Sunday, April 20, 2008

"But He Wouldn't Have Done That" Syndrome

Bush has at times been justifiably criticized for pouring hundreds of billions of dollars into Iraq, even as our nation's infrastructure crumbles - with no sign that he has any interest in "nation building" at home. An all-too-common response is, "But he wouldn't have done that anyway, so it's not fair to bring it up." Sure it is. Prior to his launching his multi-trillion dollar venture to rebuild Iraq, we frequently heard how Republicans don't support "nation-building", yet there we are. If the federal government is going to spend hundreds of millions of dollars fixing public schools, is it not far less hypocritical for a "conservative" like Bush to expend similar sums within our borders for the benefit of taxpayers, than outside our borders as part of a nation-building exercise?

Along that line, Martin Neil Baily of the Brookings Institute writes,
The war in Iraq has been much more costly than anyone expected1, both in lives and money, and it is tempting to wrap it into a single package with our current economic crisis and the policy mistakes that contributed to it. But muddling the messes does not help. Let’s judge the war on its own merits, and concentrate on the real causes of the financial crisis. It’s the only way to avoid making the same mistakes again.
One could even argue that the Iraq war has boosted the economy, by injecting enormous sums of money into defense contractors and suppliers. The counter-point being,
Of course, we could have gotten just as much or more stimulus by spending $10 billion a month on actually useful stuff– think how much domestic infrastructure could have been built or repaired for the cost of this miserable war.
There's another side to it, as well. Once you max out the credit card, you not only have greater difficulty affording additional debt (assuming your lenders will extend you more credit), a good chunk of money you could spend on other priorities ends up going to interest. Thanks to Bush's war spending, we're not well-positioned to borrow for domestic spending, and money that could have been directed to domestic priorities (or toward balancing the budget) is instead directed to servicing the increased debt.

Meanwhile, investing in infrastructure improvements in the U.S. would create real jobs, right now, and should provide a return well into the future, not just through increased efficiency but by preventing calamity.
1. More costly than anyone expected? Perhaps, but that doesn't mean that there weren't people who came close [PDF].
Be warned that this discussion vastly oversimplifies the analysis by constructing only two cases, whereas reality presents a dizzying array of outcomes. Returning to the metaphor of war as a giant roll of the dice, we might say that the U.S. could end up paying the “low” costs of around $120 billion if the dice come up favorably. If some dice come up unfavorably, the costs would lie between the low and the high cases. However, if the U.S. has a string of bad luck or misjudgments during or after the war, the outcome, while less likely, could reach the $1.6 trillion of the high case.
That's quite close to the mark, and may be pretty much "on the money" if we don't consider the long-term costs we will incur caring for wounded veterans.

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