The Iraq War has cost the US $3 trillion dollars according to Nobel Laureate Joseph Stiglitz. Reuters Cite, Guardian Interview, The Times of London. Their book, “The Three Trillion Dollar War” tallies the numbers. Soberingly, 2003 estimates of the War’s costs by the Bush administration were in the $50-200 billion range, about 2-7% of the latest figures. George Bush fired Lindsey for offering the $200 billion figure.
Ok, fair enough. But then he seems to argue that the Iraq war is related to our current downturn:
…and the pricking housing bubble led to our currently weak economy.
As I see it, absent the additional stimulus provided by W’s war and tax cuts, the Fed would have dropped rates lower --or delayed the rate increase for longer-- thereby inflating housing prices further. And though Greenspan’s lax regulatory stance towards out-of-control mortgage lenders certainly reflected modern conservative ideology, it had little to do with Bush’s adventure in Mesopotamia.
Stiglitz is a very smart man. But I don’t see what he’s getting at here. The Iraqi War weakened America. But I can’t see its connection to the policy errors associated with the current recessionary environment.
I think he is accusing Greenspan of colluding with Bush to create the real estate bubble so that the war could remain popular (or less unpopular).
I think he is picking up on the theme that Bush did all he could to make this idiotic war as painless to Americans as possible (at least in the short term). When in fact the stock market was stagnant (DJIA has risen about 4%/year during Bush’s term, the S&P 500 has risen about 2%/year, the Nasdq composite is lower than it was in 2001). The median family income has risen at 1%/year during Bush’s term (but the average hourly wage has actually gone down so the increase in incomes may represent more hours worked). But we had a housing boom the likes of which we had never seen before.
This along with huge national debt (this president has added almost over 3 trillion in national debt (some of which pays for the war and some of which pays for his tax cuts) has left the economy very vulnerable.
Regulators knew that the mortgage market was overheated but there was ineffective regulatory oversight but economic pain would only make the billions of dollars spent in Iraq every week seem even stupider (if that is possible).
1.“the Fed colluded in this obfuscation” is outside the quotes in the article. Maybe Stiglitz means “the Fed’s actions obscured the problem” and has been misinterpreted.
“[K]ept interest rates lower than they otherwise might have been” might simply mean that the Fed kept interest rates too low too long (which with the wisdom of hindsight is a very commonly-held position) and that Greenspan was over-eager to reinflate the economy to help Bush, rather than “lower than they might have been in the absence of the Iraq invasion”.
It’s not obvious that he is arguing this. And if he’s not it’s not clear that he has an argument.
Q1: What depressing effect? From war spending? Huh? Answer from Reuters: “It used to be thought that wars are good for the economy. No economist really believes that anymore,” Stiglitz said in an interview.
Er, don’t most economists believe that military spending stimulates the economy, which adds to aggregate demand? (Which could be inflationary or anti-recessionary, depending upon circumstances?) Of course there are other ways of spending money that are less destructive, as Stiglitz and Blimes note.
I guess Stiglitz is saying that the war made Greenspan reluctant to rock the boat with tightened policy or new regulatory initiatives. That’s a political argument (which I guess is what Paper Pusher worked out). Which frankly I don’t believe: I see Fed continuity in the pre- and post- 2003 Greenspan eras, in terms of interest rate setting, public commentary and regulatory stances.
Military spending is no more stimulitive than most other forms of deficit spending (and indeed probably not as stimulitive and infrastructure spending). You can’t keep that deficit spending going forever.
Wars in OTHER countries fought by OTHER countries is good for our economy because we are the largest arms manufacturer in the world. But when we have to spend our own money to fight wars in other countries, its not as good for our economy.
The cost of the war pales in comparison to the costs imposed by new entitlements during the Bush administration. These worsen the deficit considerably more than the shooting does.
Democrats, left to their devices, would have expanded these entitlements far more than they were - especially for the Medicare drug benefit. So not all of this can be pinned on Republicans.
Table S-8 clearly shows that the growth of entitlement spending far exceeds the growth in both security and non-security related discretionary spending. And you will note from recent years that proposals to reform entitlement spending have primarily been opposed by the Democratic Party, which generally favors more funding in these programs without much structural change.
It isn’t the war that will bankrupt us - it is old people like our friend elucidator. I’m sure for the good of the country he’ll be first in line when we spin up the Soylent factories.
So the costs of expanding entitlements (done by a Republican congress and white house) is actually the Democrats fault?
Its not just the war, its the tax cuts for the rich, medicare drug programs that are designed to make lots of money for pharmaceutical companies, an energy bill that helps out those poor deserving oil companies, etc.
History has shown that Democrats are more fiscally responsible than Republicans (which is pretty depressing). Republicans are good at doing one thing, replacing taxes with borrowing.
I’ll note the Mr. Moto’s posts here are pretty much devoid of numeric analysis. Where there are no facts or logic, there are only emotions and feelings.
Nobody said that $3 trillion of costs was going to bankrupt the US. It just made us poorer, weaker and, for some in uniform, less healthy.
$3 trillion / US population ~= $10,000 per person, though some of that will be paid by their kids and most will be paid in the future.
[This is a hijack, right?] As for the medicare drug benefit, I think it would have been better if the Republicans didn’t have such a cosy relationship with Big Pharma. Medicare should be permited to negotiate with the drug companies on pricing.
This isn’t price controls, I’m advocating. Merely prudent fiscal spending. [/This is a hijack right?]
I’ll note that Table S-8 compares Bushes budget projections for 2008-2012 with 2007 spending. But remember the budget is a George Bush creation. “Money for Iraq and Afghanistan that everyone knows will be spent wasn’t included for fiscal 2010 - 2013. Even the president’s preferred plan to have a permanent U.S. presence in Iraq at a cost of $30 billion or so a year wasn’t included…and that’s the least-cost alternative.” What a sad document.
Those interested in broad patterns of federal spending during the GWBush regime can look here. Discretionary non-security spending was fairly flat - as a share of spending though it dropped by 3.7 percentage points (from 18.4 to 14.7). The share of spending devoted to security and defense rose by 7.5 percentage points. Medicare and social security shares dropped by 2.4 points. Hat tip to Paul Krugman.
I’m sure for the good of the country he’ll be first in line when we spin up the Soylent factories.