Iraq and the economy (4.00 / 1)

While Obama's speech today was on Iraq and national security, tomorrow's is supposed to be on Iraq and the economy.  My assumption is he will make this specific point.  I agree that this is probably the best framing of the debate.  I keep waiting for someone to say "Why is it ok to spend Four Trillion dollars building Iraq's infrastructure but not our own?"

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by: Mark Matson @ Wed Mar 19, 2008 at 15:34:01 PM CDT

Precisely. The fact is, contrary to what most think, it NOT bad news in Iraq that (0.00 / 0)

will get more and more people to be against this war and for a soon-as-possible withdrawal.  It's the BAD ECONOMIC NEWS that will make people demand we get out ASAP because they will REFUSE to keep spending money there whilst we are suckin hind titty with our own economy here.

For some reason, it seems that Obama has some pathological and deep-seated psychological need for Republicans to like him.  Seriously.  It's weird.

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by: avenged savant @ Wed Mar 19, 2008 at 18:49:56 PM CDT

[ Parent ]

Don't disagree with the strategy (4.00 / 1)

But I think the war isn't so much "bad for the economy" as it is what prevents us from doing what we need to right the economy.

Imagine the Great Depression hitting with the US bogged down in a 5 year war in some Central American country with a cumulative national debt of $9.4 trillion.  Imagine if Herbert Hoover had not just done nothing, but had added $4 trillion to the debt, severely handicapping FDR in dealing with it?

This is really the dilemma we face.  We need to rebuild infrastructure and invest in renewables and energy-efficent technolog, as well as education.  We will need to subsidize the transition to universal health care.  We need to do something about at least some of the mortgage foreclosures, and are probably facing growing unemployment.

And Bush has pissed all that money down the rathole in Iraq (and to the greedy contractors), plus nearly broken the military. And then there are the tax cuts.

So I don't disagree with the strategy as such, even though I think excessive risk-taking and the housing bubble are more to blame for our economic troubles.  What the war really does is to restrict our options in dealing with our economic problems.

This is evidently the subject of Obama's speech tomorrow.
 

John McCain--He's not who you think he is.

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by: Mimikatz @ Wed Mar 19, 2008 at 15:44:20 PM CDT

military Kensyianism (4.00 / 1)

You make some good specific points, but your overall framing is kind of like saying, "The problem isn't that Daddy spent all of our money on crack. The problem is that food and shelter cost money."

If we didn't spend so much of our national wealth on the military industrial complex, we could have balanced budgets, universal healthcare, serious investment in renewable energy, well-maintained infrastructure, more and better education... you know, stuff that creates wealth and increases wages. The real estate bubble was a way to hide the effects of conservative economic policies, including the military Kensyianism that blows a huge chunk of our wealth on destructive less-than-worthless bullshit.  

miasmo.com

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by: miasmo @ Wed Mar 19, 2008 at 16:13:24 PM CDT

[ Parent ]

The perception (4.00 / 1)

that the Iraq War is the cause of our economic troubles may be the most significant political development of my lifetime.  

A fundemental reason the Neocons have been able to pursue their policy is the sense that there has been no cost to their misadventure.  

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by: fladem @ Wed Mar 19, 2008 at 15:53:49 PM CDT

As a high school government teacher, for what its worth (0.00 / 0)

I've seen firsthand the success of the neocon strategy. For the first four years of this thing, the students came to me with little to no interest in the war.  Unless they were planning to enter the military or had a family member or friend in Iraq, the war meant nothing.   This year something has been different.  Without my prompting most students have themselves drawn connections with their declining college and economic prospects and this debacle  

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by: lorij @ Wed Mar 19, 2008 at 16:16:50 PM CDT

[ Parent ]

What I've Been Waiting For (0.00 / 0)

Bravo! We've been dancing around it for sometime.  But finally you've nailed it. This is what we must rally around, that is if we can extricate ourselves from the diversionary issues the crowd in Versailles hopes we continue to busy ourselves with...

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by: lorij @ Wed Mar 19, 2008 at 16:02:26 PM CDT

War and the economy (4.00 / 1)

You've hit upon an important truth here Chris.  The meme that "war is good for the economy" is ripe for challenge.

Really, go lower than a macroeconomic scale and look at what it means to have a war economy:  Massive amounts of money are transferred to the makers of the implements of death and destruction.  Some of that trickles down to those hired to do the work, and occasionally some spinoff benefits and innovations occur, but the primary purpose is producing destruction.  

No hungry people are fed by building tanks.  No homeless people get shelter under aircraft carriers.  If anything, helping these people becomes more expensive since people who might have been growing food or building homes are instead making military hardware.  Scientists who might have cured diseases are instead designing new ones.

It is a tremendous misallocation of resources unless the society really is under dire threat from outside.

It's what Eisenhower talked about in the Cross of Iron speech:

The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities.

It is two electric power plants, each serving a town of 60,000 population.

It is two fine, fully equipped hospitals.

It is some 50 miles of concrete highway.

We pay for a single fighter with a half million bushels of wheat.

We pay for a single destroyer with new homes that could have housed more than 8,000 people.

This, I repeat, is the best way of life to be found on the road the world has been taking.

This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.

So I like this.  It's something that fits on bumper stickers, protest placards and advertising tag lines.

War is bad for the economy.  Simple and truthful.

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by: Daniel De Groot @ Wed Mar 19, 2008 at 16:21:48 PM CDT

No, no, and no (0.00 / 0)

I want to win as much as the next guy and I have no problem with throwing out little jibes about how the economy people are hurting while we have been spending billions overseas on the war that could have been better used in a million ways.

However, a line has to be drawn.  The proposition that the war was a major cause of our current economic problems is absolutely 100% indefensible.  I will eat my hat if any really credible economist thinks the war was a principle cause of the credit market crisis or the recession.  Spending lots of money on the war certainly didn't help things, but we are really talking about largely separate processes at work.  

Part of a progressive movement has to be a commitment to intellectual integrity.  If we are going to rally behind the idea that the war and the economic downturn are causally related, then who are we to criticize conservatives who claim that climate change is a myth?  Both positions are without merit, and neither are supported by anybody actually in the know.

John McCain: Health insurance for low income children represents an "unfunded liability."

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by: FuzzyDunlop @ Wed Mar 19, 2008 at 16:25:31 PM CDT

No connection between credit crunch and trillion dollar war? (0.00 / 0)

Explain please.  Doesn't Stigletz (if he's credible enough for the Nobel Committee far be it for me to argue) argue that the credit crunch was at least in part a result of engineered low interest rates to kind of lull us ignoring the horrific costs of this thing...we can both wage a war and spend, spend, spend by buying homes we can't afford and then borrowing against the magical ever-rising equity. And of course, what about the oil markets? No connection?  

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by: lorij @ Wed Mar 19, 2008 at 16:47:42 PM CDT

[ Parent ]

? (0.00 / 0)

I don't know to which quote from Stiglitz you are referring, but if you have a link please post it.

Interest rates were lowered in early 2001 order to fend off the dot com bubble bust and then gradually raised back over time starting in late 2003.  I don't see the connection, or why lowering rates would make us ignore the costs of the war to begin with.

The bottom line is this: We've spent about 500 billion on the war, which is a travesty.  But during that time period (since 2002), the federal government has spent about 17-18 trillion dollars.  The war is a pretty small component of the larger fiscal picture.

Further, its not obvious that spending itself has much to do with the current economic problems we face.  The crisis in the credit market has its own roots, and patterns of growth and decline in GDP have their own logic (although, of course, much economic theory suggests that they can be related to spending).

John McCain: Health insurance for low income children represents an "unfunded liability."

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by: FuzzyDunlop @ Wed Mar 19, 2008 at 17:11:48 PM CDT

[ Parent ]

not that small (4.00 / 1)

It strikes me that 500 billion out of 18 trillion is a pretty significant fraction. About 3% if my calculation is right. And the indirect costs add up to significantly more than 500 billion, as Stiglitz points out.

If that 500 billion is so insignificant, why haven't we spent it on infrastructure, on alternative energy, on healthcare etc. Those items get only a small fraction of the fraction. Those items would be even more effective in creating employment. And we would be getting something of real value for the money. The 500 billion we have spent on Iraq has purchased negative value.

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by: TonyV @ Wed Mar 19, 2008 at 22:33:41 PM CDT

[ Parent ]

Being specific (0.00 / 0)

It's not like the $500 billion is chump change.  And you are absolutely right that it could have been spent on all sorts of better things.  As I said in my original post, this kind of criticism is not just fair game, but is something that the Dems should definitely hammer home in the fall.

But that is fundamentally distinct from the question of whether the war spending is a principle cause of the recession and the credit market crisis.  Despite what most Americans appear to think, it is not.  And Democrats and Progressives need to understand that fact and not fall into the trap of distorting the truth simply because its politically convenient.  We have to stand for something when it comes to truth and credibility.

John McCain: Health insurance for low income children represents an "unfunded liability."

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by: FuzzyDunlop @ Thu Mar 20, 2008 at 08:18:35 AM CDT

[ Parent ]

I like truth (0.00 / 0)

but the truth is not so clear here. I think any reasonable person would conclude that the Iraq war has hurt the economy. I consider Stiglitz to be a reasonable person as well as an economic whiz, and he so concludes.

If so, then in conjunction with other causes, it has contributed to the recessionary problems that are immanent. Is it the major factor, I would guess not, but what do I know? Maybe it is. Maybe its more like the straw that broke the camel's back. It's a debatable question, and the I think the Dems are on ethically firm ground when they connect our current economic woes in part to the war.  

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by: TonyV @ Sat Mar 22, 2008 at 00:32:30 AM CDT

[ Parent ]

None. (0.00 / 0)

I completely agree with the parent.  The whole reason Stiglitz made headlines with his assertion that the credit crunch was partially caused by the war is because it hasn't been made by any other credible economist.  The truth is that we had a loose monetary policy to get us out of the dot-com recession for too long.  Low interest rates combined with predatory lending and speculative real estate investments gave us the real estate bubble.  That would have been problem enough, except we then had banks turning around and selling derivatives that were backed by mortgage payments that starting drying up when housing prices stopped going up.  Add in the fact that these derivatives were deemed as safe as treasuries by the rating agencies and look at the massive amounts of leveraged buying, and we've got quite a problem.  

Government spending in Iraq played a marginal role at best in the whole thing.  In fact, it is quit likely that building tanks and bullets in the US will actually help the economy by providing jobs and spending that otherwise would not be spent. That's economics 101.

You could make an argument that the government could spend even more domestically if we weren't in Iraq, but the affect would likely be marginal.

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by: BobbyWallace @ Wed Mar 19, 2008 at 17:25:33 PM CDT

[ Parent ]

Careful about assigning credibility (0.00 / 0)

I must admit to being at a loss in determining which economists I should call credible.  Should we start with Greenspan?  

Certainly, the war didn't launch the loose credit policy, but I believe part of Stiglitz's point is that it was in the interests of the war-makers -- and their rapacious enablers in the financial sector --  to continue and even encourage the frenzy. For some time now, the economy in this country has been propped up by the housing bubble and the spending it financed...households taking on record debt to keep the machine humming.  I'm not sure how often--if ever-- we have pursued a war without raising taxes, but we can't overlook the impact of Bush's tax cuts (Stiglitz doesn't)on this either.  Or what's happening to the oil markets. (Of course, a deep recession might cure that problem...sigh.)  It seems to me, we're running out of new-fangled crazy ways to manipulate the global financial markets and disguise the costs of this war and in fact the entire wasteful military, security establishment we've created.

Isn't military Keynesianism the most destructive path a democrat republic can take?  I'm rambling now.  
Peace.

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by: lorij @ Wed Mar 19, 2008 at 18:24:46 PM CDT

[ Parent ]

Yes, and no (4.00 / 1)

In the strict macroeconomic sense it is hard to say whether the war is beneficial or harmful. Certainly, if it sucks a lot of dollars out of the US and into Iraq, that would hurt the economy.

However in budgetary terms Iraq spending is VERY harmful, as those dollars could have been spent on health care or education or whatever. This does end up having an economic effect in terms of the opportunities lost.

The average (educated) person has a vague understanding of the interplay of economic subtleties, but they can easily understand the budget issues like taxes, debts and reductions in Medicaid (for example) spending.

Therefore, asserting that the Iraq war has had a big impact on the economy, is true in terms of opportunities lost, shifted priorities, and federal budget, even if it is a "small" part of the national economy.

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by: MetaData @ Wed Mar 19, 2008 at 22:50:43 PM CDT

[ Parent ]

Several Jumps Here (0.00 / 0)

I think you're making the same kind of mistake that you say running on Iraq or running on the economy would be. You're taking a specific set of circumstances and generalizing them to a larger ideological point.

Your quote says that people believe that spending on the war in Iraq is currently hurting the economy. But you say Democrats should run on the idea that defense and military spending hurts the economy. To get there from your starting point you have to make two abstractions.

1) Go from "spending on the Iraq war is bad for the economy" to "spending on any war is bad for the economy." You may or may not find people willing to go along with this, but since shifting resources to fight the Taliban and al-Qaeda in Afghanistan seems to be a priority for many Dems, I think more people may be inclined to say "War spending may be a drain on the economy, but if it's a just or necessary war, it's a cost worth paying."

2) Beyond that, you want to go from "spending on war is bad" to "spending on military and defense is bad." I just don't see people moving easily to this position. If Vietnam and the Cold War didn't persuade people of this, I don't see how they're going to make the move now. Defense spending is often portrayed as a method of job creation through manufacturing and providing support to servicepeople - witness the uproar whenever a military base gets closed or a defense contract gets slashed. I think many people's default preference is to spend a lot of money building stuff we then don't have to use.

Don't get me wrong, I agree with you about the harm defense spending does to our ability to pursue a progressive agenda. I just think that the Iraq-economy link is not one that's going to lead people who don't already agree with that position to take it up. It's just as much a context-specific situation as running on just-Iraq or just-the-economy would be. When Iraq is no longer seen to be hurting the economy, its value as vote-driving force will wane.

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by: Dave Thomer @ Wed Mar 19, 2008 at 20:59:44 PM CDT

This IS the issue (4.00 / 1)

that can win the election. I hope that Obama will hit this issue hard here in PA, where people can and will see the connection between a fading economy, and spending vast sums on counterproductive wars. I wish that moral arguments would sway equally large numbers of voters, but I wouldn't bet on it.

How can you spend upwards of 500 billion on something which ends up in worse shape than when you started, and not have damaged yourself economically? Even more, how can you continue to spend that kind of money year after year, and not suffer decline. The U.S. dollar was not faring too well the last time I glanced.

If some economists tell me otherwise, I say so much the worse for economists. Most of them don't have a real clue anyway. Economics is hardly an exact science.

You just can't keep on throwing real money down a rathole and expect that it will not impoverish you. If economists try to tell me otherwise, well, you know, sometimes a little knowledge is a dangerous thing.  

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by: TonyV @ Wed Mar 19, 2008 at 22:57:23 PM CDT