Friday, February 29, 2008

Getting us out of Iraq can get us out of recession

The American Prospect’s Harold Meyerson has an op-ed in the Washington Post today outlining the nature of the coming recession, and how our economic response is going to have to change if we’re to fix it.

“Wait,” you’re thinking, “is he saying we’re in recession? Surely not! I know it’s a worry, but no one’s actually said it’s official yet.”

Let’s take a look at the facts, then:

Citigroup, America’s largest bank, has been hit with a staggering $10 billion in losses this quarter. Naturally, the company is doing what all companies do as a first response to crisis–cutting thousands of jobs–and is begging foreign investors to pump cash into its reserves to keep it solvent.

Countrywide, America’s largest lender, reported spikes in delinquencies and foreclosures so severe that the company was looking at bankruptcy protection. It was hailed as a relief when Bank of America announced plans to buy the lender, but think about this–how bad is our economic state when our biggest giants in their respective industries are doing so poorly?

And what about the consumer, that bulwark of economic growth through spending? Well, thanks to a combination of collapsing home equity, high gas, energy, and food prices, and nearly insurmountable personal debt, consumers are falling behind on loan payments, credit card debt is on the rise, and retail sales are plummeting from lack of consumer spending.

If this isn’t a recession, it’s damn close, and like the wolf hungrily stalking its prey, will be upon us soon.

Back to Meyerson’s column. He accurately notes that the mazelike structures of current Wall Street investment strategies make it nigh-impossible to accurately oversee these transactions, which has led to so many billions of dollars’ worth of losses. Moreover, he also notes that without some serious infusion of jobs, cash, and direction from the government, this recession may deepen into a depression that will take years to recover from.

“Okay,” you may be asking, “but where can we get the money for such a thing? That’s going to be expensive!”

Well, here’s one simple idea–ending the war in Iraq immediately and bringing our troops home. Imagine what we could do with the influx of capital we’re wasting on a failed venture that has cost thousands of lives and tens of millions of dollars. I live in DC, so I used my own city as the basis for calculation:

Taxpayers in District Of Columbia will pay $2 billion for the cost of the Iraq War through 2007. For the same amount of money, the following could have been provided:

504,157 People with Health Care OR

3,465,229 Homes with Renewable Electricity OR

33,815 Public Safety Officers OR

33,333 Music and Arts Teachers OR

946,048 Scholarships for University Students OR

174 New Elementary Schools OR

6,801 Affordable Housing Units OR

620,958 Children with Health Care OR

266,133 Head Start Places for Children OR

33,333 Elementary School Teachers OR

29,432 Port Container Inspectors

Any one of these projects provides a golden opportunity for new jobs and economic revitalization for my city, or the even better long-term investment of raising kids with decent educations and the ability to make better lives for themselves. But we’ll never know, because that money went instead to turning a country into a protectorate of our empire just to keep the oil pumps working.

I said not long ago that in order to win, Democrats should run on the economy instead of Iraq, and I still hold to that. But I am rethinking that approach–instead of trying to push Iraq aside in people’s minds, Democrats and progressives should link the two together. Every dollar spent in Iraq, fighting a war started on a lie that has cost us immeasurably, is a dollar not spent on rebuilding our country’s prosperity, peace, and future solvency.

End the war, bring our troops home, and let’s get down to the equally painful business of rebuilding our country’s economic base and transiting us out from a system based on debt, consumption, greed, and graft. We’ve done it before, and we can do it again. We don’t have any choice in the matter.

The $3 Trillion War - Vanity Fair

After wildly lowballing the cost of the Iraq conflict at a mere $50 to $60 billion, the Bush administration has been concealing the full economic toll. The spending on military operations is merely the tip of a vast fiscal iceberg. In an excerpt from their new book, the authors calculate the grim bottom line.

by Joseph E. Stiglitz and Linda J. Bilmes April 2008

Bush & Cheney

In March 19, 2008, the U.S. will have been in Iraq for five years. The Bush administration was wrong about the need for the Iraq war and about the benefits the war would bring to Iraq, to the region, and to America. It has also been wrong about the full cost of the war, and it continues to take steps to conceal that cost.

In the run-up to the war there were few public discussions of the likely price tag. When Lawrence Lindsey, President Bush’s economic adviser, suggested that it might reach $200 billion all told, Secretary of Defense Donald Rumsfeld dismissed the estimate as “baloney.” Deputy Defense Secretary Paul Wolfowitz went as far as to suggest that Iraq’s postwar reconstruction would pay for itself through increased oil revenues. Rumsfeld and Office of Management and Budget Director Mitch Daniels estimated the total cost of the war in the range of $50 to $60 billion, some of which they believed would be financed by other countries.

For fiscal year 2008 the administration has asked for nearly $200 billion to fund the wars in Iraq and Afghanistan. If Congress provides the money, as it almost certainly will, then the total appropriated for direct operations in these two countries (including reconstruction, embassy costs, enhanced base security, and foreign aid) since the wars began will come to roughly $800 billion. It is extremely difficult to disentangle the Iraq and Afghanistan numbers, but Iraq is by far the larger endeavor and accounts for about three-fourths of the total. By the administration’s own reckoning, then, the cost of the Iraq war, counting only the money officially appropriated, will soon be some $600 billion, or more than 10 times Rumsfeld’s original number.

The administration’s estimates have been low—and wrong—from the start. Some of this is the result of its shortsightedness about every aspect of the war, beginning with its nature and duration. For instance, extensive use of reservists and the National Guard avoided the need to increase the size of the armed forces or resort to a draft—but at a heavy price, including reliance on highly paid contractors, people who in other contexts would have been called mercenaries. Another factor is the soaring price of fuel caused by the increase in the price of oil—which is itself, in part, a consequence of the war.

But even the $600 billion number is disingenuous—which is to say false. The true cost of the war in Iraq, according to our calculations, will, by the time America has extricated itself, exceed $3 trillion. And this is a deliberately conservative estimate. The ultimate cost may well be much higher.

Why the huge difference between our number and the administration’s? One big reason lies in the misleading way the federal government does its accounting. Any publicly owned business, no matter how small, is required by law to use a method of accounting that takes future obligations into consideration. This is known as “accrual” accounting. But Defense Department accounting is done on a “cash” basis, which logs only what the government is actually spending day by day and ignores future obligations. In the case of the Iraq war, the future obligations are huge. They include the cost of replacing military equipment, which is being used up at 6 to 10 times the peacetime rate. They also include the cost of providing health care and disability payments for our returning troops. These costs will be especially high because of our improved ability to keep even the most horribly wounded soldiers alive.

The cash type of accounting also provides an incentive to make short-term savings. It was only in 2007, four years after the war began, and after roadside bombs had caused some 1,500 American fatalities, that the Pentagon decided to replace its vulnerable fleet of 18,000 Humvees with vehicles designed to withstand blasts from so-called improvised explosive devices (I.E.D.’s). The short-term savings have resulted in a great deal of long-term human suffering and have brought on higher-than-anticipated costs for medical care.

Another obstacle to estimating the true costs is that many of them are buried in other government accounts and therefore don’t show up in the direct appropriations for the war. Further, some war-related spending has been pushed out of the government altogether and is borne by private parties. But just because it doesn’t show up in the government ledger doesn’t mean it isn’t a cost—it means only that someone else pays it. For example, the failure to provide adequate budgetary support for the Veterans Health Administration has forced many veterans to buy private medical care. While this reduces government spending, there are no real savings for the country. Similarly, relying on the National Guard and the reserves to help fight the war removes hundreds of thousands of workers from the civilian labor force, imposing real costs on the economy as a whole—not to mention on the men and women who are suddenly called to active duty, and on their families.

Finally, we should point out that the procedure used by the administration to fund the Iraq war was chosen deliberately in order to deflect close attention. The administration has requested nearly all the money for the war in the form of “emergency” funding, which is not subject to standard budget caps or vigorous scrutiny. Emergency funding is intended for genuine crises, such as Hurricane Katrina, where the utmost speed is required to get the money to the field. The continued use of this emergency procedure—five years after the war began—is budgetary sleight of hand that makes a mockery of a democratic budget process.

The Other Surge

To understand why the true costs of the war are so much higher than the official estimates, we can start by looking at America’s veterans. No one has suffered more from the administration’s blindness and stinginess. To date, more than 1.6 million American troops have been deployed in the Iraq and Afghanistan operations. More than 4,000 have been killed. More than 65,000 have been wounded or injured, or have contracted a disease. Of the 750,000 troops who have been discharged so far, some 260,000 have been treated at veterans’ medical facilities. Nearly 100,000 have been diagnosed as having mental-health conditions. Another 200,000 have sought counseling and re-adjustment services at walk-in vet centers.

No adequate preparation was made for casualties on this scale. The Department of Veterans Affairs (V.A.) and other agencies have been overwhelmed—both by the need for immediate medical care and by the demand for disability benefits. Already, a quarter of a million returning veterans have applied for disability benefits. Not surprisingly, many disability claims are complex: the average veteran cites five separate disabling medical conditions. The least fortunate among the veterans have suffered unimaginable horrors: brain trauma, amputations, burns, blindness, and spinal damage. Because a greater number of the injured are surviving today, the relative costs of long-term care will be greater than for any previous war. This is the surge the administration doesn’t talk about.

[two more pages]

Wednesday, February 27, 2008

Total Economic Cost of the War

War at Any Cost? The Total Economic Cost of the War Beyond the Federal Budget

Thursday February 28th, 2008




Opening Statements:Chairman Schumer's Opening Statement
Congresswoman Maloney's Opening Statement
Witnesses:Joseph Stiglitz, Columbia University, Nobel Laureate
Robert Hormats, Vice Chairman, Goldman Sachs (International)
Rand Beers, President, National Security Network
Scott Wallsten, Vice President for Research and Senior Fellow at iGrowthGlobal
Charts and GraphsThe Administration Wants To spend $435 Million On Iraq Every Day, Each Year That Money Could Be Used To:
Federal Spending on Iraq War vs. Other Priorities
Costs Incurred and Requested for the War In Iraq (2003-2008)
Costs Incurred and Requested for the War In Iraq (2003-2019)
Federal Spending on Iraq Continues to Skyrocket Spending on Afghanistan Flatlines
Location:106 Dirksen Senate Office Building
Time:9:30 AM
Press Advisory:


Additional Resources:Watch the Hearing
Read The JEC Report, "War an Any Price? the Total Economic Costs of the War Beyond the Federal Budget"

Link to Vanity Fair's excerpt of Stiglitz' book "The $3 Trillion War"

Link to Democracy Now's interview of Stiglitz

Link to Times of London article by Stiglitz

Link to FDL Book Salon interview of co-author Linda Bilmes

Tuesday, February 26, 2008

Bush & the governors

Robert Pear writes in the New York Times: "President Bush rebuffed appeals from the nation's governors on Monday to increase spending on roads, bridges and other public works as a way to revive the economy.

"Governors said Mr. Bush had told them at a White House meeting that he wanted to see the effects of his economic stimulus package before supporting new measures.

"A bipartisan group of governors is pushing for major road and bridge projects as a way to create jobs and foster economic development. But the White House says the money could not be spent fast enough to be of much immediate help. . . .

"Gov. Edward G. Rendell of Pennsylvania, a Democrat who is vice chairman of the National Governors Association, described the response as 'a fairly significant no.'

"'There are tens of billions of dollars of infrastructure projects ready to go,' Mr. Rendell said. 'I asked the president if he would support spending on those projects as part of a second stimulus package, and he said no.'

Wednesday, February 20, 2008

McCain’s view

From Juan Cole's blog Informed Comment:

Moreover, does McCain really know much about how the world works? Does he really understand Middle Eastern history?

McCain thinks when "only' 4 US troops are wounded in a single day in Iraq, or when only 15 Iraqi police are killed in mortar strikes in a single day, that is a sign of 'calm' and that the 'surge is working' in Iraq, and it is all right for us to put up with these US casualties for the next 100 years and spend $9 billion a month on this boondoggle for his friends in Houston. He is part of a successful propaganda campaign, as Tom Engelhardt points out that has made Iraq disappear as an issue even though people die there every day and the US is hemorrhaging blood and treasure for goals that remain, to say the least, murky. McCain even manages to celebrate the defeat of al-Qaeda in Iraq at the same time as he insists the US has to stay in Iraq a hundred years to fight al-Qaeda! Which is it? Either the surge has failed in its goals or it has succeeded. If it has succeeded, why do we have to stay? If it has failed, when will it succeed?

And, let's just consider the shaky dictator Pervez Musharraf, who just suffered a sharp rebuke from the Pakistani electorate, as I wrote about today in McCain appears never to have met a rightwing dictator he didn't like. McCain defends the dictator. Here is what McCain said about Musharraf late last December:

"Prior to Musharraf, Pakistan was a failed state," McCain said. "They had corrupt governments and they would rotate back and forth and there was corruption, and Musharraf basically restored order. So you're going to hear a lot of criticism about Musharraf that he hasn't done everything we wanted him to do, but he did agree to step down as head of the military and he did get the elections."

So in the building confrontation between democratic parties and the military dictator who trashed the rule of law, which would McCain support? What kind of relations will a president McCain have with the new prime minister of Pakistan if McCain is on record supporting the dictatorship that preceded?

[Blog post continues with detailed history of Pakistan and McCain's part in it for the past few decades. Well worth reading.]

Tuesday, February 19, 2008

MoveOn’s take - Iraq War and recession

As of today, we've spent over $495 billion in Iraq.1 With the economy in the tank, think about what that money could do here at home: Cover millions of kids who don't have insurance, or help folks who're losing their jobs and homes.

Instead, it's supporting a failed occupation in Iraq .

More and more Americans are making the connection between the billions we've spent over there and the crumbling economy here at home. In fact, a new AP poll shows that most Americans think ending the war is the best way to help the economy.2 But pundits still talk about the war and the economy as two unrelated things.

That's why we're launching our "Iraq/Recession" campaign—our push to make sure that politicians and pundits understand what voters already know: As long as we keep pouring that money down the drain in Iraq , we won't have the money we need to solve our economic woes.

Can you take a moment to write a letter to the editor of your local paper about how much we're spending in Iraq , while things go south here at home? By speaking out together, we can make sure the cost of war is part of the economic equation. Our tool makes writing a letter easy. Click here to get started:

If thousands of us write, we can get the media to stop ignoring the connection between the war and the recession. The opinion pages are the most widely read pages in the newspaper, so we can also make sure voters—who are growing increasingly concerned about the economy—know that any candidate who wants to stay in Iraq has no plan for the economy.

The ongoing occupation in Iraq is sucking up the resources we need to make our economy work again. The tradeoffs are stark: Bombs or unemployment insurance for people laid off as the economy slows? Billions for Halliburton and Blackwater, or help for people on the verge of losing their homes because of the subprime meltdown? Consider these key facts:

  • The recession is going to force states to cut back their budgets. Most likely, the cuts are going to affect the services that working families need and depend on.3

  • Meanwhile, the war is costing Americans more than $338 million a day. 4 That money could be spent to help out the folks who're hurting most now. For less than what we're spending on the war, we could pay for affordable housing for hundreds of thousands of families, health care for children, or scholarships to help folks pay for education. 5

  • Gas prices are close to double what they were before the war began. The cost of oil is still hovering around $100 barrel. 6

  • We're borrowing $343 million every day to finance the war in Iraq . 7 Our skyrocketing debt will be a bigger and bigger drag on the economy—slowing recovery and burdening future generations.

The truth is that economic forecasts are going to continue to be grim as long as we continue to dump billions into a reckless war that has no end in sight. Please write a letter to the editor of your local paper today:

Thanks for all you do.

–Nita, Wes, Justin, Eli, and the Political Action Team
Tuesday, February 19th, 2008

1. "The War in Iraq Costs, National Priorities Project," January 2008

2. AP Poll: Exiting Iraq would boost economy more than stimulus, Associated Press, February 9, 2008

3. "State and Local Governments Need Fiscal Relief." AFSCME, January 29, 2008

4. The Economy & The War In Iraq, Factsheet from Speaker Pelosi, February 13, 2008

5. "Federal Budget Trade-Offs, National Priorities Project," February 2008

6. "Oil prices continue higher above 91 usd mark as possible Fed rate cut eyed," CNN, January 29, 2008

7. "Hidden Costs to the War in Iraq ," Rep. Murtha in Huffington Post, January 28, 2008

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