I can see this one spiraling into Great Debates, but I am really and truly just looking for a factual answer.
It seems as if the Clinton and Bush II administrations thought, along with most of the rest of the world, that Hussein had WMDs and would soon have nukes.
What happened, and why was our and others’ intelligence so woefully wrong on this?
Paul Simon said it best: “A man sees what he wants to see, and disregards the rest.”
Spiegel interviews David Kay on the CIA’s intelligence gathering and ‘Curveball’ (March, 2008):
I don’t recall either the Clinton admin, or ‘most of the world’ ever telling us that Saddam would soon have nukes. That seems to be more of a Bush thing.
True, but “WMDs” refers to more than just nukes.
True, but the OP explicitly included nukes among those things Bush, Clinton, and the rest of the world thought Saddam would soon have. That isn’t true.
True, but your answer excluded what was on the other side of his “and”, i.e., “…had WMDs and would soon have nukes…”. (Not to mention the OP’s title.) I’m glad that I’ve helped you provide the full answer you no doubt intended. 
There’s more to it than just that, though. Saddam wanted his neighbours (particularly Iran) to think he still had viable chemical weapons stockpiles, and was acting in such a way that inspectors wouldn’t ever actually find evidence of WMDs (and hence proof that he was in violation of various UN resolutions and the like), but that there would always be considerable doubt on the subject. He was walking a sort of tightrope between incurring renewed military action by the US, and still being seen as a guy with a big stick.
That’s why virtually everyone thought that he actually did have some sort of WMD capabilities. Granted, most observers didn’t think those would be very substantial, and insufficient cause for war, but they did think there’d be something there - some past-its-best-before-date VX gas stockpiled in the desert somewhere, or something.
Out “Intelligence” was wrong because the Bush Administration wildly distorted all of it to support war. And outright made things up; remember the imaginary fleet of WMD drones ?
Intelligence is rarely an exact science. You shift through a million small pieces of evidence and try to figure out what the overall pattern is. You’re never going to have all the facts, most of the facts you have will have multiple possible interpretations, and there’s usually people trying to hide and distort the evidence. So intelligence estimates always contain some level of guesswork.
As for the Iraqi WMDs, I suspect there was an additional factor. I’m surmising that there were people who instead of looking at the facts and then trying to figure out the most likely interpretaion, chose to take the premise that there were ongoing WMD programs and then looked for evidence to support this belief. They probably felt that the resulting evidence they found was proof of their pre-existing premise but, given the problems I mentioned above, it’s easy for people to misinterpret the evidence and mislead themselves if they’re not very careful.
Iraq had a nuke program that was unknown to the world largely because they were processing the uranium in the same manner as the Manhattan Project and not with centrifuges. One of Saddam’s son’s talked too much and the project became known. I believe we can agree that the project was abandoned by the time of the WMD Crisis.
My Dad whom is a retired Army general said basically this exact same thing when I posed the OP’s question to him.
Couple that with the off chance that Saddam was given some chemical “gifts” from the US during Iraq’s war with our *enemy du jour * Iran in the 1980’s, AND the undeniable fact that he gassed Kurds shows that he had them at one point or another, and just off assumption alone it was a safe hedge that he still had them.
And there is a distinct difference between this explanation and outright lying about or manufacturing evidence/intelligence.
There is also the matter of the NIE (National Intelligence Estimate) that was given to Congress just before the war. There was the Reader’s Digest Condensed version, prepared by the WH, that emphasized the reports that indicated there were WMDs, and did not include the doubts that existed in the intelligence community about those reports. Then there was the full NIE which gave a broad spectrum of analyses and showed that there was considerable doubt about the status of the various WMDs and WMD programs.
Most of the folks in Congress never read the full NIE, and we in the public never got to see it since it was classified. My information is from what I’ve gotten from an interview with Senator Bob Graham (D-Fl) who was the chariman of the Senate Intelligence committee at the time of the AUMF vote, and who did read the full report. He also voted against the AUMF, btw.
IIRC, there was a group inside the intelligence community that was actively questioning the evidence. But they were ignored and marginalized.
Right before the war began, according to some comments I read in the press at the time, the french government believed that Irak probably had some left-over combat gas, like mustard gas, probably for the most part not useable (no french official made any statement on this issue, AFAIK). So, I’ve no reason to believe that “most of the rest of the world” believed that Hussein had a significant amount of WMD. Actually, my guess is that the USA admnistration thought the same, despite claims to the contrary.
Note that I said “right before the war”. It might have been very different some years ago, under Clinton, for instance, and possibly even some months ago, for instance before the last weapon inspections.
Regarding nukes, nobody believed that Irak was about to get them. It was just blatant propaganda. I don’t remember having ever read any serious article taking seriously such claims.
Regarding this issue, you can’t take as a given that the intelligence was really wrong, nor in the USA, nor elsewhere. What the various governments did with this intelligence is an entirely different problem.
The issues are mostly semantics and timing.
Iraq had WMDs. This is not in dispute. “Chemical Ali” killed tens of thousands of people with them.
The question was whether they had WMDs at the time Bush II planned the invasion. Official intelligence reports at the time said yes, reality said no; by then the WMDs were destroyed, past their shelf life, shipped to Libya, or whatever. There weren’t any left.
Next is where the semantics come in. The intelligence community said “Iraq has weapons of mass destruction.” Democrats who believed them were “misled,” but Republicans who believed them were “lying.”
NOTE: I really don’t know whether George W Bush personally had access to more information than the members of Congress that agreed with his assessment of the intelligence reports. My impression all along is that he wanted to believe the information, so he didn’t look very hard for conflicting data.
I read somewhere, I think it may have been Michael Scheuer, that one reason we misjudged Saddam’s WMD capacity is that the CIA had recruited a number of Iraqi assets who were, to put it mildly, lying through their teeth to us. They knew we’d pay them more if they told us what we wanted to hear, and besides, they wanted Saddam out too and knew that we were likelier to take him down if they exaggerated his capabilities.
See post #2 on ‘Curveball’.
More at Wikipedia:
But they have a short shelf life and long ago became useless. They would require a facility to make them. They had none.
Partly it is because the ‘intelligence community’ is not an independent body or particularly professional. It was pressured and in some cases directed to make the findings it did.
Mostly though, it’s because the US is not as smart as the French, who got it right.