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Washington Post Idiocy: Calls for War With Iran to Save America's Economy

George Washington's picture




 

Washington’s Blog

As many writers have documented, the corporate media is usually pro-war. See this.

And so Washington Post hack David Broder's op-ed arguing that war with Iran will save America's economy is not all that surprising.

Of
course, China and Russia might not sit idly by and let their ally,
Iran, be attacked. So there's the wee complication that bombing Iran
could start WWIII.

And, of course, attacking Iran would increase the level of terrorism.

But forget politics and national security.

Broder is also plain wrong on the economics.

In a blog entry entitled "Has David Broder Lost His Mind?," Foreign Policy managing editor Blake Hounshell writes that Broder's proposal is "crazy for a number of reasons."

One
is that markets don't like tensions, and certainly not the kind that
jack up oil prices. Second, World War II brought the United States out
of the Great Depression because it was a massive economic stimulus
program that mobilized entire sectors of society. Today's American
military has all the tools it needs to fight Iran, and there isn't
going to be any sort of buildup. Hasn't Broder been reading his own
newspaper? The Pentagon is looking to find billions in cuts as it
confronts the coming world of budget austerity.

And as I have repeatedly pointed out, "military Keynesianism" - that is, launching wars to stimulate the economy, doesn't work.

And as I have repeatedly pointed out, "military Keynesianism" - that is, launching wars to stimulate the economy, doesn't work.

For example, as I wrote in August:

Nobel-prize winning economist
Joseph Stiglitz has said that war can be very bad for the economy.
For example, in 2003, Stiglitz wrote:

War
is widely thought to be linked to economic good times. The second
world war is often said to have brought the world out of depression, and
war has since enhanced its reputation as a spur to economic growth.
Some even suggest that capitalism needs wars, that without them,
recession would always lurk on the horizon.

Today, we know that
this is nonsense. The 1990s boom showed that peace is economically far
better than war. The Gulf war of 1991 demonstrated that wars can
actually be bad for an economy.

Stiglitz has said that this decade's Iraq war has been very bad for the economy. See this, this and this.

And as the New Republic noted last year:

Conservative Harvard economist Robert Barro has argued that increased military spending during WWII actually depressed other parts of the economy.

 

Also from the right, Robert Higgs has done good work showing that military spending wasn't the primary source of the recovery and that GDP growth during WWII has been "greatly exaggerated."

 

And from the left, Larry Summers and Brad Delong argued
back in 1988 that "five-sixths of the decline in output relative to
the trend that occurred during the Depression had been made up before
1942."

As I noted in January:

All of the spending on unnecessary wars adds up.

The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.

 

Two
top American economists - Carmen Reinhart and Kenneth Rogoff - show
that the more indebted a country is, with a government debt/GDP ratio of
0.9, and external debt/GDP of 0.6 being critical thresholds, the more
GDP growth drops materially.

Specifically, Reinhart and Rogoff write:

The
relationship between government debt and real GDP growth is weak for
debt/GDP ratios below a threshold of 90 percent of GDP. Above 90
percent, median growth rates fall by one percent, and average growth
falls considerably more. We find that the threshold for public debt is
similar in advanced and emerging economies...

Indeed, it should be obvious to anyone who looks at the issue that deficits do matter.

A PhD economist told me:

War always
causes recession. Well, if it is a very short war, then it may
stimulate the economy in the short-run. But if there is not a quick
victory and it drags on, then wars always put the nation waging war into
a recession and hurt its economy.

You know about America's unemployment problem. You may have even heard that the U.S. may very well have suffered a permanent destruction of jobs.

But did you know that the defense employment sector is booming?

As I pointed out
in August, public sector spending - and mainly defense spending - has
accounted for virtually all of the new job creation in the past 10
years:

The U.S. has largely been financing job creation for
ten years. Specifically, as the chief economist for BusinessWeek,
Michael Mandel, points out, public spending has accounted for virtually
all new job creation in the past 10 years:

Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:

 

longjobs1.gif

 

Between
May 1999 and May 2009, employment in the private sector sector only
rose by 1.1%, by far the lowest 10-year increase in the post-depression
period.

 

It’s impossible to overstate how bad this is. Basically
speaking, the private sector job machine has almost completely stalled
over the past ten years. Take a look at this chart:

 

longjobs2.gif

 

Over
the past 10 years, the private sector has generated roughly 1.1
million additional jobs, or about 100K per year. The public sector
created about 2.4 million jobs.

 

But even that gives the private
sector too much credit. Remember that the private sector includes
health care, social assistance, and education, all areas which receive a
lot of government support.

***

 

Most
of the industries which had positive job growth over the past ten
years were in the HealthEdGov sector. In fact, financial job growth was
nearly nonexistent once we take out the health insurers.

 

Let me finish with a final chart.

 

longjobs4.gif

 

Without
a decade of growing government support from rising health and
education spending and soaring budget deficits, the labor market would
have been flat on its back.

Indeed, Robert Reich lamented this month:

America’s biggest — and only major — jobs program is the U.S. military.

Back to my January essay:

Raw Story argues that the U.S. is building a largely military economy:

The
use of the military-industrial complex as a quick, if dubious, way of
jump-starting the economy is nothing new, but what is amazing is the
divergence between the military economy and the civilian economy, as
shown by this New York Times chart.

 

In
the past nine years, non-industrial production in the US has declined
by some 19 percent. It took about four years for manufacturing to
return to levels seen before the 2001 recession -- and all those gains
were wiped out in the current recession.

 

By contrast, military
manufacturing is now 123 percent greater than it was in 2000 -- it has
more than doubled while the rest of the manufacturing sector has been
shrinking...

It's important to note the trajectory -- the military
economy is nearly three times as large, proportionally to the rest of
the economy, as it was at the beginning of the Bush administration. And
it is the only manufacturing sector showing any growth. Extrapolate
that trend, and what do you get?

The change in leadership in Washington does not appear to be abating that trend...[121]

So
most of the job creation has been by the public sector. But because
the job creation has been financed with loans from China and private
banks, trillions in unnecessary interest charges have been incurred by
the U.S.And this shows military versus non-military durable goods
shipments:

[Click here to view full image.]

So
we're running up our debt (which will eventually decrease economic
growth), but the only jobs we're creating are military and other public
sector jobs.

PhD economist Dean Baker points out that America's massive military spending on unnecessary and unpopular wars lowers economic growth and increases unemployment:

Defense
spending means that the government is pulling away resources from the
uses determined by the market and instead using them to buy weapons and
supplies and to pay for soldiers and other military personnel. In
standard economic models, defense spending is a direct drain on the
economy, reducing efficiency, slowing growth and costing jobs.

A
few years ago, the Center for Economic and Policy Research
commissioned Global Insight, one of the leading economic modeling
firms, to project the impact of a sustained increase in defense
spending equal to 1.0 percentage point of GDP. This was roughly equal
to the cost of the Iraq War.

Global Insight’s model projected
that after 20 years the economy would be about 0.6 percentage points
smaller as a result of the additional defense spending. Slower growth
would imply a loss of almost 700,000 jobs compared to a situation in
which defense spending had not been increased. Construction and
manufacturing were especially big job losers in the projections, losing
210,000 and 90,000 jobs, respectively.

The scenario we asked Global Insight [recognized as the most consistently accurate
forecasting company in the world] to model turned out to have vastly
underestimated the increase in defense spending associated with current
policy. In the most recent quarter, defense spending was equal to 5.6
percent of GDP. By comparison, before the September 11th attacks, the
Congressional Budget Office projected that defense spending in 2009
would be equal to just 2.4 percent of GDP. Our post-September 11th
build-up was equal to 3.2 percentage points of GDP compared to the
pre-attack baseline. This means that the Global Insight projections of
job loss are far too low...

The projected job loss from this increase in defense spending would be close to 2 million.
In other words, the standard economic models that project job loss
from efforts to stem global warming also project that the increase in
defense spending since 2000 will cost the economy close to 2 million
jobs in the long run.

The Political Economy Research Institute at the University of Massachusetts, Amherst has also shown that non-military spending creates more jobs than military spending.

So
we're running up our debt - which will eventually decrease economic
growth - and creating many fewer jobs than if we spent the money on
non-military purposes.

As I wrote last month:

 

It
is ironic that America's huge military spending is what made us an
empire ... but our huge military is what is bankrupting us ... thus
destroying our status as an empire.

Even Admiral Mullen seems to agree:

 

The Pentagon needs to cut back on spending.

“We’re going to have to do that if it’s going to survive at all,” Mullen said, “and do it in a way that is predictable.”

Indeed, Mullen said:

For industry and adequate defense funding to survive ... the two must work together. Otherwise, he added, “this
wave of debt” will carry over from year to year, and eventually, the
defense budget will be cut just to facilitate the debt.

Secretary of Defense Robert Gates agrees as well. As David Ignatius wrote in the Washington Post in May:

 

After
a decade of war and financial crisis, America has run up debts that
pose a national security problem, not just an economic one.

 

***

 

One
of the strongest voices arguing for fiscal responsibility as a
national security issue has been Defense Secretary Bob Gates. He gave a landmark speech in Kansas on May 8, invoking President Dwight Eisenhower's warnings about the dangers of an imbalanced military-industrial state.

 

"Eisenhower was wary of seeing his beloved republic turn into a
muscle-bound, garrison state -- militarily strong, but economically
stagnant and strategically insolvent," Gates said. He warned that
America was in a "parlous fiscal condition" and that the "gusher" of
military spending that followed Sept. 11, 2001, must be capped. "We
can't have a strong military if we have a weak economy," Gates told
reporters who covered the Kansas speech.

 

On Thursday the
defense secretary reiterated his pitch that Congress must stop
shoveling money at the military, telling Pentagon reporters: "The
defense budget process should no longer be characterized by 'business
as usual' within this building -- or outside of it."

While morons like David Broder might want to start another war,
America's top military leaders and economists say that would be a very
bad idea.

 

 

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Mon, 11/01/2010 - 10:34 | 690447 BigJim
BigJim's picture

Timmy would buy off the Chinese by making sure any anti-China legislation coming down the pike was delayed until just before the next time we need their cooperation.

Remember the timing of the last time the administration went quiet on the subject? It was when China started playing ball re: the U.N. Iran sanctions.

Mon, 11/01/2010 - 09:33 | 690252 ElvisDog
ElvisDog's picture

While I agree with your sentiment, how exactly would China "jump in"? They have no real air force and no deep water navy. Would the Chinese Army march overland to Iran?

Mon, 11/01/2010 - 10:15 | 690382 kaiserhoff
kaiserhoff's picture

Check the map, Elvis.  They already occupy Tibet and a third of Kashmir.  They are in the neighborhood, but that isn't the way the Chincoms would play it. 

Mon, 11/01/2010 - 10:37 | 690463 Tsukato
Tsukato's picture

They would do nothing. Its not the chinese way. They will work with whoever is in control, in said nation. Don't need to use military power if you own all the players.

Mon, 11/01/2010 - 08:28 | 690148 Silbertibor
Silbertibor's picture

Am I the only one who has ever heard of Fredric Bastiat's Broken Window Fallacy?

Mon, 11/01/2010 - 10:32 | 690434 Sean7k
Sean7k's picture

You have us confused with the Federal reserve. :) We are but simple economists. We have not the degrees and titles associated with such august minds. How can we question their trumping the broken window fallacy with ever increasing levels of debt for the salvation of our economy? If we did that, we would have to be independent thinkers, lovers of liberty, a people willing to stand up to the crimes perpetrated by bankers upon us all. No, we are but simple minded citizens groveling at the feet of great masters- thankful for the meager scraps they allow to fall from their banquet table.

Mon, 11/01/2010 - 10:31 | 690430 BigJim
BigJim's picture

Yes, how could devoting your entire manufacturing output to making things that go 'BANG' not hugely increase your real wealth? Get with the program, pinko-peacenik mullah-lover!

Maybe we should ditch GDP and measure our wealth in GMP (Gross Munitions Production).

GMP up 50% in 2009 alone! Woo Hoo!

A grenade in every pot, and a drone in every garage. The American dream.

Mon, 11/01/2010 - 09:54 | 690308 RockyRacoon
RockyRacoon's picture

No, you are not.  It has been a much discussed topic on ZH.

Theory being that if we turn the earth into a fused ball of glass that we can stimulate the hell out of the world economy.   Makes perfect sense, no?   No.

Thanks for pointing out the fallacy's absurdity here; it is pertinent.

Mon, 11/01/2010 - 08:21 | 690138 ZackAttack
ZackAttack's picture

Broder says:

But the nation will rally around Obama because Iran is the greatest threat to the world in the young century.

Bullshit. The standards of evidence for WMD are now so unbelievably high that, in order to garner US public support, Iran would have to conduct below-ground tests AND pose a direct, immediate threat to the continental US.

 

If he can confront this threat and contain Iran's nuclear ambitions, he will have made the world safer and may be regarded as one of the most successful presidents in history.

 

Isn't that how Bush's advisors sold Iraq to him? That we would be "welcomed as liberators"?

Mon, 11/01/2010 - 10:25 | 690409 Sean7k
Sean7k's picture

The Washington post is the mouthpiece for the Bilderbergers. Having said that, GW- great piece. I shall attempt to put this as succinctly as I can: outside the benefits garnered from advanced research, all military spending is like flushing money down the toilet. The only benefit is country security- if your security has actually been threatened!

If a cruise missile costs a million dollars and you shoot it off- there is zero economic benefit. In fact, it will probably be an economic loss where ever it lands as well.

Beyond economics, who in their right mind advocates the killing and destruction of other lands, people and our own children to benefit an economy? Sorry, this would be genocide and make us no better than Hitler's Germany. If we allow it or our soldiers participate- we deserve to be brought up for war crimes and executed. Starting with Broder.

It is as plain as that.

Mon, 11/01/2010 - 10:24 | 690406 BigJim
BigJim's picture

Bush lost popularity because he occupied Iraq. If we'd just bombed them back to the stone age, the American voter would probably still regard him with fondness, millions of (Iraqi) civilian deaths notwithstanding. And if we'd imposed a news blackout... for 'security reasons'... and bombed more al-Jazeera outposts, hardly anyone would have known about the civilian casualties, either.

All they need to do is link these latest parcel bombs from Yemen to Iran and it'll be game on. They wouldn't invade, they'd just bomb everything... the military, and military-related infrastructure (you know, water, sewage, electricity, fuel, bridges, roads, airports, TV stations, hospitals, etc).

Yes, there'd be hell to pay in Iraq and Afganistan, but I doubt they care very much. And if they're long oil, they'll make a killing in both senses of the word.

Hmmm. Am I getting too cynical?

Mon, 11/01/2010 - 09:31 | 690248 ElvisDog
ElvisDog's picture

I would argue that starting a war with Iran would be politically neutral at best for Obama. Wars always help the popularity of Republican presidents because their core constituency is more militaristic. If Obama attacks Iran, I would have to believe that the liberal left (maybe 30% of voters?) would abandon him permanently if they have any sense of personal integrity, which I think most of them do. For every voter he gains, he would lose at least one (or have one sit out the next election)

Mon, 11/01/2010 - 12:39 | 690852 Imminent Crucible
Imminent Crucible's picture

" Republican...core constituency is more militaristic"

Hmm.  Not sure about this;

WWI... Democrat Woodrow Wilson steers U.S. into it.

WWII... Democrat Franklin D Roosevelt drags a kicking and screaming U.S. in.

Korean "police action"... Democrat Harry Truman commits U.S. forces.

Vietnam "conflict"... Democrat John Kennedy involves U.S., Democrat Lyndon Johnson escalates.

Bosnian conflict... Democrat Bill Clinton

Battle of Mogadishu... Democrat Bill Clinton

Sudanese Aspirin War... Democrat Bill Clinton

If memory serves me, Reagan dinked around in Lebanon, Lybia and Grenada, and the Bush 41 "Rescue Kuwaiti oil" and Bush 43 "Rescue Iraqi oil after kicking Taliban butt" actions are recent Republican adventures, but it's hard to make the case that Democrats don't like to pull the Pentagon's trigger from time to time.

For myself, I'm opposed to dying in foreign dumps to protect some corporation's interests, no matter whether the order comes from a donkey or an elephant.

Mon, 11/01/2010 - 08:14 | 690131 cbaba
cbaba's picture

Great article, thanks for sharing with us.

Mon, 11/01/2010 - 08:05 | 690117 mrhonkytonk1948
mrhonkytonk1948's picture

If it's politically expedient with a short-term horizon, Occam's Razor suggests it will happen. 

Mon, 11/01/2010 - 12:22 | 690788 A Nanny Moose
A Nanny Moose's picture

+1. With trepidation.

Mon, 11/01/2010 - 10:10 | 690363 BigJim
BigJim's picture

That puts it pretty succinctly.

Mon, 11/01/2010 - 08:58 | 690189 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

With 5 individual blades to make it extra close...

Mon, 11/01/2010 - 08:02 | 690114 ella
ella's picture

David Broder is a Republican and this is what you get, more war.  How does he expect to pay for it, more charge and spend?  Just listen to the Republicans and you know what their war policy is.  Bush almost doubled the national debt, adding 5 trillion, with his charge and spend policies.  His job creation was among the worse in modern history with a little of 3 million.  Bush's policies were supported by his Republican controlled Congress. 

Mon, 11/01/2010 - 10:09 | 690360 BigJim
BigJim's picture

You're a zero hedge forum member and you're still peddling this party-political, left vs right swill?

Grow a frontal lobe.

Mon, 11/01/2010 - 10:06 | 690345 kaiserhoff
kaiserhoff's picture

David Broder is the Dean of the left and has been for decades.  This happy horse shit is a good measure of their desperation..., and moral bankruptcy.

Mon, 11/01/2010 - 10:52 | 690516 lawrence1
lawrence1's picture

Ignorance is it own reward .. enjoy your blessings.

Mon, 11/01/2010 - 10:52 | 690515 lawrence1
lawrence1's picture

Ignorance is it own reward .. enjoy your blessings.

Mon, 11/01/2010 - 10:52 | 690514 lawrence1
lawrence1's picture

Ignorance is it own reward .. enjoy your blessings.

Mon, 11/01/2010 - 09:38 | 690259 Crab Cake
Crab Cake's picture

I junked you, and I did so not because you are incorrect, but because you fail to understand that the military industrial complex is joined at the hip to BOTH parties.  If you still think it matters what letter the schill on stage has in front of their name, then you are behind the times.  The Republicans and the Democrats are two sides of the same debased coin; heads they win, tails you lose.

Mon, 11/01/2010 - 12:12 | 690753 G. Marx
G. Marx's picture

 

Gee, you broke my heart with the junking. Maybe you should ask questions before you jump to your incorrect conclusions? I quite understand the problem with both parties and how they are merely two sides of the same authoritarian coin. Fact is, I have lived in the DC area all my life and have read the W. Post for forty years. Broder's political/ideological leanings aren't a secret. His political bias tilts heavily towards the democrats, his own words leave no doubt about that. To state otherwise just exposes the ignorance of you and others. If not ignorance, then attempts at partisan misinformation to do damage control for your political masters.

Instead, maybe you should question the knowledge and motives of the poster to which I initially responded. It seems to me that he wants to ascribe all social and political desires for war, onto one party and it's supporters. This logical fallacy can be easily demonstrated through simply researching US history to see which party has sent the US to war over the past one hundred years. No doubt there exist more war hawks in the republican party, but that does not mean they have a monopoly on this position or that fifty years of columns that has rhetorically supported the democrats can be overturned with one that suggests it would be in the political and economic best interest of a democratic president to go to war. The three partisan posts alleging that Broder is a republican, can't change those facts.

Be it ignorance or partisan desperation, what you alleged is laughable for anyone halfway familar with the five decades of opinions from David Broder and the one century history of the democratic party.

Mon, 11/01/2010 - 09:35 | 690256 G. Marx
G. Marx's picture

 

You obviously have never read Broder during his over five decades of beinga columnist for the Wash. Post. he's a progressive liberal and a democrat, sorry. That's just a fact. That is the reason he wrote this column, to advise a progressive liberal democrat president. So, try again.

Mon, 11/01/2010 - 12:33 | 690822 Commander Cody
Commander Cody's picture

I my view, Broder is a fucking moron.

Mon, 11/01/2010 - 10:31 | 690428 weinerdog43
weinerdog43's picture

No, he is most certainly NOT a Liberal nor a progressive.  He is a typical Republic masquarading as a "moderate".  He cheerled the war against Iraq from the beginning.  That is certainly NOT a Liberal position.  Try again.  Oh, and I junked you.

Mon, 11/01/2010 - 12:18 | 690769 A Nanny Moose
A Nanny Moose's picture

Please step away from the Kool Aid. It is neither red, nor blue, but purple.

Mon, 11/01/2010 - 06:38 | 690083 idle muesli
idle muesli's picture

Nazi journalists who pushed for wars of aggression got into an awful lot of hot water.  When one does so, not that one ought do it, one ought be sure one will wind up on the winning side of the conflagration.

Mon, 11/01/2010 - 01:21 | 689979 Johnny Dangereaux
Johnny Dangereaux's picture

WE NEED A PUTSCH!      Great article...thank-you for your efforts. 

Mon, 11/01/2010 - 00:51 | 689956 Minion
Minion's picture

USA has only one thing left making it a superpower:  threat of death.  World reserve currency status is ending.

Mon, 11/01/2010 - 00:51 | 689955 Between The Lines
Between The Lines's picture

I would not put it past BO to attack Iran if he thought it would get him re-elected.

Mon, 11/01/2010 - 13:34 | 691045 Lapri
Lapri's picture

That's what Stratfor is actually suggesting. Attacking Iran as the only way to salvage his presidency and get re-elected in 2012.

http://www.stratfor.com/weekly/20101025_us_midterm_elections_obama_iran

Mon, 11/01/2010 - 08:26 | 690143 Seer
Seer's picture

Wow, that's something that's never happened before!

I'm sure that the Tea-Baggers will elect someone who wouldn't do such a thing!

Mon, 11/01/2010 - 10:07 | 690352 BigJim
BigJim's picture

The tea party originally comprised Ron Paul non-interventionists. The Republican apparatchiks organised a hijack of the brand, and now its membership is increasingly swelled by Sarah Palin types.

Whether the current Tea Party followers would elect a leader who would go to war for the sake of winning an election depends on how large a proportion of them is still libertarian.

Mon, 11/01/2010 - 09:40 | 690267 G. Marx
G. Marx's picture

 

Wow, good argument. If you think the "tea-partiers" would do it, then it's okay for Obama to do. Way to go, dude.

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