links for 2008-03-04

• Hair of the dog - Paul Krugman Blog
• Long-term cycles in American national electoral politics - EurekAlert
• From tightrope to hurdles - Free exchange
• Obama’s free-trade credentials top Clinton’s - Jagdish Bhagwati
• The $2 Trillion Nightmare - Bob Herbert
• Sociable and Smart - New York Times
• Lessons from Northern Rock: Banking and shadow banking - Vox EU
• What Do Slowing Imports Mean? Is There a J-Curve? - Menzie Chinn
• Brokerage Firms Cut Back Lending - naked capitalism
• Monopolies and price stability - YouNotSneaky!
• Are the Obama Wonks Really So Great? - Noam Scheiber

Comments

[anne]

http://www.nytimes.com/2008/03/04/opinion/04herbert.html

March 4, 2008

The $2 Trillion Nightmare
By BOB HERBERT

We've been hearing a lot about "Saturday Night Live" and the fun it has been having with the presidential race. But hardly a whisper has been heard about a Congressional hearing in Washington last week on a topic that could have been drawn, in all its tragic monstrosity, from the theater of the absurd.

The war in Iraq will ultimately cost U.S. taxpayers not hundreds of billions of dollars, but an astonishing $2 trillion, and perhaps more. There has been very little in the way of public conversation, even in the presidential campaigns, about the consequences of these costs, which are like a cancer inside the American economy.

On Thursday, the Joint Economic Committee, chaired by Senator Chuck Schumer, conducted a public examination of the costs of the war. The witnesses included the Nobel Prize-winning economist, Joseph Stiglitz (who believes the overall costs of the war — not just the cost to taxpayers — will reach $3 trillion), and Robert Hormats, vice chairman of Goldman Sachs International.

Both men talked about large opportunities lost because of the money poured into the war. "For a fraction of the cost of this war," said Mr. Stiglitz, "we could have put Social Security on a sound footing for the next half-century or more."

Mr. Hormats mentioned Social Security and Medicare, saying that both could have been put "on a more sustainable basis." And he cited the committee's own calculations from last fall that showed that the money spent on the war each day is enough to enroll an additional 58,000 children in Head Start for a year, or make a year of college affordable for 160,000 low-income students through Pell Grants, or pay the annual salaries of nearly 11,000 additional border patrol agents or 14,000 more police officers.

What we're getting instead is the stuff of nightmares. Mr. Stiglitz, a professor at Columbia, has been working with a colleague at Harvard, Linda Bilmes, to document, among other things, some of the less obvious costs of the war. These include the obligation to provide health care and disability benefits for returning veterans. Those costs will be with us for decades.

Mr. Stiglitz noted that nearly 40 percent of the 700,000 troops from the first gulf war, which lasted just a month, have become eligible for disability benefits. The current war is approaching five years in duration.

"Imagine then," said Mr. Stiglitz, "what a war — that will almost surely involve more than 2 million troops and will almost surely last more than six or seven years — will cost. Already we are seeing large numbers of returning veterans showing up at V.A. hospitals for treatment, large numbers applying for disability and large numbers with severe psychological problems."

The Bush administration has tried its best to conceal the horrendous costs of the war. It has bypassed the normal budgetary process, financing the war almost entirely through "emergency" appropriations that get far less scrutiny.

Even the most basic wartime information is difficult to come by. Mr. Stiglitz, who has written a new book with Ms. Bilmes called "The Three Trillion Dollar War," said they had to go to veterans' groups, who in turn had to resort to the Freedom of Information Act, just to find out how many Americans had been injured in Iraq.

Mr. Stiglitz and Mr. Hormats both addressed the foolhardiness of waging war at the same time that the government is cutting taxes and sharply increasing non-war-related expenditures....

[anne]

While Joseph Stiglitz is arguing is that a combination of increasing military spending and decreasing taxes meant the government had to borrow. What would have been funds for private investment were being absorbed by the government in financing wars and occupations. The Federal Reserve understanding the liquidity problem that would have resulted as the government borrowed, increase liquidity so that private investment would not be limited. Also, the Fed gave no attention to the nature of private investment that was created ignoring mortgages lending abuses that were discussed even in the New York Times.

Siglitz, as Robert Hormats, argues that the nature and extent of military spending increases financed by borrowing, directly led to excessive credit expansion by the Fed and lacking credit supervision in turn led to the mortgage market abuses underlying our current economic difficulties. Hormats, representing Goldman Sachs should be closely attended to as Goldman understood the credit abuses that were occuring and was highly self-protective where other financial houses seldom were.

[anne]

We had then a combination of increased military spending, lowered taxes, government social spending that was completely controlled and obviously lacking in critical infrastructure building areas as well as in meeting needs even as the needs of health care protection for needy children or infants, and we had private investment that was drawn above all to the domestic housing market much financing excessively expensive mortgages.

Joseph Stiglitz has explained our current economic problems, and in pointing to the astounding costs not only of military spending as such but the costs of destroying wars and occupations and the inevitable effects Stiglitz shows how troublesome the legacy of our wars an occupations will be.

Why then are economists unwilling to discuss the finings or argument of Stiglitz?

[anne]

Asking why economists are unwilling to discuss the findings or argument of Stiglitz or Hormats or Bilmes, beyond a slanderous dismissal by a Wall Street Journal managing editor writing with an academic mask in the Financial Times, is reasonable.

Where is Paul Krugman or Brad DeLong, even if arguing that Stiglitz is wholly foolish? Why can Bob Herbert write of there being hardly a whisper? When in August 2005, Bilmes wrote of a trillion dollar war, while having too little access to costs, the figures were dismissed when any attention was given which was seldom. Cost estimates from Stiglitz and Bilmes rose to $2 trillion and even American Enterprisers were suddenly briefly findings costs at $1 trillion.

However, overwhelmingly the effects of the costs of trillions of dollars for wars and occupations have been ignored by economists and I just do not understand why or wish to be unfair.

What am I missing?

[anne]

I recently noticed an economist's essay titled "Why I am Not a Rawlsian" which has been widely circulated, and which turning the title to a question I was immediately tempted to answer "because you have no conscience." Possibly I have no conscience, but I do wonder why $1 or $2 or $3 trillion in spending on destruction makes no apparent difference to so many economists.

John Rawls and Martin Luther King, who we pretend to honor, on a day, would have understood that $3 trillion in wanton destruction make a difference even economically.

[anne]

Forgive me if I am being unfair, but thinking I do have a Rawlsian conscience I would wish to be even more unfair.

[anne]

http://matthewyglesias.theatlantic.com/archives/2008/03/the_cost_of_war_2.php

March 4, 2008

The Cost of War
By Matthew Yglesias

Good column * from Bob Herbert on Iraq's hefty price tag and, of course, there's Stiglitz's book as well. If you look at something like the economic problems in Ohio right now and consider how much better that situation would look had that kind of money been invested in productive infrastructure in the US, it's pretty infuriating. Spent directly, that money would have meant jobs. But spent on something more useful than a fruitless occupation of Iraq, it would have laid the groundwork for continued prosperity. Now at best it's down the drain.

This reminds me of something John Brennan, formerly of the CIA then director of the Terrorist Threat Integration Center and then the National Counterterrorism Center until retiring in 2005, said on Sunday, namely that in contrast to John McCain, Barack Obama "understands the direct correlation between tremendous expenditures of blood and treasury in Iraq and the US economy." Brennan points out that "al-Qaeda strategy has been to bleed the US into bankruptcy" and thus to do as McCain proposes and "continue with the same approach will have severe consequences for U.S. national security." Obviously this came out in the midst of a primary campaign, but it's hardly an Obama-specific point; rather it's one anti-war candidates of any stripe can (and should) make.

Few people seem to appreciate it, but it's quite literally true that al-Qaeda's strategy is to cripple the U.S. economy by dragging us into quagmires abroad. Osama bin Laden himself has said this, and it's the only strategy that makes sense. A smallish number of people with no base of resources can't possibly defeat us unless we shoot ourselves in the foot repeatedly as Bush and McCain propose.

* http://www.nytimes.com/2008/03/04/opinion/04herbert.html

[anne]

http://matthewyglesias.theatlantic.com/archives/2008/03/consciousness_raising.php

March 4, 2008

Consciousness Raising
By Matthew Ygleias

NRO's Lisa Shiffren's not very happy * about The Washington Post's "women are dumb" op-ed kick:

"As far as I can tell, there is more than enough stupidity out there to go round. When it's a writer with a dumb idea for a column, the idea is that an editor will exercise better judgement. I'm not an oversensitive feminist. But as a rule, 'women are really stupid' columns aren't funny even when written by women."

Note the requisite I'm not one of those feminists! disclaimer here. But this is just what it's about. Shiffren, like an awful lot of people, don't think that major newspaper op-ed pages should just be offering up random misogyny as their political commentary and then claiming they were just joking when people get pissed off. That's feminism.

[anne]

The missing link, to the protest that women are really not so stupid as Washington Post selected women think they are:

* http://corner.nationalreview.com/post/?q=OTMwNDBkNTdhM2NiYTJiZTNhMDk2Y2Y0MzNiNDhlZTk=

Along with the links to the selected Washington Post women who think women really are so stupid:

* http://corner.nationalreview.com/post/?q=OTMwNDBkNTdhM2NiYTJiZTNhMDk2Y2Y0MzNiNDhlZTk=

** http://www.washingtonpost.com/wp-dyn/content/article/2008/02/29/AR2008022902992_pf.html

*** http://delong.typepad.com/sdj/2008/03/washington-post.html

[anne]

http://economistsview.typepad.com/economistsview/2008/03/links-for-2008.html

Mark Thoma:

The response to the opportunity cost argument is pure fear mongering ("the guns vs. butter argument fails in a war that threatens America's existence"):

http://washingtontimes.com/apps/pbcs.dll/article?AID=/20080229/EDITORIAL/895564035/1013&template=printart

That's how it will go once again.

[Please notice the construction that Mark Thoma cleverly chose to highlight, "the guns vs. butter argument fails in a war that threatens America's existence." Though only a lunatic could believe that there is a war that threatens America's existence, simply claiming that there is such a war is enough for the claim to be endlessly thoughtlessly repeated and for the claim to be devastingly effective.]

[Ken Houghton]

Fairness note: Stiglitz and Blimes have presented various versions of that book (the numbers go up over time), including one at the AEA that was discussed by Krugman et al., iirc.

(I skipped it. I read the original paper and didn't see anything in the updated version that merited more than the observation that the data was updated.)

So when Anne wants a ruckus raised, we have to note that the Ruckus was raised well over a year ago, with the original version. The book extended the data, but didn't change the original argument in any material way.

Otoh, the Bhagwatian B*llsh*t re-confirms that Clinton, not Obama, should be the ProgLib candidate of choice. Too bad she didn't smile enough...

[anne]

Numbers may do many things from going up to going down, and when Linda Bilmes began her counting of the costs of wars and occupations in August 2005, costs were even then masked and less understood than now. Nonetheless suggesting the costs of our wars and occupations could be a trillion dollars should have struck any sane person as astounding. However the costs were generally dismissed or ignored, so too the ignoring and dismissing continued at $2 trillion.

The dismissals were everywhere found and have everywhere continued. When the New York Times found disability status to veterans returned from Iraq and Afghanistan was already beyond 100,000 by October 2006, there was no sound.

When Bilmes wrote of actual casualty figures in the Los Angeles Times in December 2006, an Assistant Secretary of Defense immediately called her Dean at Harvard to complain, then called her to complain, then having learned where Bilmes had developed the figures the figures were hidden.

[anne]

Not only was Bilmes bullied for discussing proper casualty figures, so we might understand the developing problems and costs, but the actual casualty figures were immediately hidden while public figures were slashed by more than 55%, while the slashed figures were then dutifully reported from then even though the New York Times had correctly recorded the changes.

Number go up and numbers go down, but number may matters, and understanding the costs of wars and occupations matter to decent-minded people. Interestingly, however, the costs were only going up and the costs were being both hidden and widely ignored.

[anne]

Ken Houghton:

"I read the original paper and didn't see anything in the updated version that merited more than the observation that the data was updated."

Imagine my surprise. Care to document the discussion by Krugman, though? Especially the discussion by the et als.

[anne]

I find no reference for Paul Krugman addressing the work of Joseph Stiglitz, nor for Brad DeLong. I contentedly await references to the et als. Bob Herbert has however found reason to notice the figure then and now. I love Herbert, but I want and expect lots more, say, like from economists who can appreciate a John Rawls.

[anne]

Me, I am a Rawlsian, thinking there is remarkably little more to be wished of ethical stances than the development of ethics from Kant to Rawls, while Martin Luther King came the same way Biblically and appreciated Kant as much.

[anne]

http://matthewyglesias.theatlantic.com/archives/2008/03/in_her_own_words.php

March 4, 2008

In Her Own Words
By Matthew Yglesias

Experience in action. Watch in amazement as Hillary Clinton specifically cites her experience as First Lady as confirming her view that Saddam Hussein has links with al-Qaeda and active chemical, biological, and nuclear weapons programs (and no she didn't read the classified intelligence that might have cast some doubts on her Bush administration talking points) that we had to address through war:

[YouTube]

I, for one, look forward to a general election campaign in which every time Clinton starts making a persuasive critique of the Bush-McCain approach to world affairs she winds up getting tagged as a flip-flopper. It's time to get our heads out of the sand and have a Democratic Party that can make a clean break from this nonsense.

[The ultimate criticism.]

[anne]

Interestingly, Bob Herbert's is the the most read of New York Times articles this day which suggests that there really are people who care, really care, about the ideas of Joseph Stiglitz.

[Holly W.]

Anne, no thanks for making me go look up that awful Washington Post column. What on earth was going through the op-ed editor's mind to publish that?

I guess I'd better take my dim little brain and look for some nice feminine blogs to hang out on ...

[anne]

http://www.juancole.com/2008/03/26-killed-in-2-baghdad-bombings.html

March 4, 2008

Public Rues Economic Cost of Iraq War
By Juan Cole

Some 92 percent of Democrats and 77 percent of independents are opposed to the Iraq War, * which cannot be good news for John McCain, who has tied his campaign to staying in Iraq. Peter Slevin of the Washington Post argues ** that the public is now understanding the Iraq War in terms of other issues, especially the economy.

* http://ap.google.com/article/ALeqM5h_bA_0c63a5WTrdoVGRsSj6l-GBwD8V6625O2

** http://www.washingtonpost.com/wp-dyn/content/article/2008/03/02/AR2008030202374.html

[anne]

Holly:

"Anne, no thanks for making me go look up that awful Washington Post column. What on earth was going through the op-ed editor's mind to publish that?"

For sure.

[anne]

"Fairness note" noting:

Having just finished the Stiglitz-Bilmes work, the argument has been much more meaningfully developed as more of an understanding of the tragedies we have chosen in war and occupation has been gained; while with regard to the ruckus, which was saddeningly absent then and is absent now save among those of conscience, let there be ever so much ruckus.