The recent crash of a marine CH-53 in Iraq, killing all 31 on board, is one of the more prominent examples of why the war in Iraq is so expensive. The American armed forces have lots of expensive equipment, and they are using it 5-10 times more intensively as they would during peacetime. The CH-53s are Vietnam era helicopters that have been regularly rebuilt. But using these choppers a lot is expensive, with each hour of flight costing about $3,000 (fuel, spare parts, maintenance). Most of the money spent on Iraq operations goes to the army, and most of that is for spare parts, fuel, construction (of bases) and maintenance in general. All those reserve troops called to active service are expensive. Normally a reservist gets about a months military pay a year, but in wartime, they get over a hundred percent of their full time military pay (because of extra combat pay). Ammunition expenses are not that great, because most of the ammo used is for small arms. The combat currently going on in Iraq does not call for many smart bombs and missiles. More ammo is fired during training exercises than in combat. Several billion dollars has also gone to reconstruction and Civil Affairs type operations. The army learned early on that the most effective ammunition was U.S. currency. Sometimes this meant just passing out a few hundred dollars here and there as rewards for information, or more for the capture of a known bad guy. The reconstruction projects were targeted to win the trust of communities where there might be problems with anti-government forces. Each of these projects (building a school, fixing a road) was not expensive, but the army has delivered thousands of them. This is one of the reasons most of Iraq is quiet, and that more of the anti-government fighters are getting arrested. 

The spending has meant tens of billions of dollars in additional purchases of spare parts, construction equipment, MREs, medical gear, ammo and weapons. A lot of this purchasing is done, quietly, overseas when American manufacturers cannot ramp up their production quickly enough. The American manufacturers dont mind too much, because they know that when the Iraq operations are over, the big orders will fade away in a year or two. This will include purchases to rebuild war reserve stocks, which will be larger in the future. The war reserve stock levels were allowed to fall too low in the 1990s. So, there will be larger stockpiles in the future, of things like spare tracks for armored vehicles and some types of munitions.