Economist's View

What Is It Good For? Absolutely Nothing.

I've been looking for the perfect anti-war screed, but so far haven't found it.

So let me just say, I hate war, and I don't care if it's Bush or Obama giving the orders.

That is all.

'No US Peace Dividend after Afghanistan'

Stiglitz and Bilmes:

No US peace dividend after Afghanistan, by Joseph Stiglitz and Linda Bilmes, Commentary, FT: Nearly 12 years after the US-led invasion of Afghanistan began, a war-weary America is getting ready to leave. ... But the true cost of the war is only just beginning. ...

The number of Iraq and Afghanistan veterans receiving government medical care has grown to more than 800,000, and most have applied for permanent disability benefits. Yielding to political pressure, the White House and Congress have boosted veteran’s benefits ... and made it easier to qualify for disability... But the number of claims keeps climbing. ... To recruit volunteers to fight in highly unpopular wars, the military adopted higher pay scales and enhanced healthcare benefits... Meanwhile, there is a huge price tag for replacing ordinary equipment that has been consumed during the wars...

... The US has already borrowed $2tn to finance the Afghanistan and Iraq wars – a major component of the $9tn debt accrued since 2001... Today,... it could have been hoped that the ending of the wars would provide a large peace dividend... Instead, the legacy of poor decision-making from the expensive wars in Afghanistan and Iraq will live on in a continued drain on our economy – long after the last troop returns to American soil.

'The New Mandate on Defense'

Barney Frank argues that, when it comes to defense spending, we should "spend less, and liberals should not flinch from that position." The essential point, I think, is that "the major trade-off in putting together a total deficit reduction package is between the military and health care," and, though he does note this in a couple of places, I wish that point had been stressed more in the article (the essay is much, much longer):

The New Mandate on Defense, by Barney Frank, Democracy: There were so many encouraging signs for liberals in the election results this year that one of the most significant has been overlooked. For the first time in my memory, a Democratic candidate for President argued for less military spending against a Republican candidate who called for great increases—and the Democrat won. ...

Because so much of that spending stems from overreach advocated by those who believe that America should be the enforcer of order everywhere in the world—and because we subsidize our wealthy European and Asian allies by providing a defense for them...—there has been increasing conservative support for reining in the military budget. Ron Paul, who goes far beyond most liberals in his eagerness to impose severe military cuts, was a popular figure with a significant base of GOP support not despite taking this position but in part because of it.

Earlier this year, for the first time that I can recall, a majority of the House of Representatives voted to reduce the military appropriation recommended by the House Appropriations Committee. The cut was only $1.1 billion—less than it should have been—but it ... passed... with the support of ... a significant minority of Republicans...

A realistic reassessment of our true national security needs would mean a military budget significantly lower... That is, by next year, we no longer should be forced to spend additional funds—close to $200 billion a year at their peak—in Afghanistan and Iraq. Additionally, we can reduce the base budget by approximately $1 trillion over a ten-year period ... while maintaining more than enough military strength...

Even with the revenue increase we can achieve by raising taxes on the wealthy, serious deficit reduction must come in part from reducing military spending beyond what the President proposes, unless we make very deep cuts in the nonmilitary parts of the budget. ... Given the numbers involved, the major trade-off in putting together a total deficit reduction package is between the military and health care...

To be clear, this is not an argument against America continuing to be the strongest nation in the world. ... That said, being the strongest nation in the world can be achieved much less expensively than at current levels. Obama ... underestimates the extent to which the public is willing to support even further reductions, and I believe that he may appear to be overly influenced by being told that as President, he has the duty to continue to lead the indispensable nation.

The United States was indispensable in 1945 and for many years thereafter... But things have changed. We can no longer afford ... extending a military umbrella over many allies on whom it is not raining—and who can well afford their own protective gear if it does. ...

This all means that a major political task going forward for liberals is pushing for further reductions in military spending, an objective that we now know is not only socially and economically necessary but also politically achievable.

Important social services versus tax cuts for the rich and military spending. Those with unmet needs and little social/economic power versus the wealthy and the military. I suppose in some sense, given who's in this battle, it's remarkable there's been any headway at all. But there needs to be more progress on protecting the vulnerable.

What's Driving Projected Deficits?

The CBPP has updated its chart (full report) showing the source of the budget deficit, "and they continue to find that these deficits stem overwhelmingly from the economic downturn, the tax cuts first enacted under President Bush, and the wars in Iraq and Afghanistan." But going forward, it's the Bush-era tax cuts that make the largest contribution:

Who Are We Becoming?

Brad DeLong:

Who Are We Becoming?: Torture Edition: Scott Lemieux: Torture Without Accountability:

Adam Serwer: Investigation of Bush-era Torture Concludes With No Charges | Mother Jones

It is not as though we got anything out of torture. We blackened our reputation for a generation and did substantial damage to our national security. We gave away a piece of our soul. And our torturers and our torture techniques--they are the techniques designed to elicit false confessions.

At least when we sent Maher Arar to the Syrian Mukhabarat, the professionals there figured out pretty quickly that he was innocent and sent him back. Had our CIA kept hold of him, it would have elicited a false confession and still be claiming that he was a mastermind behind 911…

So I write:

I think the good guys have lost this permanently.

Impeaching or trying presidents and cabinet members for policies of torture is a vote loser, or so all the High Politicians think. And going after lower-downs creates very bad precedents for the future--for one thing, it then makes CIA agents slaves of the then-president because they must get their end-of-term plenary pardons before the administration changes. And the Roman Republic's fall teaches it how bad it is for people to fear that losing an election will land them in jail.

POTUS now has plenary power to arrest, detain, torture, or kill anyone on his say-so alone without ever having to explain why--a power William the Conquerer never claimed…

And somebody smarter than I am responds:

I would urge people to think of accountability as a generational project -- this is how it has worked out in Chile, Argentina, South Africa... the thing that can be done now is create opportunities for more participants to tell their stories, put on record what was done and who did it and how, so that the record gets fuller rather than thinner over time.

Stiglitz: The Price of 9/11

Joseph Stiglitz:

The Price of 9/11, by Joseph E. Stiglitz, Commentary, Project Syndicate: The September 11, 2001, terror attacks by Al Qaeda were meant to harm the United States, and they did, but in ways that Osama bin Laden probably never imagined. President George W. Bush’s response to the attacks compromised America’s basic principles, undermined its economy, and weakened its security. ...

The attack on Afghanistan that followed the 9/11 attacks was understandable, but the subsequent invasion of Iraq was entirely unconnected to Al Qaeda – as much as Bush tried to establish a link. That war of choice quickly became very expensive... Indeed, when Linda Bilmes and I calculated America’s war costs three years ago, the conservative tally was $3-5 trillion. Since then, the costs have mounted further. ...

Even if Bush could be forgiven for taking America, and much of the rest of the world, to war on false pretenses, and for misrepresenting the cost of the venture, there is no excuse for how he chose to finance it. His was the first war in history paid for entirely on credit. As America went into battle, with deficits already soaring from his 2001 tax cut, Bush decided to plunge ahead with yet another round of tax “relief” for the wealthy. ...

Today, America is focused on unemployment and the deficit. Both threats to America’s future can, in no small measure, be traced to the wars in Afghanistan and Iraq. ...[continue reading]...

Sachs: America Needs a Third-Party Movement

Jeff Sachs wonders why military spending isn't a large part of the budget talks:

Obama could have cut hundreds of billions of dollars in spending that has been wasted on America's disastrous wars in Afghanistan, Iraq, Libya, and Yemen, but here too it's been all bait and switch. Obama is either afraid to stand up to the Pentagon or is part of the same neoconservative outlook as his predecessor. The real cause hardly matters since the outcome is the same: America is more militarily engaged under Obama than even under Bush. Amazing but true. ... The American people ... have said repeatedly that they want a budget that sharply cuts the military, ends the wars, raises taxes on the rich, protects the poor and the middle class, and invests in America's future

I've been wondering the same thing. Military spending has hardly been mentioned in the budget debate.

He's pretty hard on both Republicans and Democrats, e.g.:

The Republicans also misrepresent the costs and benefits of closing the deficit through higher taxes on the rich. Americans wants the rich to pay more, and for good reason. Super-rich Americans have walked away with the prize in America. Our country is run by millionaires and billionaires, and for millionaires and billionaires, the rest of the country be damned. Yet the Republicans and their propaganda mouthpieces like Rupert Murdoch's media empire, claim with sheer audacity that taxing the rich would kill economic growth. This trickle-down, voodoo, supply-side economics is the fig leaf of uncontrolled greed among the right-wing rich.

And:

at every crucial opportunity, Obama has failed to stand up for the poor and middle class. He refused to tax the banks and hedge funds properly on their outlandish profits; he refused to limit in a serious way the bankers' mega-bonuses even when the bonuses were financed by taxpayer bailouts; and he even refused to stand up against extending the Bush tax cuts for the rich last December, though 60 percent of the electorate repeatedly and consistently demanded that the Bush tax cuts at the top should be ended. It's not hard to understand why. Obama and Democratic Party politicians rely on Wall Street and the super-rich for campaign contributions the same way that the Republicans rely on oil and coal. In America today, only the rich have political power.

I've been hoping to help to change the course that Democrats have been on recently, and frustrated at every turn. Jeff Sachs seems to have given up. In his view, a third party is the only answer:

America needs a third-party movement to break the hammerlock of the financial elites. Until that happens, the political class and the media conglomerates will continue to spew lies, American militarism will continue to destabilize a growing swath of the world, and the country will continue its economic decline.

I'm not quite there yet (and I should note that I don't agree with everything he says in the article). I worry a fractured party would open the door to GOP control (though it could fracture both parties?), but what do you think? Is he correct?

The Costs of War

One of the costs of war is higher unemployment:

Gender Values: The Costs of War, by Susan Feiner: At ten years and counting, the wars in Iraq and Afghanistan are the longest in U.S. history. Not surprisingly, they are the most expensive, with total war spending poised to top two trillion dollars early this summer. ... The U.S. government's spent over $2,000 per capita on all aspects and accouterments of war. ...

Spending on the military counts for a huge share -- 58 percent -- of U.S. discretionary federal spending. If military funding were redirected to meet critically important social needs, the nation as a whole would reap enormous benefits. ...[gives examples]

This military spending has yet another negative economic impact, and that's on the labor market. The largest share of military spending goes to weapons procurement, not to pay soldiers or other military personnel. The consequence of this is that it closes off employment opportunities in fields where women are most likely to earn decent salaries.

Dollars spent on the military and dollars spent on domestic programs like health care and education call very different jobs into existence. According to an important study by the Political Economy Research Institute (PERI),... one billion dollars spent on education or health care would create many more jobs than does spending the same amount on military projects. When the nation spends one billion dollars on the military, 11,600 jobs are created. If that billion dollars was spent instead on education 29,100 jobs would be created. And if it were spent on health care almost 20,000 jobs would be created. The military currently rips through more than $600 billion per year. If ... $300 billion were spent instead on education and health care, the employment picture would shift dramatically. The sum of $150 billion spent on education would create over four million jobs. Spending another $150 billion on health care would create about three million jobs. Adding the two sets of new jobs together, and subtracting out the military jobs that are lost, yields 3.8 million new jobs,... driving the unemployment rate to down from the current level of nine percent to under seven percent.

The positive benefits of such a change for women can't be understated. ...

[Also see Stiglitz and Bilmes.]

Libya and the Missing Progressive Blogosphere

I have enough trouble keeping up with economic developments daily, and then trying to make sense of them myself and to others. I just don't have the time or the expertise to make sense of all the developments in the Middle East. So I've been ticked off at the progressive blogosphere for not doing a better job of talking about the various war efforts, and why we should support Obama when we didn't support Bush under similar circumstances. (Update: Just to be clear, I am wondering about and suggesting hypocrisy. Why is this different and if it's not, where's the outrage?)

I am not a "no wars ever under any circumstances" type, but for me the bar is very, very high. Killing people should always be a last resort, and even then I hesitate (you might guess I oppose capital punishment as well, and you'd be right). And, more importantly, the location of that bar should never, ever be decided by one person.

With that said, I think Obama is flat wrong on Libya.

"The Solution in Afghanistan: Get Out"

The human and financial costs of the war in Afghanistan "are unacceptable and unsustainable":

The solution in Afghanistan: Get out, by James P. McGovern and Walter B. Jones, Commentary, Washington Post: No one, it seems, wants to talk about the war in Afghanistan. This week the House debated a budget bill that is touted as reflecting new fiscal restraint, yet borrows tens of billions more for the war. In an hour-long State of the Union address..., President Obama devoted less than one minute to the conflict. Given the investment and sacrifices our country has made for nearly 10 years, the phones in our offices should be ringing off the hook with calls from those who are tired of being told that the United States doesn't have enough money to extend unemployment benefits or invest in new jobs.

But by and large, Americans are silent. The war wasn't even an issue in the November elections... Whatever the reasons, there is no excuse for our collective indifference. At 112 months, this is the longest war in our history. More than 1,400 American service members have lost their lives...

This war has already cost us more than $450 billion; combined with the war in Iraq, it is estimated to account for 23 percent of our deficits since 2003. Where is the outcry from the Tea Partyers and the deficit hawks? Fiscal conservatives should be howling that this war is being financed with borrowed money. Those who support the war should be willing to pay for it.

And where is the liberal outrage? Those of us who are tired of being told that we can't afford green jobs, unemployment or health care should be screaming...

What are we giving up...? ...Joseph Stiglitz told the House Veterans Affairs Committee in September that the costs of Iraq and Afghanistan ... is likely to total $4 trillion to $6 trillion.

Simply put, we believe the human and financial costs of the war are unacceptable and unsustainable. It is bankrupting us. The United States should devise an exit plan to extricate ourselves from Afghanistan, not a plan to stay there four more years and "then we'll see." This doesn't mean that we abandon the Afghan people - rather, we should abandon this war strategy. ...

"The Sorrow and the Self-Pity"

Paul Krugman:

The Sorrow And The Self-Pity: There is a case for the tax cut deal, as the best of a very bad situation. But Obama did not help that case yesterday by lashing out at “purists”.

Leave aside the merits for a moment: what possible purpose does this kind of lashing out serve? Will activists be shamed into recovering their previous enthusiasm? Will Republicans stop their vicious attacks because Obama is lashing out to his left? It was pure self-indulgence; even if he feels aggrieved, he has to judge his words by their usefulness, not by his desire to vent. This isn’t about him.

And beyond that, who are these purists? Yes, a few people on the left refused to support health reform over the lack of a public option — but not many. To the extent that Obama has had trouble selling that plan, “purists” weren’t a factor; his own lack of effective messaging was.

On taxes: there might be more forgiveness now if Obama had shown any sign of fighting..., the administration really didn’t push Congress to take up the issue... Let me add that Obama has never, as far as I can recall, pointed out that these horrible tax increases on the rich the GOP warns about would bring rates back to what they were under Bill Clinton — a time of enormous prosperity. But then, Obama has always had a weirdly hard time making the case that the Clinton economy refuted Reaganism.

Add in the White House’s repeated validations of the right-wing position on the evils of public spending, from the spending freeze to the pay freeze, the appointment of a conservative Democrat and a paleo-conservative Republican to head the debt commission, etc. — and now Obama expects trust and praise from progressives?

What’s particularly striking is that Obama seems passionate about denouncing his progressive critics, even as he has nice words for the people who have spent two years trying to destroy him.

So look: there’s a policy issue here, and it’s a tough one; you trade off the stimulus Obama extracted now for the increased likelihood that low taxes for the rich will be made permanent, crippling policy for decades to come. But there’s also a character issue: what we really don’t need right now is a president who blames everyone but himself, and seems more concerned with self-justification than with sustaining the alliances he needs.

Obama is missing that the reaction from the left is not specifically about the public option, it's the more general issue of what it says about his presidency. Many Democrats were already frustrated over Obama's acceptance of conservative positions on the wars in Iran and Afghanistan, torture, Guantanamo, government wiretaps, data mining, the refusal to temporarily nationalize banks, and other issues (I can't recall if the offshore drilling decision came before or after health care was passed), and this fed into a larger narrative. To interpret the reaction of Democrats as just about narrow issues such as health care and the public option is a mistake.

Stiglitz and Bilmes: The True Cost of the Iraq War

Joseph Stiglitz and Linda Bilmes:

The true cost of the Iraq war: $3 trillion and beyond, by Joseph E. Stiglitz and Linda J. Bilmes, Commentary, Washington Post: Writing in these pages in early 2008, we put the total cost to the United States of the Iraq war at $3 trillion. This price tag dwarfed previous estimates, including the Bush administration's 2003 projections of a $50 billion to $60 billion war.

But today, as the United States ends combat in Iraq, it appears that our $3 trillion estimate (which accounted for both government expenses and the war's broader impact on the U.S. economy) was, if anything, too low. For example, the cost of diagnosing, treating and compensating disabled veterans has proved higher than we expected.

Moreover, two years on, it has become clear to us that our estimate did not capture what may have been the conflict's most sobering expenses: those in the category of "might have beens," or what economists call opportunity costs. For instance, many have wondered aloud whether, absent the Iraq invasion, we would still be stuck in Afghanistan. And this is not the only "what if" worth contemplating. We might also ask: If not for the war in Iraq, would oil prices have risen so rapidly? Would the federal debt be so high? Would the economic crisis have been so severe?

The answer to all four of these questions is probably no. ... [...continue reading...]

There are some costs -- the harm that something like torture does to our collective sense of morality for example -- that I have no idea how to evaluate.

Pentagon Plans to Reduce Budget

The Pentagon announces a plan to cut defense spending:

Pentagon Plans Steps to Reduce Budget and Jobs, by Thom Shanker, NY Times: Defense Secretary Robert M. Gates said Monday that he would close a military command, restrict the use of outside contractors and reduce the number of generals and admirals across the armed forces as part of a broad effort to rein in Pentagon spending.

Mr. Gates did not place a dollar figure on the total savings from the cutbacks, some of which are likely to be challenged by members of Congress intent on retaining jobs in their states and districts. But they appear to be Mr. Gates’s most concrete proposals to cut current spending as he tries to fend off calls from many Democrats for even deeper budget reductions...

While large headquarters have been combined and realigned over the years, Pentagon officials could not recall a time when a major command was shut down and vanished off the books, even though some jobs will probably be added elsewhere to carry on essential parts of the mission.

The White House, which is under intense political pressure to address the rapid increase in the national debt, quickly stepped in to back Mr. Gates, saying his plan would free money that could be better spent on war fighting.

“The funds saved will help us sustain the current force structure and make needed investments in modernization in a fiscally responsible way,” President Obama said in a statement.

The potential savings Mr. Gates outlined are likely to be relatively modest in the context of a total Pentagon budget... The most significant step — in symbol and in substance — was his plan to close the military’s Joint Forces Command in Norfolk, Va. ...

For months, Mr. Gates has been arguing that if Congress and the public allow the Pentagon budget to grow by 1 percent a year, he can find 2 percent or 3 percent in savings within the department’s bureaucracy to reinvest in the military — and that will be sufficient to meet long-term national security needs. ...

Assessing his prospects for convincing Congress not to use its power over budgets to block these efforts, Mr. Gates said, “Hard is not impossible.” ...

Pentagon spending has averaged a growth rate of 7 percent a year over the last decade, adjusted for inflation (or nearly 12 percent a year without adjusting), including the costs of the wars. ...

Joe Klein adds some perspective:

Pentagon Cuts, by Joe Klein: The usual suspects are whining about SecDef Robert Gates' plan to eliminate the Joint Forces Command and reduce the number of Pentagon bureaucrats and contractors. Actual military experts like Abu Mook don't seem very upset. JFCom mostly existed to expedite inter-service relations--the sort of thing that's nice but not exactly crucial.

Actually, the most important thing here is context: the JFCom budget is $240 million in a Pentagon budget of over $700 billion. Gates intends to seek annual Pentagon budget increases of 1% per year; the savings from axing JFCom would be used to help fund the actual combat services being performed. That's good, but there's a larger question: How much of that $700 billion is actually necessary these days? How many cold war weapons systems are being sustained simply to keep Congressional members happy? (It is no accident that the Virginia delegation is up in arms about the end of JFCom--which is located in Norfolk.) And wouldn't it be better if the federal government were spending money on things that might actually help the economy--infrastructure, for one--rather than anachronistic weapons systems? And, while we're at it, why does the U.S. need to deploy troops in places like Germany and Okinawa? Is it really necessary to spend more on military stuff than the entire rest of the world combined?

If the deficit situation is so dire--and the need to create real economic growth, through new programs or tax cuts, so important--aren't these questions we should be asking? ...

What about the "the actual combat services being performed"? Are those necessary?

WikiLeaks Releases Documents on Afghanistan

Will this be a game changer in Afghanistan?

Defense Spending and Deficit Reduction

The defense budget seems to be off the table when it comes to budget discussions, but it shouldn't be:

America's Unquenchable Defense Spending, by Michael Cohen: If there's one issue that seems to unite an increasingly divided and fractured capital, it is the ever-expanding federal budget deficit. ... Except one area of the federal budget is seemingly off limits: the $692 billion elephant in the room -- America's defense budget.

The calls from Republicans and Democrats for belt-tightening rarely, if ever, seem to extend to the military. Deficit hawks in the House have even demanded that an amendment to the $37 billion Afghanistan spending bill that would allocate $10 billion to prevent teacher layoffs ... be paid for with offsetting spending cuts. No such demands have been made about war spending, which since 9/11 tops more than $1 trillion. ...

Yet, outside ... Social Security, Medicare and Medicaid, the defense budget is by far the biggest chunk of the nation's fiscal pie. Aside from money allocated for the Pentagon there is another more than $300 billion in additional outlays for costs like homeland security, military aid, veteran's benefits and military-related interest on the national debt. That's more than $1 trillion in taxpayer money -- or about $3 out of every $10 in tax revenue.

And while the defense budget has been growing for decades, since 9/11 the numbers have jumped significantly. ... [T]he money is not just going to pay for wars in Iraq and Afghanistan. Nonwar defense spending makes up more than a third of the increase.

All of this is happening at a time when the U.S. faces no major foreign rival and al-Qaida, according to the nation's intelligence chiefs, has been reduced to a mere 400 to 500 key operatives in Pakistan and Afghanistan. In Afghanistan alone, the U.S. is spending $100 billion and deploying 100,000 troops to face an enemy that has only about 50 to 100 operatives in the entire country.

Trimming the defense budget will not solve the country's deficit woes, but it would certainly help. Moreover, smart spending cuts would allow lawmakers to divert money toward creating jobs and growing the economy -- steps that would, over time, do far more to reduce the deficit. A recent report by the Sustainable Defense Task Force ... found nearly $1 trillion in possible savings over 10 years. ...

[I]f Congress is willing to consider cuts to Social Security and Medicare, or won't even fund money for teachers and benefits for the unemployed out of deficit fears, why should the defense budget be off the table?

Of course, as the report also suggests, the surest way to truly reduce U.S. military spending would be to adopt a policy of greater "restraint" that makes the deployment of U.S. forces a true last resort, minimizes overseas commitments and stops subsidizing the defense responsibilities of our allies in Europe and Asia. ...

In the short-run, cuts in defense spending (or more "restraint") could be used to temporarily fund recession fighting and job creating programs. In the longer run, as those expenditures expire, the reductions in defense spending would help with the debt problem.

"Comes a Moment to Decide"

Another quick one -- this is from David Warsh -- again on the path forward for Obama: First, I didn't realize that nancy Pelosi "brought the American war in Iraqi to a foreseeable end":

Comes a Moment to Decide, by David Warsh: ...Here’s something else that EP knows, which the president knows too, or should know, since he was there, though it is not exactly common knowledge.  It was Speaker of the House Nancy Pelosi (D-Calif.), not Gen. David Petraeus, who brought the American war in Iraqi to a foreseeable end.  Pelosi’s elevation after the Democrats regained control of the House in November 2006 led to a series of budget skirmishes in early 2007 that made it clear she had the votes to shut down funding of the war.

Bush responded with his surge, not as a demonstration of credible resolve – that was the cover story – but to obscure the fact that the situation had changed decisively and that the Americans would soon be leaving. The strategy was daring and clever. It gave everyone a chance to take a deep breath and regroup. It permitted the “Anbar awakening” (a Sunni militia financed by the US) to shut down Al Qaeda factions and enlist ad-hoc insurgents. The current fragile truce among Sunnis, Shiites and Kurds emerged. Iraq grasped the opportunity to reclaim itself. It was the fig leaf the Americans needed.

Something like this presumably is the rationale behind the 30,000 more US troops that Obama committed to the Afghan campaign last December after a laborious and showy review, with a promise to begin withdrawals in July 2011. But that’s where the logic breaks down. ...

The main topic of the article is:

Comes a Moment to Decide, by David Warsh: As a (sometimes) shadow newspaper columnist, one who joined the Obama bandwagon before the Iowa caucuses made the Illinois Senator a favorite, Economic Principals feel obligated and/or entitled to keep track of the shifting tides of his presidency. ...

Obama is approaching a decision that will make or break his presidency, not in the long view of history, but now, in real time. He must summon the courage to begin to leave Afghanistan next year, however ignominiously, and accept the nearly certain defeat of most American war aims that will ensue, perhaps in advance of the 2012 election.

I haven't done a very good job of representing the post -- you should read the original -- but here's the closing:

Senior military commanders, at least some of them, still think that they could “win this thing” if they just had another decade or two – that’s just what Gen. Creighton Abrams argued forty years ago in Vietnam. ... Probably only a few hard-rock conservatives expect that the US-led NATO forces can remain in Afghanistan indefinitely. US elections later this year and in 2012 will provide the test. ...

The United States has been at war in Afghanistan for nine years. Nobody has been a more perspicacious critic of American foreign policy in that time than Andrew Bacevich, the former US Army colonel turned teacher and author. ...

On The New Republic blog last week, Bacevich taunted the president, arguing that Obama “lacks the guts to get out.”  The White House has bought into the conventional wisdom about American power: “It’s all so complicated.  There are risks involved. Things might go wrong. There’s an election to think about.”  When Americans look to Washington, he wrote, “they see a cool, calculating, dispassionate president whose administration lacks a moral core.”

Here’s hoping that Bacevich is wrong. With its bias towards hope, EP expects that Obama will rise to the occasion. But either way, it has come to this:  as the old hymn has it (written in 1845 by James Russell Lowell to protest the US war with Mexico), Once to every man and nation comes a moment to decide.

"Time to Get Tough on Defense Spending"

Calling all budget hawks:

Time to get tough on defense spending, by Katrina vanden Heuvel, Commentary, Washington Post: With the fixation on shrinking the budget deficit, why is over $700 billion in annual defense spending almost always off-limits for discussion? The ... bipartisan Sustainable Defense Task Force's June 11 report recommending over $1 trillion in Pentagon cuts over the next 10 years is an indication that some sanity might arrive inside the Beltway. ... Some of the report's big-ticket items for savings over a 10-year period include $113 billion by reducing the U.S. nuclear arsenal; $200 billion by reducing U.S. military presence abroad and total uniformed military personnel; $138 billion by replacing unworkable, costly weapons systems with better alternatives; and $100 billion by cutting unnecessary command, support and infrastructure funding.

But, the report argues, "significant savings" may depend on rethinking "our national security ... goals..." It goes on to describe "a strategy of restraint -- one that reacts to danger rather than going out in search of it.... We need not stick around in foreign lands often. "Our military budget should be sized to defend us. For this end, we do not need to spend $700 billion a year... We can be safe for much less... Our principal enemy, al-Qaeda, has no army, no air force, and no navy . . . . The hunt for anti-American terrorists is mostly an intelligence and policing task."

A reorientation of security policy will not come easily in light of ... the hawkish Democratic foreign policy advisers, the neocons, the think-tank specialists, and pundits who ... crowd out alternative policies and arguments. Lobbyists for defense contractors with hundreds of billions of dollars at stake are also formidable opponents to change.

This ... is abetted by a mainstream media that offer little exposure to new security ideas... Indeed, few in the media have covered the task force's report. Add to that mix the oft-used argument -- especially potent in an economy with double-digit unemployment -- that defense cuts are a jobs killer, and the prospect for the broader debate Americans need and deserve are dim. Defense spending, however, is one of the worst ways to create jobs per dollar spent. It makes far more sense to cut an increasingly bloated Pentagon budget than to reduce much-needed investment in jobs, clean energy, transportation and support for state and local governments...

Making significant cuts in defense spending will ... require rethinking our role in the world, as the task force report suggests. Is America Globocop or responsible Republic? As Globocop, we have spent over $1 trillion on the wars in Afghanistan and Iraq alone. Isn't it time we had an honest and open debate on that question?

Seniors will trade chickens for health care and have their Social Security payments reduced before "hawkish Democratic foreign policy advisers, the neocons, the think-tank specialists, and pundits" will even consider rethinking our military strategy. Even then, they'd likely conclude that there are many other things that must be cut first.

"The National Security Shell Game"

Jamie Galbraith says that "the 'national security' case for cutting Social Security and Medicare is bogus":

The national security shell game, by James K. Galbraith, Commentary, LA Times: Deficit hawks are using national security as an excuse to seek cuts in Social Security and in Medicare...

In late May, the Obama administration released its National Security Strategy... A few lines make passing reference to "medium-term deficit reduction." But when Secretary of State Hillary Rodham Clinton appeared at the ... Brookings Institution to discuss the National Security Strategy, three of the six questions she was asked harped on the deficit issue, with one questioner calling it "potentially, if not actually, the biggest single national security threat to the United States."

Clinton agreed, declaring that it is time to "make the national security case about reducing the deficit and getting the debt under control." ... On this, she and the Brookings deficit hawks are wrong. Was World War II, for example, won with balanced budgets? No. Deficits ran about 25% of GDP every year of the war, and the national debt had reached 121% of GDP by 1946. Was the United States weakened by this? Hardly. America had never been stronger than it was in 1946. And afterward, the economy didn't implode. The debt-to-GDP ratio merely declined, year after year...

"Everything must be on the table," we're told, as the Simpson-Bowles commission prepares to explain why Social Security and Medicare must be cut. But why? Social Security and Medicare are ... successful, popular programs that protect America's elderly from poverty. ... Social Security and Medicare are ... the most important bulwarks of middle-class life in America. And we can afford them. A rich nation can always afford modest retirement benefits and decent healthcare for its old. ...

The real cause of our deficits and rising public debt is our broken banking system. The debts our economic leaders deplore were largely due to the collapse of private credit, and to the vast giveaways the federal government made to banks to prevent their failure when credit collapsed. ...

The "national security" case for cutting Social Security and Medicare is bogus. In economic terms, it's just a smokescreen for those who would like to transfer the cost of all those bank failures onto the elderly and the sick.

The relationship between the deficit and defense spending doesn't get enough attention. The question for me is whether we can make cuts in defense spending without compromising security, and it's my view that we can.

The Cost of Military Outsourcing

Reversing the outsourcing of military services will save billions (ending the wars would save even more):

Our view: Warfare, outsourced, adn.com: Congress has finally begun to reconsider the nation's heavy reliance on private contractors to fight our wars in Iraq and Afghanistan. Measured by personnel numbers, the country has outsourced almost half of our war-fighting effort. As of September, 242,000 contractors supported 280,000 military in the two war zones, according to the Congressional Research Service. In Afghanistan, contractors actually outnumber troops by 40,000.

That outsourcing was supposed to help save money and liberate soldiers from doing routine, safe tasks behind the battle lines, so they could concentrate on fighting.

Congress is realizing it hasn't always worked out that way. In fighting an insurgency, there are no battle lines, and no secure rear areas for contractors to work in.

In that dangerous environment, it takes a lot of money to compensate for the risk of death on the job. U.S. civilians driving supply trucks through hostile territory, for example, could earn triple or more the pay of the GI grunts riding in the seat beside them.

Last year, Congress concluded that each military contract worker cost $250,000 a year. As the Washington Post noted this month, Congress expects to save $44,000 per worker in the defense budget by "in-sourcing" about $5 billion worth of work now handled by contractors. ...

There will always be a role for private contractors in helping supply the country's military on the field of battle. As the Congressional Research Service noted, contractors have carried part of the nation's war effort dating as far back as the Revolutionary War.

But contracting out doesn't automatically guarantee the military will save money. When there are savings, they may come from cutting quality, rather than improving efficiency, so proper oversight is critical. Some jobs - like interrogating enemy suspects or pulling the trigger to kill people -- are just too important to outsource.

It's good to see Congress realize that when the nation is fighting to protect itself; only carefully limited functions are properly handed over to private business. ... Hiring contractors to handle some military logistics can help, but hiring them to wield weapons is asking for trouble.

But was it really about saving money? Or was it a way to ramp up the effective size of the fighting force without having to institute a draft or some other means of increase the size of the military (e.g. increasing pay substantially)? And perhaps sending a few, more than a few actually, bucks in certain directions?

Instituting a draft would not have been popular, at all, and would have undermined support for the war the Bush administration wanted to carry out. And increasing pay as much as would have been required was far too costly and had its own political problems. So while outsourcing was sold to the public as a means of saving money, the real intent was to use the private contractors for support services thereby freeing all of the military personnel previously involved in services to be used on the front lines. This effectively increased the size of the fighting force without increasing the size of the military (in terms of personnel). It wasn't about saving money. If the Bush administration wanted to avoid a substantial public backlash from using a draft or other means to increase personnel levels as much as planned, they had little choice but to obscure the expansion from the public by outsourcing many services previously carried out by military personnel.

"The Army's Development Delusions"

Bill Easterly is worried that the Army's "utopian dreams" for conquered societies will lead to the "excessive use of military force, which kills real human beings":

J’accuse: the US Army’s Development Delusions, by Bill Easterly: A wise economist that I met recently tipped me off that I would find the latest Army field manual interesting reading. He was more than right about that. The 2009 US ARMY STABILITY OPERATIONS FIELD MANUAL (available in a University of Michigan paperback as well as an earlier version online ) is remarkably full of utopian dreams of transforming other societies into oases of prosperity, peace, and democracy through the coordinated use of military force, foreign aid, and expert knowledge.

My usual MO is to ridicule such documents. But my wells of satire are starting to run dry after years of deployment against utopians like Jeffrey Sachs and Paul Collier. More in sorrow than in anger, I see the utopian social engineering craze might affect actions of people with guns. I am sad for Iraqis and Afghans that the U.S. Army is operating in their countries guided by such misguided ideas.

To document a little of what seems utopian, the foreword by Lieutentant General William B. Caldwell IV, Commander, US Army Combined Arms Center, says:

Iranian Elections

It appears that the election in Iran was rigged.

I don't feel like I understand what's going on in Iran as well as I should. Comments? One thing I haven't seen at all and am interested in is how what's happening right now in Iran might relate to the war in Iraq - if it is related to any significant extent - that's part of what I want to understand. How what's happening now relates to our policy toward Iran in recent years is also of interest.

[And since this is an economics blog, predictions and explanations about how this might affect the world economy - oil markets for example - are also welcome, though I am not expecting much effect, at least not at this point.]

Sachs: Obama's Military Conundrum

The people who need to hear this advice from Jeff Sachs don't seem to be interested in listening:

Obama's military conundrum, by Jeffrey Sachs, Project Syndicate: American foreign policy has failed in recent years mainly because the US has relied on military force to address problems that demand development assistance and diplomacy. Young men become fighters in places such as Sudan, Somalia, Pakistan and Afghanistan because they lack gainful employment. Extreme ideologies influence people when they can't feed their families, and when lack of access to family planning leads to an unwanted population explosion. President Barack Obama has raised hopes for a new strategy, but so far the forces of continuity in US policy are dominating the forces of change. ...

The policy decisions of recent months offer little ... hope for a fundamental change in US foreign policy direction. While the US has signed an agreement with Iraq to leave by the end of 2011, there is talk in the Pentagon that US "non-combat" troops will remain in the country for years or decades to come. ...

Some opponents of the Iraq war, including me, believe that a fundamental – and deeply misguided – objective of the war from the outset has been to create a long-term military base (or bases) in Iraq, ostensibly to protect oil routes and oil concessions. As the examples of Iran and Saudi Arabia show, however, such a long-term ­presence sooner or later creates an explosive backlash.

The worries are even worse in Afghanistan and Pakistan.

Truth, Justice, and the American Way

We should waterboard Cheney to get the truth about what happened regarding the interrogations. He says it's not torture, there's no lasting damage, and it works, so what are we waiting for? I want the ad revenue from the live broadcast.

I can't believe we are allowing the torture debate to be redefined to be about whether it works, and who knew what when. No matter who knew about it, or when they knew about it, it was wrong and those responsible - Republican or Democrat, whomever - need to be held accountable. Actually, I can't believe we are debating torture at all. If you had told me prior to the Bush administration that we'd be debating the use of torture today, I would have laughed and thought you were nuts. The whole debate still feels surreal. Are people really arguing that torture is not torture, and that it works?

The truth, however ugly it might be, is the only way forward. Obama's refusal to release pictures and other information on the interrogations because it might lead to pressure on him to seek the truth and interfere with other items on his agenda, or whatever his reason is for this decision, is indefensible.

No matter how much I'd like to see Cheney on the waterboard telling us whatever we want to hear to make it stop, I grew up believing we were better than that, that even if torture did work the United States would never, ever do that. There was never any need to debate whether we had crossed the torture line because we were nowhere near it. I know we were never as pure as we believed, that we didn't always live up to our ideals, but this? We may not have always lived up to our view of ourselves, but we didn't abandon the underlying moral principles. What a disappointment.

Paul Krugman: Reclaiming America’s Soul

We need to "regain our moral compass":

Reclaiming America’s Soul, by Paul Krugman, Commentary, NY Times: “Nothing will be gained by spending our time and energy laying blame for the past.” So declared President Obama, after his commendable decision to release the legal memos that his predecessor used to justify torture. Some people in the political and media establishments have echoed his position. We need to look forward, not backward, they say. No prosecutions, please; no investigations; we’re just too busy.

And there are indeed immense challenges out there: an economic crisis, a health care crisis, an environmental crisis. Isn’t revisiting the abuses of the last eight years, no matter how bad they were, a luxury we can’t afford?

No, it isn’t, because ... never before have our leaders so utterly betrayed everything our nation stands for. “This government does not torture people,” declared former President Bush, but it did, and all the world knows it.

And the only way we can regain our moral compass ... is to investigate how that happened, and, if necessary, to prosecute those responsible.

What about the argument that investigating the Bush administration’s abuses will impede efforts to deal with the crises of today? Even if that were true — even if truth and justice came at a high price — ...laws aren’t supposed to be enforced only when convenient. But is there any real reason to believe that the nation would pay a high price for accountability? ...

Tim Geithner ... wouldn’t be called away... Peter Orszag, the budget director, wouldn’t be called away... Even the president needn’t, and indeed shouldn’t, be involved. All he would have to do is let the Justice Department do its job... America is capable of uncovering the truth and enforcing the law even while it goes about its other business.

Still, you might argue — and many do — that revisiting the abuses of the Bush years would undermine the political consensus the president needs to pursue his agenda.

But the answer to that is, what political consensus? There are still, alas, a significant number of people in our political life who stand on the side of the torturers. But these are the same people who have been relentless in their efforts to block President Obama... The president cannot lose their good will, because they never offered any.

That said, there are a lot of people in Washington who ... probably just don’t want an ugly scene... But the ugliness is already there, and pretending it isn’t won’t make it go away.

Others, I suspect, would rather not revisit those years because they don’t want to be reminded of their own sins of omission.

For the fact is that officials in the Bush administration instituted torture as a policy, misled the nation into a war they wanted to fight and, probably, tortured people in the attempt to extract “confessions” that would justify that war. And during the march to war, most of the political and media establishment looked the other way.

It’s hard, then, not to be cynical when some of the people who should have spoken out against what was happening, but didn’t, now declare that we should forget the whole era — for the sake of the country, of course.

Sorry, but what we really should do for the sake of the country is have investigations both of torture and of the march to war. These investigations should, where appropriate, be followed by prosecutions — not out of vindictiveness, but because this is a nation of laws.

We need to do this for the sake of our future. For this isn’t about looking backward, it’s about looking forward — because it’s about reclaiming America’s soul.

I wrote this several days ago, but never posted it. It echoes much of the above:

When asked whether people will be held accountable for their actions during the time the last administration was in power, this administration says that it's time to move on, to put the past behind us, to let bygones be bygones. But that is not a reason to prevent people from having to take responsibility for their actions.

"Things to Come"

Paul Krugman a little over six years ago, on 3/18/03, the eve of the Iraq war:

Things to Come, by Paul Krugman, Commentary, NY Times: Of course we'll win on the battlefield, probably with ease. I'm not a military expert, but I can do the numbers: the most recent U.S. military budget was $400 billion, while Iraq spent only $1.4 billion.

What frightens me is the aftermath — and I'm not just talking about the problems of postwar occupation. I'm worried about what will happen beyond Iraq — in the world at large, and here at home.

The members of the Bush team don't seem bothered by the enormous ill will they have generated in the rest of the world. They seem to believe that other countries will change their minds once they see cheering Iraqis welcome our troops, or that our bombs will shock and awe the whole world (not just the Iraqis), or that what the world thinks doesn't matter. They're wrong on all counts.

More Unsurprising News

Since we are noting the obvious today (yes we are in a recession), here's something else that won't surprise anyone:

Bush Says He was 'Unprepared for War', by Steve Bennen: We've heard Bush express some various regrets in recent years, but I think this one is a first.

Looking back on his eight years in the White House, President George W. Bush pinpointed incorrect intelligence that Iraqi President Saddam Hussein had weapons of mass destruction as "biggest regret of all the presidency."

"I think I was unprepared for war," Bush told ABC News' Charlie Gibson in an interview airing today on "World News."

"In other words, I didn't campaign and say, 'Please vote for me, I'll be able to handle an attack,'" he said. "In other words, I didn't anticipate war. Presidents -- one of the things about the modern presidency is that the unexpected will happen." ...

The president added, "I wish the intelligence had been different, I guess." Asked if he would have gone to war if he knew Iraq did not have stockpiles of weapons of mass destruction, Bush said, "That is a do-over that I can't do." ...

Nah, there was nothing in the 2000 election about Bush being strong on national defense:

In the 2000 election George W. Bush, who had shirked military service, succeeded in presenting himself as more reliable on national security than Al Gore. This was despite Gore's service in Vietnam, his seven years on the Senate Armed Services Committee, his four years on the House Intelligence Committee, his help in brokering a deal to dismantle the nuclear arsenal of former Soviet republics, and his creation of binational commissions with Russia, South Africa, Egypt, Kazakhstan, and Ukraine to deal with issues ranging from AIDS to disarmament.

He didn't say the exact words "Please vote for me, I'll be able to handle an attack," that's true, but he certainly implied it:

Bush's 2000 Acceptance Speech: ...We will give our military ... a commander-in-chief who ... earns their respect. A generation shaped by Vietnam must remember the lessons of Vietnam: When America uses force in the world, the cause must be just, the goal must be clear, and the victory must be overwhelming.

I will work to reduce nuclear weapons and nuclear tension..., my administration will deploy missile defenses to guard against attack and blackmail. Now is the time not to defend outdated treaties but to defend the American people.

By his own admission, he got fooled by false evidence, evidence he wanted to believe in so he did, then he went to war based upon that evidence even though he was not prepared to do so.  But as I said, we are noting the obvious today. [Update: comments say what is obvious is that he knew the evidence was false, but used it anyway.]

Update: Thinking it over, what were they prepared for? War? Hurricanes? An economic crisis? And worse, in every case, even after the event occurred they seemed to have great trouble coming up with a plan of action, let alone having plans ready in advance. Broadly, and again obviously, they were unprepared to govern.

Iraq and Confidence that the US can Solve the Financial Crisis

I have a question.

Has our experience in Iraq undermined the confidence the rest of the world had in our ability to show leadership and solve problems?

If so, has the lack of confidence in our ability to fix the problems in financial markets increased fear thereby making the problem much worse and much harder to fix? Did Iraq also show the world - as we are seeing with the G7 - that the cooperation among countries needed to solve problems is unlikely (another reason to be fearful)? When Bush gives a speech urging cooperation, as he did today, do European and other countries listen the way they might have before the war?

Is the severity of the financial market problems yet another consequence of Iraq?

I'm curious to hear your views, either way.

Did the Surge Work?

New evidence suggests that "ethnic cleansing by rival Shiites may have been largely responsible for the decrease in violence for which the U.S. military has claimed credit":

UCLA study of satellite imagery casts doubt on surge's success in Baghdad, EurekAlert: By tracking the amount of light emitted by Baghdad neighborhoods at night, a team of UCLA geographers has uncovered fresh evidence that last year's U.S. troop surge in Iraq may not have been as effective at improving security as some U.S. officials have maintained.

Night light in neighborhoods populated primarily by embattled Sunni residents declined dramatically just before the February 2007 surge and never returned, suggesting that ethnic cleansing by rival Shiites may have been largely responsible for the decrease in violence for which the U.S. military has claimed credit, the team reports in a new study based on publicly available satellite imagery.

"Essentially, our interpretation is that violence has declined in Baghdad because of intercommunal violence that reached a climax as the surge was beginning," said lead author John Agnew, a UCLA professor of geography and authority on ethnic conflict. "By the launch of the surge, many of the targets of conflict had either been killed or fled the country, and they turned off the lights when they left."

"Learning the Lessons of Iraq"

I don't think we will know if the war in Iraq was a success or not until many years, decades even, after we are gone. If, for example, a few years after we leave, Iraq breaks down terribly and alliances that are very much against our geopolitical interests are formed, that won't be a success, will it? We just don't know yet if it is a success or not, and furthermore, if things do break down, we will have no way of knowing if an alternative path would have produced a better outcome -- we can't run the alternative scenario and find out.

I hope it is a success, let there be no mistake about that, but I just don't see how we can say anything beyond so far so good, and we'll see how it goes from here. As for repeating this strategy in Afghanistan, if we don't know for sure that Iraq will remain stable after we leave, and we don't, and if we don't know for sure if it was the surge or something else that caused the reduction in violence, and we don't, then we should be very careful before repeating the strategy once again.

If it was other factors that caused the reduction in violence, in combination with or independent of the surge in troops, and if we can better understand what those factors were, there may be a way to produce a similar outcome in Afghanistan without so much death and destruction.

So before we commit to repeating the same tactic, let's better understand exactly why things improved in Iraq. I realize that whether the reduction in violence is attributed to the surge or not has large political consequences, but I don't care about that, I just want our best assessment of what factors were at work. It's a matter of life and death:

Learning the Lessons of Iraq, by Joseph Stiglitz, Project Syndicate: The Iraq war has been replaced by the declining economy as the most important issue in America’s presidential election campaign, in part because Americans have come to believe that .. the ... ‘surge’ has ... cowed the insurgents, bringing a decline in violence. The implications are clear: a show of power wins the day.

It is precisely this kind of macho reasoning that led America to war in Iraq in the first place. The war was meant to demonstrate the strategic power of military might. Instead, the war showed its limitations. Moreover, the war undermined America’s real source of power – its moral authority. ...

To be sure, the reduction in violence is welcome, and the surge in troops may have played some role. Yet the level of violence, were it taking place anywhere else in the world, would make headlines; only in Iraq have we become so inured to violence that it is a good day if only 25 civilians get killed.

And the role of the troop surge in reducing violence in Iraq is not clear. Other factors were probably far more important, including buying off Sunni insurgents... But that remains a dangerous strategy. The US should be working to create a strong, unified government, rather than strengthening sectarian militias.

Now the Iraqi government has awakened to the dangers, and has begun arresting some of the leaders whom the American government has been supporting. The prospects of a stable future look increasingly dim.

That is the key point: the surge was supposed to provide space for a political settlement, which would provide the foundations of long-term stability. That political settlement has not occurred. ...

Meanwhile, the military and economic opportunity costs of this misadventure become increasingly clear. Even if the US had achieved stability in Iraq, this would not have assured victory in the “war on terrorism,”... Things have not been going well in Afghanistan, to say the least, and Pakistan looks ever more unstable.

Moreover, most analysts agree that at least part of the rationale behind Russia’s invasion of Georgia, reigniting fears of a new Cold War, was its confidence that, with America’s armed forces pre-occupied with two failing wars..., there was little America could do in response...

The belief that the surge was successful is especially dangerous because the Afghanistan war is going so poorly. ... [T]he belief that the surge ‘worked’ is now leading many to argue that more troops are needed in Afghanistan. True, the war in Iraq distracted America’s attention from Afghanistan. But the failures in Iraq are a matter of strategy, not troop strength.

It is time for America, and Europe, to learn the lessons of Iraq – or, rather, relearn the lessons of virtually every country that tries to occupy another and determine its future.

China, Iraq, Oil, and Geopolitical Stability

I think this is right, we should encourage this:

A new dynamic for the Middle East, econbrowser: Maybe it's time to try something new. And maybe it's already starting.

Last week the New York Times reported:

In the first major oil deal Iraq has made with a foreign country since 2003, the Iraqi government and the China National Petroleum Corporation have signed a contract in Beijing that could be worth up to $3 billion, Iraqi officials said Thursday.

Under the new contract, which must still be approved by Iraq's cabinet, the Chinese company will provide technical advisers, oil workers and equipment to help develop the Ahdab oil field southeast of Baghdad, according to Assim Jihad, a spokesman for Iraq's Oil Ministry. If the deal is approved, work could begin on the oil field within a few months, Mr. Jihad said.

And today the Guardian confirms that the deal was approved by Iraq's cabinet.

There are some Americans who regard expanding Chinese global influence with fear and suspicion. But I maintain that stability and prosperity for Iraq and the broader Middle East should be the primary U.S. objective at the moment. Although China of course has its own reasons to be interested in the region, those interests are undermined by terrorism and regional instability just as much as ours. And precisely because China is a distinct power with separate interests from the U.S., its status as a more neutral third party leaves it in a position to assist in restoring stability to Iraq and the region in ways that the U.S. cannot. The perception that the purpose of toppling Saddam Hussein was to benefit U.S. oil companies greatly undermines our capacity to bring peace to the region. One way the U.S. can signal that our goal is instead regional stability is by embracing a larger role for China in Iraq and the Middle East.

Some may ask, What good does it do Americans if Iraqi oil gets shipped to China? The answer is, it is a global market for oil... [P]rice depends on the total quantity produced globally and the total quantity consumed globally. More global production means a lower price, and which country consumes which oil is of little practical significance... But it matters a great deal for the price that American consumers pay for oil whether the Iraqi oil is produced or is not produced.

Others may worry that higher oil production today just leaves the world with less of this depletable resource for the future. But to this I would counter that the transition to a world when global oil production no longer increases each year will raise some tremendous geopolitical stresses. The more stability and cooperation we can have as we enter that phase, the better off we will be.

You've heard it said, "What's good for General Motors is good for the U.S." But I say, "what's good for Iraq and China is good for the U.S."

A Political Surge?

David Warsh:

The Wall Street Journal reported last week that US and Iraq negotiators have agreed on a timetable for American withdrawal from Iraq.

US forces are to withdraw from Iraqi cities by June, 2009, and from the country altogether in 2011 according to the plan. Unnamed US officials familiar with the talks told WSJ reporters Gina Chon and Yochi J. Dreazen that President George W. Bush was “almost certain to accept the agreement,” but that the pact probably would not be formally signed for at least a few more weeks.”

The usual interpretation of events is that a desperate last-ditch attempt by the American army to bring Iraq under control succeeded. Dexter Filkins, the veteran Iraq correspondent of The New York Times, expressed this consensus view last week:

The arrival of the 30,000 extra soldiers, deployed to Baghdad’s neighborhoods around the clock, allowed the American to exploit a series of momentous developments that had begun to unfold at roughly the same time: the splintering of Moktada al-Sadr’s militia, the Mahdi Army; the growing competence of the Iraqi Army; and, most important, the about-face by leaders of the country’s Sunni minority, who suddenly stopped opposing the Americans and joined with them against Al Qaeda in Mesopotamia and other local extremist groups. The surge, clearly, has worked for now.

It is, however, equally possible that the decisive events took place in Washington in the first months of 2007, when newly-elected Speaker of the House of Representatives Nancy Pelosi (D-Cal.) won a series of hard-fought legislative battles which made clear that the new Democratic majority in the House of Representatives would not continue to fund the American presence in Iraqi indefinitely – or even much longer. The Bush administration countered with its plan for a short-lived surge.

The leadership of various Iraqi factions read the newspapers. Those “momentous developments” there thus may have stemmed as much from the recognition that the US Congressional majority that came to power following the mid-term election of 2006 would soon end, no matter what, the remarkable American misadventure in Iraq, as from those “extra boots on the ground” and the more generals leading them.

Political expectations are as rational as economic ones.

[Another part of the same post discusses a new book on global warming by William Nordhaus, A Question of Balance.]

"America’s War-Torn Economy"

I'm still have doubts about the claim that the Iraq war has hurt the economy (more doubts here), but Joseph Stiglitz doesn't:

No quick fix for America’s war-torn economy, by Joseph Stiglitz, Project Syndicate: Some say there are two issues in the coming US elections: the Iraq war and the economy...; ...neither is faring well. In some sense, there is only one issue, and that is the war, which has worsened America’s economic problems. ...

It used to be thought that wars were good for the economy. After all, the Second World War is widely thought to have helped lift the global economy out of the Great Depression. But, at least since Keynes, we know how to stimulate the economy more effectively, and in ways that increase long-term productivity and enhance living standards.

This war, in particular, has not been good for the economy, for three reasons.

"Is This Any Way to Rebuild Iraq?"

Since "the U.S. economy is weak and our own bridges, roads and airports are in desperate need of repair," Linda Bilmes and Joseph Stiglitz want Iraq to pick up a greater share of the cost of its own reconstruction:

Is this any way to rebuild Iraq?, by Linda J. Bilmes and Joseph E. Stiglitz, Commentary, Financial Times: Across the Middle East, ... the dizzying rise in oil prices has fueled a construction and employment boom. Yet in Iraq, one-quarter of the population remains jobless, and Baghdad gets only 11 hours of electricity a day. Four million Iraqis have been displaced from their homes and are urgently in need of resettlement. After five years of war, the country is still desperately in need of rebuilding.

It's not that Iraq has failed to share in the oil windfall. ... A new report by the U.S. Government Accountability Office shows that Iraqi oil revenues will reach up to $85 billion this year, resulting in a budget surplus of as much as $50 billion. But despite all the money that is pouring in, Iraq is not taking responsibility for its own reconstruction.

Instead, the U.S. military is footing the reconstruction bill. Over the last two years, while Iraq has earned nearly $100 billion in oil revenues (and spent just $2 billion on capital investments such as roads, water and electricity), U.S. taxpayers have plowed $48 billion into reconstruction activities in Iraq. About half of that has gone to the oil and electricity infrastructures. The U.S. has also helped to renovate 3,000 schools, train 30,000 teachers, distribute 8 million textbooks and rebuild irrigation infrastructure for 400,000 people, as well as fund projects to improve drinking water, bridges, roads, sewage treatment, airports and, of course, oil pipelines and refineries.

True, it was the United States that invaded Iraq, and none of the work we've done there since is adequate compensation for the ... suffering that the Iraqi people have endured. But at a time when the U.S. economy is weak and our own bridges, roads and airports are in desperate need of repair, there is a real question of whether we can sustain subsidizing Iraq's rebuilding on this scale.

Adding insult to injury is the fact that Iraqis pay a heavily subsidized $1.35 for a gallon of gas..., while the U.S. military -- the largest single consumer of oil in the world -- is stuck paying world prices of $3.23... Kuwait, by contrast, offers U.S. forces a steep discount...

This means that even as the U.S. is bankrolling Iraq's reconstruction, it is ... transferring to the Iraqis extra money, which, it turns out, is being squirreled away in unproductive international bank accounts. The oil windfall is yet another example of the ongoing financial fallout of the war, which is costing the U.S. more than $13 billion a month (not counting the future costs of caring for war veterans and replenishing military equipment).

It is time for the newly solvent Iraqi government to begin helping financially (as well as militarily) to get the country back on its feet. And it is time for the U.S. to ... concentrate ... on helping the Iraqi government rebuild its capacity to undertake such projects on its own. ...

Whatever the specifics, it is important to move quickly. Elections are looming in Iraq and the U.S., and the two countries are trying to agree on America's future role. Iraq's future reconstruction program needs to be home grown -- both for the sake of Iraq and for the U.S. taxpayers who need relief from the endless cost of this foolish war.

"Iraq Leader Maliki Supports Obama's Withdrawal Plans"

Iraqi Prime Minister Nouri al-Maliki doesn't say so directly, well not quite, but he makes it clear that he thinks Barack Obama's plans for Iraq are superior to John McCain's:

Iraq Leader Maliki Supports Obama's Withdrawal Plans, Speigel: Iraqi Prime Minister Nouri al-Maliki supports US presidential candidate Barack Obama's plan to withdraw US troops from Iraq within 16 months. When asked in and interview with Speigel when he thinks US troops should leave Iraq, Maliki responded "as soon as possible, as far as we are concerned." He then continued: "US presidential candidate Barack Obama talks about 16 months. That, we think, would be the right timeframe for a withdrawal, with the possibility of slight changes."

Obama: It’s Time to End this War

Barack Obama says "on my first day in office, I would give the military a new mission: ending this war." He believes that we can "safely redeploy our combat brigades at a pace that would remove them in 16 months. That would be the summer of 2010":

My Plan for Iraq, by Barack Obama, Commentary, NY Times: The call by Prime Minister Nuri Kamal al-Maliki for a timetable for the removal of American troops from Iraq presents an enormous opportunity. We should seize this moment to begin the phased redeployment of combat troops...

Unlike Senator John McCain, I opposed the war in Iraq before it began, and would end it as president. ...

Obama Should Agree to Go to Iraq with McCain

McCain keeps asking Obama to go to Iraq with him. Even though the people responsible for security have said they would not allow them to go to Iraq together, and Obama has declined, I think it's a good idea. It would be a great opportunity for Obama to straighten out McCain on all the things he has wrong about Iraq. In the past, McCain has had Joe Lieberman around to whisper in his ear when he makes great big mistakes. But Lieberman has his own problems and his own misperceptions, and he can't always be there, and Barack is a much better choice if the goal is to gain a clearer understanding of the political, economic, social, military, and other issues that make Iraq and the greater area such a complicated and difficult problem to solve.

Let's start with an easy one. If the two of them were there today, Obama could point to troops and say see those people in uniform? There's 155,000 of them - more than the pre surge levels. I know you have trouble with technical stuff, economics, that sort of thing, but this is easy John - 155,000 is a bigger number than 130,000 so we are not back down to pre surge levels like you have claimed. And if the numbers have changed by the time they get there, it will still be worthwhile for Obama to explain why it's important for someone wanting to be the Commander in Chief to keep track of how many soldiers we have deployed.

He could point to Mosul and say, I know you said that things are quiet there, but on a day when there were three suicide bombings, it's probably best to describe it some other way.

He could, and this is important for McCain to learn because he's made this mistake more than once, set up meetings with Sunnis and Shi'as. Then, - very slowly because as, as just noted, McCain has trouble on this one - explain how they differ and why it's important to understand the difference.

And as a follow up to the previous point, once McCain does finally get this distinction, Obama could point out that understanding this will help him to avoid saying it's common knowledge that Iran is training Al Qaida when it's not true (though this is one case where, when he said this, the ear whispering Lieberman did cause him to correct his obvious lack of knowledge).

Speaking of Iran, though they wouldn't actually be in Iran, it's bound to come up, and when it does it would be a great opportunity to explain to McCain how Iran's government is structured. McCain has been confused about who leads Iran, so once again, Barack could help McCain with this. And he could, yet again, also explain why it's important to get this right.

If they are walking through a market under very heavy military guard, if there's no other way to enter the area other than with armed escorts, Barack could explain how it's probably not quite correct to say the market is safe.

And, while they are strolling through the streets of Iraq protected by hordes of military personnel who could be doing more important things than setting up TV shots for campaigns, maybe Obama can talk about other things too, educate McCain on the economy, explain that tax cuts don't increase revenue, that sort of thing. It's a bit unrelated, but not completely given how poorly the Bush administration has handled economic development issues in Iraq.

So I can see why John McCain wants Barack Obama to come along to Iraq with him, he needs somebody with him who actually understands how the politics, economics, relations with nearby countries, military presence, and so on affects Iraq, he needs to hear from someone who had Iraq policy right from day one.

Why should Barack help McCain? Aren't they political opponents? Yes, but McCain, along with the noise machine that supports whatever he says no matter how daffy or gaffey, has been confusing the public about these issues. There are considerable misperceptions as a result of McCain's confusion and lack of knowledge. When Obama does win the presidency this fall, that confusion will make it much, much harder to do what needs to be done to get things back on the right track, so whatever he can do now to help to overcome those misperceptions will help to pave a smoother road to the future.

So go ahead, agree to accompany McCain to Iraq, he really needs you there. McCain has been there several times already, and his lack of knowledge shows he really needed to take those trips, but it hasn't been enough, he still gets key things wrong. You'd think he'd have figured it all out by now, if he could, that he would have had someone explain it again and again until he gets it, but maybe you can help him, and yourself, and all of us, by going along.

Taxes During Wars

What do you think of this? It's the Introduction to a book from the Urban Institute, War and Taxes. The argument is that in criticizing the Bush administration for its policies regarding financing the war, "we should be careful not to compare today’s policies to some cardboard cutout version of an imagined past."

About Those TV Generals...

This is about the "effort to dupe the American public with propaganda dressed as independent military analysis."

War and the Economy

Are wars good for the economy?

America’s War-Torn Economy, by Joseph E. Stiglitz, Project Syndicate: ...It used to be thought that wars were good for the economy. After all, World War II is widely thought to have helped lift the global economy out of the Great Depression. But, at least since Keynes, we know how to stimulate the economy more effectively, and in ways that increase long-term productivity and enhance living standards.

This war, in particular, has not been good for the economy, for three reasons. First, it has contributed to rising oil prices. ... Higher oil prices mean that Americans (and Europeans and Japanese) are paying hundreds of millions of dollars to Middle East oil dictators and oil exporters elsewhere in the world rather than spending it at home.

Moreover, money spent on the Iraq war does not stimulate the economy today as much as money spent at home on roads, hospitals, or schools, and it doesn’t contribute as much to long-term growth. Economists talk about “bang for the buck” – how much economic stimulus is provided by each dollar of spending. It’s hard to imagine less bang than from bucks spent on a Nepalese contractor working in Iraq.

With so many dollars going abroad, the American economy should have been in a much weaker shape than it appeared. But, much as the Bush administration tried to hide the true costs of the war by incomplete and misleading accounting, the economy’s flaws were covered up by a flood of liquidity from the Federal Reserve and by lax financial regulation. ...

In a sense, the strategy worked: a housing bubble fed a consumption boom, as savings rates plummeted to zero. The economic weaknesses were simply being postponed to some future date; the Bush administration hoped that the day of reckoning would come after November 2008. Instead, things began to unravel in August 2007.

Now it has responded, with a stimulus package that is too little, too late, and badly designed. ...

With home prices falling (and set to continue to fall), and with banks uncertain of their financial position, lenders will not lend and households will not borrow. So, while the additional liquidity injected into the financial system by the Fed may have prevented a meltdown, it won’t stimulate much consumption or investment. Instead, much of it will find its way abroad. China, for example, is worried that the Fed’s stimulus will increase its domestic inflation.

There is a third reason that this war is economically bad for America. Not only has America already spent a great deal on this war – $12 billion a month, and counting – but much of the bill remains to be paid, such as compensation and health care for the 40% of veterans who are returning with disabilities, many of which are very serious.

Moreover, this war has been funded differently from any other war in America’s history... Normally, countries ask for shared sacrifice, as they ask their young men and women to risk their lives. Taxes are raised. There is a discussion of how much of the burden to pass on to future generations. In this war, there was no such discussion. When America went to war, there was a deficit. Yet remarkably, Bush asked for, and got, a reckless tax cut for the rich. That means that every dollar of war spending has in effect been borrowed.

For the first time since the Revolutionary War, two centuries ago, America has had to turn to foreigners for financing, because US households have been saving nothing . The numbers are hard to believe. The national debt has increased by 50% in eight years, with almost $1 trillion of this increase due to the war – an amount likely to more than double within ten years.

Who would have believed that one administration could do so much damage so quickly? America, and the world, will be paying to repair it for decades to come.

Recall that an increase in government spending can be paid for in one of three ways, we can raise taxes, we can borrow the money, or we can print the money needed to finance the spending. (In a given year, the government budget constraint is Government spending + Interest on debt- Taxes = Change in money supply plus Change in bond supply). This administration didn't raise taxes to pay for the war - taxes were lowered - so that means that changes in the money supply and changes in borrowing needed to make up the $1 trillion spent on the war plus the hundreds of billions of revenue lost due to the tax cuts.

Normally, an increase in borrowing (government debt) has two costs, First, it raises interest rates because the government competes with private investors and other governments for available funds, and that increases the price of borrowing. The increase in interest rates causes investment to be lower, that in turn lowers growth, and that means output will be lower in future time periods. In effect, output has been shifted from the future to the present through borrowing. Second, the interest payments themselves are a cost to the US if they are made to people living outside the US (payments made within the US redistribute income, but they are not a net cost to US citizens). Since recent borrowing was from foreigners, all the interest paid on the debt will flow out of the US and represent a cost to US citizens.

One of these costs, interest payments flowing outside of the US, has occurred and will continue to occur, but the other, an increase in interest rates brought about by competition from the government for saving has not. Why? One reason is the "savings glut" in the world that allowed us to borrow money from the foreign sector without pushing up interest rates. But a second reason is Federal Reserve interest rate targeting. With a constant interest rate target, deficit spending that puts upward pressure on interest rates is automatically "monetized," i.e. the Fed buys up the debt and replaces it with money to keep the interest rate on target, and the increase in the money supply holds down interest rates. But there is a cost here too, by increasing the money supply to hold down interest rates, inflation pressure is created, and inflation acts as a hidden tax by lowering the value of money.

I think the spending on the war and low-interest rates that have been brought about by Fed policy and the savings glut have helped to keep our economy from sputtering, but it has not been costless. First, as noted above, spending on the war may have some had stimulative effect, but if that is the goal, there are much better ways to do this. So, relative to spending the money domestically on, say, infrastructure, we have not gotten as much for our money as we might have otherwise.

Second, increases in the money supply and the influx of funds from foreigners to finance debt kept interest rates low and financed a housing bubble, but the result was a misallocation of resources to the housing sector. We stimulated the economy with low interest rates and a housing bubble, but we built things that didn't need to be built and are now sitting idle wasting resources. That is a cost to the economy, and we'd be better off now if some of that spending had been in other sectors.

Third, the interest costs. As noted above, we have borrowed from foreigners to pay for the war, so the interest on the debt will be a net drain to the US economy.

Fourth, inflation. Keeping interest rates low is inflationary, and inflation imposes a cost. I'm not sure how much of the $1 trillion has been financed by printing money, but to the extent that it has been financed in this way, the consequence is potentially higher inflation in the future.

Fifth, the increase in the price of oil as detailed above.

There are also the human costs, and the costs to the Iraqis, which are not included in these figures.

Because we have paid for the war by borrowing and printing money, and because of delays in the appearance of many of the costs associated with the war, e.g. the cost of paying for permanently disabled soldiers will come largely in the future, inflation only appears with a long lag, interest payment to foreigners will be ongoing, etc., many of the costs are not evident yet. But the costs are there and they will need to be paid.

Are there any costs that I've overlooked, misstated, or forgotten?

"The Economic Costs of the Endless War"

Robert Reich on the cost of the war:

The Economic Costs of the Endless War, by Robert Reich: Attention turns back to Iraq tomorrow when General Petraeus reports on the endless war in Iraq. In recent months the bad news from there ... has been eclipsed by the bad news on the economy. The two are closely related -- but not in the way some contend.

Let’s be clear. The cost of the War in Iraq – so far estimated to total somewhere between 1 and 3 trillion dollars – is not directly responsible for the economic mess we’re in. Wars can cause inflation when a nation’s resources are already fully committed... But when a nation’s resources are underutilized wars have been known to get economies back on track, as we learned when Franklin D. Roosevelt took the nation to war in 1941.

The US economic expansion that began in 2001 was anemic as expansions go, so the American economy has had enough capacity to support a war in Iraq without igniting inflation. ...

With the US economy falling into recession, we have even more unused capacity. That’s not in itself a reason for continuing to spend billions of dollars for the Iraqi War, of course. The war is a terribly inefficient stimulus to the US economy. A dollar spent on repairing a bridge in Iraq doesn’t have nearly the multiplier effect on our economy as a dollar spent repairing a bridge here in the United States.

More to the point – and here’s what Americans need to understand – a dollar spent in Iraq is a dollar we do not have to spend here, not only repairing our own bridges, roads, and water and sewage systems, but also giving Americans access to health insurance and children access to good schools, fully funding Social Security and Medicare, investing adequately in non-carbon based energy sources and green technologies, and borrowing less from abroad.

In other words, the real economic cost of the Iraqi War doesn’t show up in the business cycle, and it's not responsible for the current recession. The real economic cost will show up years from now in a standard of living that for most Americans will be significantly lower than we might otherwise have enjoyed.

I was doing a radio interview and made a similar point, that the real cost of the war is the opportunity cost, the things we could have spent the money on if we weren't spending it in Iraq - roads, bridges, schools, health care, etc. The host then asked something like, "With this administration, if we weren't spending the money in Iraq, do you believe we'd be spending any of it on the domestic programs you listed? Without the war, would the money have been spent at all?"

We didn't give up much because of the war, taxes were cut so the private sector was not asked to sacrifice - instead those near the top of the income distribution enjoyed large gains - and for the most part the war was paid for through deficit spending, so domestic programs were not reduced either. It's unlikely domestic initiatives would have received much attention from this administration in any case, so I'm not sure we've given up many roads, bridges, etc. - yet - to pay for the war. Instead, we pushed most of the costs forward, a game of budgetary kick-the-can.

We have not sacrificed much for this war, we haven't reduced either public or private spending, instead we've paid for the war by borrowing from the future. There will be a cost to this war, and for the most part it will be paid in the future when the bills come due. When they do, we will have to make choices, we can increase taxes or we can decrease government spending on infrastructure, health care, or other areas of the budget, we could even print money and hide the tax as inflation, but somehow the bills will have to be paid.

"$3 Trillion May Be Too Low"

Joseph Stiglitz and Linda Bilmes say they may have been wrong about how much the war in Iraq will cost - the estimate may be too low:

$3 trillion may be too low, by Joseph Stiglitz and Linda Bilmes, Commentary, Comment is Free: President Bush has tried to give the impression that the $3 trillion dollar estimate of the total cost of the war that we provide in our new book may be exaggerated.

We believe that it is in fact conservative.

"The Smart Way Out of a Foolish War"

The war. When will it end?:

The Smart Way Out of a Foolish War, by Zbigniew Brzezinski, Commentary, Washington Post: Both Democratic presidential candidates agree that the United States should end its combat mission in Iraq within 12 to 16 months of their possible inauguration. The Republican candidate has spoken of continuing the war, even for a hundred years, until "victory." The core issue of this campaign is thus a basic disagreement over the merits of the war and the benefits and costs of continuing it. ...

"War Costs and Costs and Costs"

Joseph Stiglitz on the cost of the war:

War costs and costs and costs, by Joseph Stiglitz,Project Syndicate: ...In our new book The Three Trillion Dollar War, Harvard's Linda Bilmes and I conservatively estimate the economic cost of the war to the US to be $3 trillion, and the costs to the rest of the world to be another $3tn - far higher than the Bush administration's estimates before the war. The Bush team not only misled the world about the war's possible costs, but has also sought to obscure the costs as the war has gone on.

This is not surprising. After all, the Bush administration lied about everything else, from Saddam Hussein's weapons of mass destruction to his supposed link with al-Qaida. Indeed, only after the US-led invasion did Iraq become a breeding ground for terrorists.

The Bush administration said the war would cost $50bn. The US now spends that amount in Iraq every three months. To put that number in context: for one-sixth of the cost of the war, the US could put its social security system on a sound footing for more than a half-century, without cutting benefits or raising contributions.

Moreover, the Bush administration cut taxes for the rich as it went to war, despite running a budget deficit. As a result, it has had to use deficit spending - much of it financed from abroad - to pay for the war. This is the first war in American history that has not demanded some sacrifice from citizens through higher taxes; instead, the entire cost is being passed onto future generations. Unless things change, the US national debt ... will be $2tn higher because of the war (in addition to the $800bn increase under Bush before the war).

Was this incompetence or dishonesty? Almost surely both. ...

The war has had only two winners: oil companies and defence contractors. The stock price of Halliburton, vice-president Dick Cheney's old company, has soared. But even as the government turned increasingly to contractors, it reduced its oversight.

The largest cost of this mismanaged war has been borne by Iraq. Half of Iraq's doctors have been killed or have left the country, unemployment stands at 25%, and, five years after the war's start, Baghdad still has less than eight hours of electricity a day. Out of Iraq's total population of around 28 million, 4 million are displaced and 2 million have fled the country.

The thousands of violent deaths have inured most westerners to what is going on: a bomb blast that kills 25 hardly seems newsworthy anymore. But statistical studies of death rates before and after the invasion tell some of the grim reality. They suggest additional deaths from a low of around 450,000 in the first 40 months of the war (150,000 of them violent deaths) to 600,000.

With so many people in Iraq suffering so much in so many ways, it may seem callous to discuss the economic costs. And it may seem particularly self-absorbed to focus on the economic costs to America, which embarked on this war in violation of international law. But the economic costs are enormous, and they go well beyond budgetary outlays. Americans like to say that there is no such thing as a free lunch. Nor is there such a thing as a free war. The US - and the world - will be paying the price for decades to come.

Linda Bilmes and Joseph Stiglitz on the Cost of the War

Linda Bilmes and Joseph Stiglitz argue that the costs of the war are far greater than most people realize, something they are trying to change:

The Iraq War Will Cost Us $3 Trillion, and Much More, by Linda J. Bilmes and Joseph E. Stiglitz, Commentary, Washington post: ...All told, the bill for the Iraq war is likely to top $3 trillion. And that's a conservative estimate.

President Bush tried to sell the American people on the idea that we could have a war with little or no economic sacrifice. Even after the United States went to war, Bush and Congress cut taxes, especially on the rich -- even though the United States already had a massive deficit. So the war had to be funded by more borrowing. By the end of the Bush administration, the cost of the wars in Iraq and Afghanistan, plus the cumulative interest..., will have added about $1 trillion to the national debt.

The long-term burden of paying for the conflicts will curtail the country's ability to tackle other urgent problems, no matter who wins the presidency in November. Our vast and growing indebtedness inevitably makes it harder to afford new health-care plans, make large-scale repairs to crumbling roads and bridges, or build better-equipped schools. Already, the escalating cost of the wars has crowded out spending on virtually all other discretionary federal programs...

To make matters worse, the U.S. economy is facing a recession. But our ability to implement a truly effective economic-stimulus package is crimped by expenditures of close to $200 billion on the two wars this year alone and by a skyrocketing national debt. ...

Think what a difference $3 trillion could make for so many of the United States' -- or the world's -- problems. We could have had a Marshall Plan to help desperately poor countries, winning the hearts and maybe the minds of Muslim nations now gripped by anti-Americanism. ... We worry about China's growing influence in Africa, but the upfront cost of a month of fighting in Iraq would pay for more than doubling our annual current aid spending on Africa. Closer to home, we could have funded countless schools to give children locked in the underclass a shot at decent lives. ...

The Bush team, then, is not merely handing over the war to the next administration; it is also bequeathing deep economic problems that have been seriously exacerbated by reckless war financing. We face an economic downturn that's likely to be the worst in more than a quarter-century.

Until recently, many marveled at the way the United States could spend hundreds of billions of dollars on oil and blow through hundreds of billions more in Iraq with what seemed to be strikingly little short-run impact on the economy. But there's no great mystery here. The economy's weaknesses were concealed by the Federal Reserve, which pumped in liquidity, and by regulators that looked away as loans were handed out well beyond borrowers' ability to repay them. Meanwhile, banks and credit-rating agencies pretended that financial alchemy could convert bad mortgages into AAA assets, and the Fed looked the other way as the U.S. household-savings rate plummeted to zero.

It's a bleak picture. The total loss from this economic downturn ... is likely to be the greatest since the Great Depression. ...

Others will have to work out the geopolitics, but the economics here are clear. Ending the war, or at least moving rapidly to wind it down, would yield major economic dividends.

As we head toward November, opinion polls say that voters' main worry is now the economy, not the war. But there's no way to disentangle the two. The United States will be paying the price of Iraq for decades to come. ... [full article]

"The Three Trillion Dollar War"

Good question:

Keynesian trillions, Editorial, LA Times: President Bush['s]... final State of the Union speech made clear that he intends ... to ... spend whatever it takes to secure Iraq and Afghanistan -- and his legacy.

While the president's speechwriters were tweaking his address Monday, the White House announced that Bush would ask for $70 billion more for the two wars this year. A Pentagon spokesman said combat operations were costing $12 billion a month, with $9.2 billion spent in Iraq. That's just for combat operations. Including replacing equipment that's being used up and providing medical care and disability benefits for the wounded, Iraq has already cost well over $1 trillion. Back in early 2006, when war spending was running about $5 billion a month, economists Joseph Stiglitz and Linda Bilmes were sharply criticized for a study that predicted the Iraq war would cost up to $2 trillion. Their sequel, to be released next month, is titled "The Three Trillion Dollar War."

The interesting question is why the U.S. economy, beneficiary since 9/11 of the largest military spending binge in history, now requires $150 billion more in the form of a short-term stimulus package. Why hasn't the $1 trillion in defense spending, in addition to the 2001 and 2003 tax cuts, been sufficient to keep the economic boom going? ... Does that mean the fundamentals of our economy are weaker than we thought, and a deeper slump might have occurred without all that spending? ...

The economist John Maynard Keynes taught us in the 1930s that money spent on guns -- or butter, or even digging ditches and filling them up again -- had the same stimulative effects on a slumping economy. We've developed a more nuanced view of government spending since then, but it's still worth asking: What would Keynes say about a $3-trillion war?

Update: Paul Krugman:

An Iraq recession?, Paul Krugman Blog: One thing I get asked fairly often is whether the Iraq war is responsible for our economic difficulties. The answer (with slight qualifications) is no.

Just to be clear: I yield to nobody in my outrage over the way we were lied into a disastrous, unnecessary war. But economics isn’t a morality play, in which evil deeds are always punished and good deeds rewarded.

The fact is that war is, in general, expansionary for the economy, at least in the short run. World War II, remember, ended the Great Depression. The $10 billion or so we’re spending each month in Iraq mainly goes to US-produced goods and services, which means that the war is actually supporting demand. Yes, there would be infinitely better ways to spend the money. But at a time when a shortfall of demand is the problem, the Iraq war nonetheless acts as a sort of WPA, supporting employment directly and indirectly.

There is one caveat: high oil prices are a drag on the economy, and the war has some — but probably not too much — responsibility for pricey oil. Mainly high-priced oil is the result of rising demand from China and other emerging economies, colliding with sluggish supply as the world gradually runs out of the stuff. But Iraq would be exporting more oil now if we hadn’t invaded — a million barrels a day? — and that would have kept prices down somewhat.

Overall, though, the story of America’s economic difficulties is about the bursting housing bubble, not the war.

Keeping Darth Alive

Darth Vader and his evil twin:

Darth Vader blogging, by Paul Krugman: Back when Hillary Clinton described Dick Cheney as Darth Vader, a number of people pointed out that this was an unfair comparison. For example, Darth Vader once served in the military.

Here’s another reason the comparison is invalid: the contractors Darth Vader hired to build the Death Star actually got the job done.

Multiply by Ten

A reminder about opportunity costs:

Now and Forever, by Bob Herbert, Commentary, NY Times: Most of the time we pretend it’s not there: The staggering financial cost of the war in Iraq, which continues to soar, unchecked...

A report prepared for ,,, the Joint Economic Committee of the House and Senate warns that without a significant change of course in Iraq, the long-term cost of the wars in Iraq and Afghanistan could head into the vicinity of $3.5 trillion. The vast majority of those expenses would be for Iraq.

Priorities don’t get much more twisted. A country that can’t find the money to provide health coverage for its children, or to rebuild the city of New Orleans, or to create a first-class public school system, is flushing whole generations worth of cash into the bottomless pit of a failed and endless war. ...

Make Livelihoods, Not War

Jeffrey Sachs says our militarized foreign policy has been a disaster. Here's the short version:

America’s Failed Militarized Foreign Policy, by Jeffrey D. Sachs, Project Syndicate: Many of today’s war zones – including Afghanistan, Ethiopia, Iran, Iraq, Pakistan, Somalia, and Sudan – share basic problems that lie at the root of their conflicts. They are all poor, buffeted by natural disasters – especially floods, droughts, and earthquakes – and have rapidly growing populations that are pressing on the capacity of the land to feed them. And the proportion of youth is very high, with a bulging population of young men of military age (15-24 years).

All of these problems can be solved only through long-term sustainable economic development. Yet the United States persists in responding to symptoms rather than to underlying conditions by trying to address every conflict by military means. It backs the Ethiopian army in Somalia. It occupies Iraq and Afghanistan. It threatens to bomb Iran. It supports the military dictatorship in Pakistan.

None of these military actions addresses the problems that led to conflict in the first place. On the contrary, American policies typically inflame the situation rather than solve it.

Time and again, this military approach comes back to haunt the US. The US embraced the Shah of Iran by sending massive armaments, which fell into the hands of Iran’s Revolutionary Government after 1979. The US then backed Saddam Hussein in his attack on Iran, until the US ended up attacking Saddam himself. The US backed Osama bin Laden in Afghanistan against the Soviets, until the US ended up fighting bin Laden. Since 2001 the US has supported Pervez Musharraf in Pakistan with more than $10 billion in aid, and now faces an unstable regime that just barely survives.

US foreign policy is so ineffective because it has been taken over by the military. Even postwar reconstruction in Iraq under the US-led occupation was run by the Pentagon rather than by civilian agencies. The US military budget dominates everything about foreign policy. Adding up the budgets of the Pentagon, the Iraq and Afghanistan wars, the Department of Homeland Security, nuclear weapons programs, and the State Department’s military assistance operations, the US will spend around $800 billion this year on security, compared with less than $20 billion for economic development. ...

A more peaceful world will be possible only when Americans and others ... realize that today’s conflicts, having resulted from desperation and despair, can be solved through economic development rather than war. ...

The Iraq War Costs More than You Think

Tyler Cowen writes a letter "To: President George W. Bush" with the subject identified as "The Hidden Costs of Iraq":

What Does Iraq Cost? Even More Than You Think, by Tyler Cowen, Commentary. Washington Post: ...One commonly cited estimate of Iraq's cost, based on an August analysis by the nonpartisan Congressional Budget Office, is $1 trillion, and that's probably on the low side. A report released last week by the Democratic staff of Congress's Joint Economic Committee put the war's 2002-08 tab at $1.3 trillion.

But all these figures don't quite get at Iraq's real cost. ... We often think of cost simply in terms of dollars spent, but the real cost of a choice -- what economists call its "opportunity cost" -- consists of the forgone alternatives, of the things we could have had instead. ... This idea sounds simple, but if applied consistently, it requires us to rethink and, yes, raise the costs of the Iraq war.

Set aside the question of what we could have accomplished at home with the energy and resources we've devoted to Iraq and concentrate just on national security. Here, the hidden cost of the war, above all, is that the United States has lost much of its ability to halt nuclear proliferation.

Mr. President, when the war started, I was convinced by your arguments that we had to stop Iraq's dictatorship from getting the bomb. No longer. Let's look at some of the opportunity costs the United States has incurred so far:

1. We still haven't secured our ports against nuclear terrorism. The

$1 trillion we've probably spent on the war could have funded the annual budget of the Department of Homeland Security 28 times over.

2. The human toll of the war is dreadful: more than 3,800 U.S. soldiers dead and more than 28,000 wounded, plus more than 1,000 private contractors killed and many more injured. It's harder to know how many Iraqis have died; some estimates claim that the war has caused a million or more Iraqi deaths, and even if that's an overstatement, the toll is still very high. But it's not just the lives that are gone; we've also lost the contributions that these people would have made to their families and to humanity at large.

3. Another major hidden cost: Many of the wounded have severe brain injuries or other traumas and will never return to "normal" life. Furthermore, Washington will find it far harder to recruit and retain quality troops and National Guardsmen in the future.

4. Don't forget the small statistics, which are often the most striking. ...[A]n estimated 250,000 bullets have been fired for every insurgent killed in Iraq. That's not just a waste of ammunition; it's also a reflection of how badly the country has been damaged and how indiscriminate some of the fighting has been. Or take another straw in the wind: The cost of a coffin in Baghdad has risen to $50-75, up from just $5-10 before the war, according to the Nation magazine.

5. Above all, governing Iraq has, so far, been a fruitless investment. According to 2006 figures, U.S. war spending came out to $3,749 per Iraqi -- almost as much as the per capita income of Egypt. That staggering sum hasn't bought a lot of leadership from Iraq, or much of a democratic model for its Arab neighbors.

In fact, Mr. President, your initial pro-war arguments offer the best path toward understanding why the conflict has been such a disaster...

Following your lead, Iraq hawks argued that, in a post-9/11 world, we needed to take out rogue regimes lest they give nuclear or biological weapons to al-Qaeda-linked terrorist groups. But each time the United States tries to do so and fails to restore order, it incurs a high -- albeit unseen -- opportunity cost in the future. Falling short makes it harder to take out, threaten or pressure a dangerous regime next time around.

Foreign governments, of course, drew the obvious lesson from our debacle -- and from our choice of target. The United States invaded hapless Iraq, not nuclear-armed North Korea. To the real rogues, the fall of Baghdad was proof positive that it's more important than ever to acquire nuclear weapons... Iran, among others, has taken this lesson to heart. The ironic legacy of the war to end all proliferation will be more proliferation.

The bottom line is clear, Mr. President: ... you must now realize that the costs of a failed war are far higher than you've acknowledged.

Ironically, it's probably the doves who should lower their mental estimate of the war's long-haul cost: By fighting a botched war today, the United States has lowered the chance that it will fight another preventive war in the near future. The American public simply does not have the stomach for fighting a costly, potentially futile war every few years. U.S. voters have already lost patience with the pace of reconstruction in Iraq, and that frustration will linger; remember, it took the country 15 years or more to "get over" Vietnam. The projection of American power and influence in the future requires that an impatient public feel good about American muscle-flexing in the past.

Even if the wisest way forward is sticking to our guns, the constraints of politics and public opinion mean that we cannot always see U.S. military commitments through. Since turning tail hurts our credibility so badly and leaves such a mess behind, we should be extremely cautious about military intervention in the first place. The case for hawkish behavior often assumes that the public has more political will than it actually has, so we need to save up that resolve for cases when it really counts.  ...

"Billions for Guns, Vetoes for Butter"

Is the war worth the cost?

Billions for Guns, Vetoes for Butter, by E. J. Dionne, Commentary, Washington Post:

It's time that we subject the Iraq war to the same cost-benefit analysis that we are called upon to impose on other government endeavors. We are supposed to repeal or revise domestic programs that don't work. Shouldn't a troubled war policy be treated the same way?

The ruling assumption of the moment is that we can't afford to withdraw our troops from Iraq because of the chaos that would ensue. The idea seems to be that somehow -- against the evidence of the past 4 1/2 years -- good things will happen if we just keep the war going.

This upside-down debate puts the burden of proof in the wrong place. We should be asking whether keeping our forces in Iraq over an extended period is worth the cost in lives, injuries, money, lost opportunities and strain on our military. How will a prolonged stay in Iraq enhance our security? Is Iraq distracting us from foreign policy questions that will matter far more to our national interest in the long run?

President Bush regularly brags about the accomplishments of the troop surge. ... The question to which the administration has no answer is how this ... will produce a decent outcome down the road.

From Thomas E. Ricks, The Post's military correspondent, comes a disturbing answer.