Iraq and the Financial Meltdown

I believe that opponents of the Iraq War have a serious problem. For four years, they opposed the way because in their minds it wasn't "winnable". Now, we are on the brink of winning. Unfortunately, in any ideological confrontation, the only thing someone can never be is wrong. As such, opponents need to find another reason to oppose the war. Now, opponents find combinations of it costs too much and it deflected our attention from other more important matters. Whereas in 2005-2006,we were losing to Al Qaeda which wound up in Iraq because of our presence, now, we stopped paying attention to the same Al Qaeda because we were in Iraq. Logic be damned when you are defending an increasingly difficult position.

Beyond the military argument, the same folks will bring up an economic argument. The war cost so much that we lost resources in other places. That brings me to Matt Yglesias, who in some sense has been writing the same piece for the last nearly eight years...Bush is horrible. Here, he uses the Iraq war as a trojan horse to bash Bush some more.

Since September 11, the American imagination has been captured by the terrifying image of an American city struck by a terrorist WMD attack. It's a gripping scenario, but though the risk of such an event is certainly a reason to do our best to halt and reverse nuclear proliferation, it's always been a pretty outlandish concern. Nuclear weapons, it turns out, are really hard to build, even for states and for all the understandable anxiety nobody's ever created an effective biological weapon. A smallish band of terrorists operating on a shoestring budget doesn't have any plausible means of creating a mass casualty device. And though stolen Russian missiles became something of a 1990s movie cliché, in the real world, the Russians guard this stuff pretty carefully.

A more plausible, if less dramatic, means by which terrorists might bring the United States low was outlined by none other than Osama bin Laden himself in his November 2004 pre-election message. In that tape, bin Laden described a strategy of "bleeding America to the point of bankruptcy" by provoking us into undertaking costly military adventures. Mocking a certain panicky quality in American policymaking, bin Laden bragged that "all that we have to do is to send two Mujadedin to the farthest point East to raise a piece of cloth on which is written al-Qaeda in order to make the generals race there to cause America to suffer human economic and political losses without their achieving for it anything of note other than some benefits to their private companies."

In other words, UBL isn't counting on actually doing any more terrorism to the United States. Instead, he figures we will spend so much that we will run out of money. To this I would point out that the efforts of WWI, WWII, and the Civil Wars took up a much larger portion of our economy than anything we have spent on the GWOT. If UBL was hoping to bankrupt the United States defending herself, he significantly miscalculated our wealth.

Yglesias continues.

It reminds us that the distinction between national security and economics is somewhat artificial. Not only is the modern economy global in scope (banks are failing in Europe, and much of the capital that fed the bubble in the United States came from Europe) but military strength is ultimately grounded in economics. American intervention proved decisive in both world wars due to the fact that our tremendous economic weight was able to trump our relative lack of military expertise. And though possessing an adequate military deterrent throughout the Cold War was clearly vital, at the end of the day the USSR possessed one, too. What made the difference, ultimately, was not American weaponry but the juxtaposition of American economic vibrancy and Soviet economic dysfunction.


But while the United States remains an extremely wealthy society by global or historical standards, in recent years that vibrancy (for reasons that, of course, can hardly all be laid at the feet of a clever al-Qaeda plot) has started to fade. Even before the current crisis, we appeared to be entering an economic downturn. The beginning of that downturn earlier this year marked the first time the U.S. economy had moved from peak (before the tech bubble burst) to peak (early 2008, when the housing downturn started to really hurt employment) without an increase in average household incomes.


At the same time, such gains as did occur during the Bush years were concentrated in the hands of the hyper-wealthy. But -- as conservatives used to enjoy bragging -- household consumption didn't see nearly the level of stagnation as we saw in the income column. Nor did consumption inequality increase nearly as rapidly as income inequality. This was fueled by a large expansion in credit (and debt) driven by innovative new financial products that, we can now see, were like sandcastles below the high-tide line -- nice while they lasted, but poised for catastrophe.

The "stagnant wages" argument has been trotted out by just about every liberal on the face of the Earth, and it is one of the most obscenely misleading arguments I have witnessed. Bush inherited an economy that had just come off the bursting of the internet bubble. The stock market had lost three trillion Dollars in paper profits from March to December of 200. Following this we had the events of 9/11 and the Enron, Worldcom et al. Wages fell heavily in the two years following these events, and then they have steadily gone up since.

Furthermore, even if the argument is taken at face value it is an absurd one. So what if wages have stagnated for eight years, does that mean the country is nearing in on the apocalypse. The country has faced far worse economic crises than eight years of stagnating wages, and now suddenly Yglesias uses that obscure statistic as a sign the U.S. is about to head the way of the Roman Empire.

It's nonsense, and that's because the whole argument is nothing more than its own red herring. Yglesias doesn't believe the U.S. is on the brink of losing its superpower status. He just needs an excuse to bash Bush over stagnating wages.

Yglesias spends the rest of piece bemoaning a plethora of spending ideas that could have been undertaken if we hadn't spent all that money in Iraq. Keep in mind that Iraq costs us about $100 billion a year. That's no small sum, but acting like hunger, homelessness, health care, poor education, and every infrastructure failure would have been fixed if only we hadn't gone to Iraq simply doesn't add up.

It's ironic that Yglesias would bemoan the spending lost because of Iraq TODAY. That's because the latest bailout has $150 billion worth of PORK in it. That's about a year and a quarter of more funding of Iraq.

Let's have some perspective here. The financial crisis is bad and much of it can be put into Bush's lap, however none of it has to do with the war in Iraq. Irresponsible banks didn't lend to irresponsible borrowers with loans that would be securitized by irresponsible bond traders because we are fighting a war in Iraq. If liberals want to write a column bashing the Bush Presidency, I think they ought to just come out and do it. I don't think they need to struggle to find a red herring like linking the war in Iraq to the current financial crisis.