the recipient of the 2008 Speaking Truth to Power Award from the American Friends Service Committee. A member of the Council on Foreign Relations and a Fellow of the National Academy of Public Administration, Bilmes earned a BA and an MBA from Harvard University and a PhD from Oxford University.

Ralph Ranalli of the HKS Office of Communications and Public Affairs is the host, producer, and editor of HKS PolicyCast. A former journalist, public television producer, and entrepreneur, he holds an AB in Political Science from UCLA and an MS in Journalism from Columbia University.

Design and graphics support for PolicyCast is provided by Lydia Rosenberg, Delane Meadows and the OCPA Design Team. Social media promotion and support is provided by Natalie Montaner and the OCPA Digital Team. Editorial support is provided by the OCPA Editorial Team: Nora Delaney, Robert O’Neill, and James Smith.