America’s Economic Mess Aggravated by Iraq War


(Richard Vague and blogger/historian Juan Cole)
This is a guest post by Richard Vague, a moderate Republican who served as co-Founder and CEO of First USA Bank. Vague is the author of Terrorism: A Brief for Americans. He is also the chairman of American Respect, a non profit organization committed to enlightened, constructive American engagement in global problems.
The U.S. economy will not start truly getting better until we stop spending on this war. That should be page one and line one on any national agenda. Yet while congress enacts programs and candidates make promises that will at best have marginal economic impact, we continue to squander a quarter of a trillion dollars or more each year in Iraq.
The Democrats, whose job it should be to bring this war’s end, are instead lulled by polls that show that the economy has surpassed the war as voters’ greatest concern–thus missing the fact that our current woes stem directly from the $3 trillion being spent in total on Iraq.
This war is one of few, if any, that have been prosecuted without tax support, and it instead has proceeded in the wake of a tax cut. (Full disclosure–I loathe tax increases and instead wish the war had never been fought.) Rather, this war has been financed by a massive increase in debt and by printing reams of new money, thus bringing inflation–which Reagan rightly called the cruelest tax.
The rapid rise in energy and food prices and decline of the dollar against the world’s other currencies are in part evidence of this. Any market economy is subject to intermittent economic shocks–in my lifetime there have been the S&L crisis, the oil embargo crisis, the internet bubble, and now the subprime crisis, to name just a few. The difference this time is that the war has depleted our capacity to respond, and will therefore double the financial anguish. We are now re-entering the unpleasant world of Jimmy Carter’s stagflation.
This cost might be worth bearing if it had truly reduced terrorism. But all intelligence–and any reasonable theory of the causes of terrorism–point strongly to the opposite. A misplaced belief that the surge is working has lowered the war’s profile. (The perceived success of the surge is largely due to the fact that, among other things, we are now paying off Sunni warriors that we were previously attacking.)
However, if the surge is genuinely working–great, let’s start leaving now.
If not, let’s implement the Biden-Gelb plan, which will allow departure without chaos, and then start leaving. The U.S. economy will not start truly getting better until we stop spending on this war.
— Richard Vague


10 comments on “America’s Economic Mess Aggravated by Iraq War

  1. acerimusdux says:

    Expanding on my comment above:
    There has been a modest expansion in M2 in the last couple of years, driven almost entirely by money flowing into retail money funds, much of it possibly fleeing riskier assets. Even more telling may be the discontinued M3, which was expanding more rapidly. This reflects large account balances, mostly in large time deposits and institutional money market funds. The latter series is still kept, and shows a doubling in the last three years, adding about $1 trillion dollars. Large time deposits were showing a similarly rapid expansion before the series was discontinued a year ago.
    This doesn’t really reflect activity by the Fed. It reflects expanding balances in accounts of large institutions caused in part by their borrowing and lending from each other.
    So there has been no “monetization” of the debt. All $9 trillion of it is still on the books. There should be no general monetary inflation. What there has been is very lax regulation of financial markets, and the activities of large commercial and investment banks.
    There also has been, recently, a falling dollar, which does lead to higher prices on imports (including oil). In the first place, though, the dollar was very strong to begin with-pushed as high as it was in part by the Fed’s tight monetary policy. There was, in a sense, a bubble in the dollar, causing bubbles in many other dollar denominated assets.
    That has begun to fall now as investors (especially foreign investors) have lost some confidence in our financial system-not due to any excessive printing of dollars, but a lack of regulation.


  2. acerimusdux says:

    “Rather, this war has been financed by a massive increase in debt and by printing reams of new money, thus bringing inflation–which Reagan rightly called the cruelest tax.”
    Actually, there hasn’t been any massive printing of new money. The monetary base has expanded by only 5.5% a year over the last decade, and much less than that in recent years. M1 has expanded at around 0% for the last 2 years. Even now, with the economy clearly heading into recession, there has been no noticeable sign in M0 or M1 of any attempt to change these trends. We would have likely seen more money printed in the last 5 years if we had been on the gold standard.


  3. TonyForesta says:

    Ohhhh!,…. and I left out NEVERENDINGWAR!!!


  4. TonyForesta says:

    Iraq is was from the beginning, is now, and always will be a CRIME SCENE.
    Until Americans recognize this horror, and begin the arduous process of correcting the many costly bloody noendinsight wayward policies and paths and wanton profiteering perpetuating this nightmare, and earnestly dendeavore to right the many grievous terrible wrongs of the fascists in the Bush government, – America is doomed.
    The Watergatelike intrusion into Barak’s passport and whoknowswhose opponents files should send a shiver down the spine of every American. Of course we all know that this contracted spying operation will be whisked of the radar in three news cycles, and the fascist in the Bush government will walk away untouched and unaccountable for another crime.
    The fascists in the Bush government are perverting and betraying America, breaking laws insistently and repeatedly, and insidiously reengineering our laws and the Constitution.
    The coming economic calamity will hurt America and Americans in manifold ways. The fascists in the Bush government, and those who aid and abet them, will reap outrageous fortunes, and stand Olympian and immune from any law, or accountability, and reign like tyrant kings, over the subjugated people.
    America is trillions of dollars in debt. We are committed to two costly bloody wars, both of them catastrophic horrorshows. One in Afghanistan, “the forgotten war” wherein the vaunted US hypersuperior military is engaged in a “holding action”, while Taliban and Al Quaida mass murderers plot, finance, train for, and are hoping to execute the sequel to 9/11. This critical battle is somehow, for some unknown unknown reason largely ignored, underfunded, undermined, and lacking in political committment, and resources. Instead America is forced by the fascists in the Bush government to hazard, burden, and pay for a costly, bloody, noendinsight horrorshow and illegal war and occupation in Iraq, that benefits the fascists in the Bush government singularly and exclusively.
    Sadly, there is no viable possibility of a hasty exit from Iraq, which also means there in no viable possibility for increased resources, and actions in Waziristan, and the netherreaches of the rugged borders between Afghanistan and Pakistan.
    Hundreds of thousands of American troops roaming untamed mountains of Waziristan is an excercise in futility, as Iraq has proven. Iraq is a war bent on engorging the offsheet accounts of fascists in the Bush government. Afghanistan, “the forgotten war” is a holding action, with woefully inadequate resources and political commitment applied to achieve the stated objectives.
    Americans either stand up and defang and dethrone the fascists in the Bush government, (whom McCain champions, defends, and will gleefully perpetuate), – or America is doomed to a future or crippling debt, gargantuan deficits, loss of credibility, and a radical perversion and betrayal of the peoples trust, the rule of law, and our Constitution.
    We will all bequeath our children an America radically different from the America we were born into, – and an America that will no longer
    “Deliver us from evil!”


  5. Mr.Murder says:

    Balkanization within Iraq would spread the underlying problems of ethnic tensions to neighboring states.
    Especially with regard to Turkey and the Kurdish north.
    Saudi Arabia ‘s own Shi’ite repression.
    The continued strains along Iran’s border, and Syria’s.
    Refugee crisis of multiple factors, straining our regional allied leaders including foremost, Jordan.
    Mutliethnic roots can be suppressed even greater
    within the breakup. Well, a continuance of what has gone since Saddam’s ouster.
    If only Winston CHurchill was still here, to take the bid concessions for BP in the areas around Tikrit, and a railroad from Turkey to that city could link western interests within Iraq once more after the ottomans collapsed from WW1.
    Maybe Richard Halliburton could fly Iraq’s first king Faisal over the land in a RAF biplane to view surface topography for oil prospects, before he goes to visit Iran and India, before drowning in traditional a ship he captained after building, sailing to America from China.
    What business leader will make this trip across the sea of debt?
    Maybe our history degree President can remind America aobut these past efforts. We could secure additional BP grants for helping invade? Oh, that’s why Blair used Hill & Knowlton(again) to help us invade. Once for baby incubator stories in Kuwait, once for Niger forgeries the date they last did PR work for British when they had an embassy there. Except some of the letterhead stamps actually matches when Israel last had an embassy in Niger, which it withdrew right at the century’s turn. Say, the first Niger forgery references emerged about the time Israel was politely asked to leave Niger?
    Who could have imagined….


  6. PissedOffAmerican says:

    Hmmm, we sure could use that coupla three TRILLION that Zakhiem “misplaced”, couldn’t we?
    The missing component here is politicians that actually give a shit about something other than their own self-interests. We always tend to discuss these problems with the misguided notion that our government is actually working in the interest of the people. If the last eight years haven’t dispelled that fantasy, I don’t know what will.
    Really, we need another “trifecta”, so we can get cowered into buying the lies of these criminals for another eight years. What the hell, who cares if we are getting screwed if we are too frightened to realize it.


  7. Carroll says:

    Well I agreed till I got to the Biden-Gelb plan.
    What makes you think the Sunnis would agree to that? Why do you think the Kurds would not use that plan to totally seperate themselves from Iraq?
    A country of three seperate independent regions held together by oil and a government army? I don’t know how that would work….for Iraq…it might work for some other people.


  8. Accountability says:

    Time for some accountability for “those who ignored the facts five years ago”. Lesson of the year: You get to play with power; you lose when you misuse.


  9. JohnH says:

    Step One in ending the Occupation, ask the question: Iraq, for What?
    Politicians don’t have a good answer. They void the question like the plague, aided an abetted by their lackies in the corporate media and in think tanks. People must pursue politicians to the ends of the earth until they provide a good answer or cry ‘uncle.’ My guess is that they will cry ‘uncle,’ because there is simply no good justification for what we’re doing to Iraq.
    Fortunately, Jim Lobe has provided the reasons:
    He should be elevated to the journalism Hall of Fame for reporting what everyone else has avoided.
    When the public sees the real reasons, the hidden agenda, can they do anything but throw the bums out?


Add your comment

Your email address will not be published. Required fields are marked *