The Iraq War and the Bad Economy

There is a lot to this Washington Post article by Joseph E. Stiglitz and Linda J. Bilmes, but I’ll just focus on the economic consequences of the invasion of Iraq:

There is no question that the Iraq war added substantially to the federal debt. This was the first time in American history that the government cut taxes as it went to war. The result: a war completely funded by borrowing. U.S. debt soared from $6.4 trillion in March 2003 to $10 trillion in 2008 (before the financial crisis); at least a quarter of that increase is directly attributable to the war. And that doesn’t include future health care and disability payments for veterans, which will add another half-trillion dollars to the debt.

As a result of two costly wars funded by debt, our fiscal house was in dismal shape even before the financial crisis — and those fiscal woes compounded the downturn.

The global financial crisis was due, at least in part, to the war. Higher oil prices meant that money spent buying oil abroad was money not being spent at home. Meanwhile, war spending provided less of an economic boost than other forms of spending would have. Paying foreign contractors working in Iraq was neither an effective short-term stimulus (not compared with spending on education, infrastructure or technology) nor a basis for long-term growth.

Instead, loose monetary policy and lax regulations kept the economy going — right up until the housing bubble burst, bringing on the economic freefall.

In other words, the Bush Administration screwed America by borrowing heavily to invade a nation that posed no threat to us.

When, for example, Enron and Madoff engaged in such fiscal recklessness with other people’s money we were at least able to have the Justice Department come down hard on them.

Why haven’t we gone after the Bush Administration for their systematic defrauding of America?

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