Cost of the War in Iraq

Cost approaching 67 billion and counting.


Senators Say Five Years in Iraq Is Realistic

http://reuters.com/newsArticle.jhtml?type=topNews&storyID=2972993



Just the beginning of a longer haul?

U.S. troops face depression, boredom, general malaise

"It's a brutal environment where you don't feel welcome or appreciated," said Spc. Raymond Bremen, 21 of the Bronx, N.Y. "It's just hostile, between the weather, the water, the food, the people. It's everything."

"We had our hopes so high, thinking we were going home in June. We'd talk about it every day, about going home, having a barbecue. Then it was, `You're going to Fallujah,'" said Pfc. Derrick Thomas, 21, of Bensalem, Pa. "It's time for 3rd ID to go home. We fought the war, we won the war and we're still here."

Instead of riding in victory parades, these soldiers are walking patrols in temperatures of more than 100 degrees while wearing layers of body armor. Instead of being greeted with "Welcome Home" banners, they get chants of "America, go home" and read hostile graffiti - "Go out AMRKA" - on city walls.

http://www.fortwayne.com/mld/newssentinel/6135604.htm



'I just pulled the trigger'
By Bob Graham, Evening Standard, in Baghdad
19 June 2003

At first glance they appear to be the archetypal Band Of Brothers of Hollywood myth, brave and honest men united in common purpose.

But a closer look at these American GIs, sweltering in the heat of an unwelcoming Iraq, reveals the glazed eyes and limp expressions of those who have witnessed a war they do not understand and have begun to resent. By their own admission these American soldiers have killed civilians without hesitation, shot wounded fighters and left others to die in agony.

What they told me, in a series of extraordinary interviews, will make uncomfortable reading for US and British politicians and senior military staff desperate to prevent the liberation of Iraq turning into a quagmire of Vietnam proportions, where the behaviour of troops feeds the hatred of an occupied people.

http://www.thisislondon.co.uk/news/articles/5402104?source=Evening Standard


Our people belong back with their families. As of today there are still over 145,000 US troops in Iraq.

No debate. We do need to keep in mind some of the realities over there.
 
Taxpayer cost over 68 billion and counting http://www.costofwar.com/

U.S. Soldiers dead 200 and counting

Two Missing U.S. Soldiers Found Dead
32 minutes ago
By PAUL HAVEN, Associated Press Writer

BAGHDAD, Iraq - The bodies of two U.S. soldiers missing for days were discovered early Saturday northwest of Baghdad, as the toll rises past 200 for Americans killed since war started in Iraq (news - web sites).

News of their killings came amid a torrent of guerrilla-style attacks and sabotage that has marred U.S. efforts to re-establish order since Saddam Hussein (news - web sites)'s ouster. About a third of U.S. troops killed in the Iraqi conflict have died in attacks or accidents since major combat was declared over May 1.

Sgt. 1st Class Gladimir Philippe, 37, of Linden, N.J., and Pfc. Kevin Ott, 27, of Columbus, Ohio, were reported missing Wednesday from the town of Balad, 25 miles north of Baghdad.

Soldiers on the ground and using Apache attack helicopters had scoured the area, and U.S. interrogators were questioning at least six men arrested in the soldiers' disappearance.

Their bodies were found 20 miles northwest of the capital early Saturday, U.S. Central Command spokesman Lt. Cmdr. Nicholas Balice said in Tampa, Florida.

"We have always anticipated and were prepared for what we term as pockets of resistance," Balice said.

"We anticipate that we'll be dealing with the situation for some time. But our soldiers are trained, they're prepared, and they're over there knowing that this is the mission they have at hand."

At least 61 U.S. troops have died since the official end of fighting in Iraq — at least 23 of them in attacks.


And we are there to stay for 5 years maybe more? To spread democracy and reconstruct something we just broke down.? Nice going:mad:

No debate, keeping track on some of the realities over there.
 
The captives of liberation

Brian Whitaker describes the messy collision of US occupation policy and Iraqi expectations

Wednesday July 2, 2003

"American soldiers," the New York Times lamented the other day, "sometimes infuriate Iraqis by running afoul of time-honoured tradition."

It was referring to an incident last Thursday night when troops on patrol in Baghdad heard gunshots and rushed into a house from all sides.

"It turned out there was a wedding party under way, a ceremony that often occurs on Thursday evenings and is celebrated with gunfire," the paper explained.

Oh dear! Those blundering Americans again.

Respectful of "time-honoured tradition", the New York Times did not venture to suggest that the Iraqi wedding guests, in the light of the current situation, might sensibly have forgone their celebratory gunfire.

Time-honoured it may be, but firing guns in the air has always been a stupid tradition. Bullets that go up eventually come down somewhere, and one family's wedding can easily turn into another's funeral.

It's not the first time that wedding gunfire in the Middle East has been mistaken for something else. Nor, probably, will it be the last.

Four years ago in Yemen, during a particularly jittery period in the run-up to the country's presidential election, residents of Sana'a were kept awake one night by what they thought was a huge gun battle raging in the posh diplomatic quarter.

It started when a wedding guest let off a few rounds into the air. Police nearby returned his fire and summoned the army. Within minutes, hundreds of troops had arrived, along with two tanks - one of which gatecrashed the party by driving straight through a wall.

How such incidents are perceived by the public depends on the circumstances and who is involved. When it happens in Yemen at the hands of government forces ... well, it's just one of those unfortunate things. When it happens in Iraq it becomes another example of gross cultural insensitivity by the occupying power.

Americans may find that unfair, but it's a fact of life. Occupiers tend to get blamed for everything that goes wrong, whether it's their fault or not.

Late on Monday night, an explosion destroyed a mosque in Fallujah, killing at least five Iraqis. Residents of the town - which is already a hotbed of resentment - claimed they had heard an aircraft overhead, and that an American bomb or missile had hit the mosque.

The Americans insisted this was not the case and suggested that someone had hidden explosives in the mosque which had gone off accidentally. The type of physical damage - walls blown out and a collapsed roof - clearly indicated a ground-based explosive that had been inside the building, they said.

Next day, as a crane shifted some of the larger pieces of wreckage, dozens of bystanders chanted: "There is no God but Allah, America is the enemy of God."

Last week, the Guardian received an email - the sort that gets circulated all over the Internet - containing a series of photographs which were said to show American soldiers raping Iraqi women at gunpoint.

There was nothing to indicate that the pictures were authentic and the men concerned did not look much like American troops - their haircuts were wrong, for a start.

"What the coalition forces are doing," the message said, "is not only stealing our money or oil, they are ridding the whole society and raping the society of honor and chastity."

It pleaded: "I ask you in the name of the Arabic honor to forward this to as many people as you can, and if possibly [sic], to Amnesty International." Why the sender could not simply look up Amnesty International's email address on the Internet and send the pictures himself was not explained.

During the invasion there was much talk about the battle for Iraqi hearts and minds - and it's easy to see now which way the battle is going. It doesn't make much difference how the occupation forces actually behave; what counts is the overall perception.

Many Iraqis, of course, are pleased that Saddam Hussein has gone. They are willing to give the occupiers a chance to restore order and leave with dignity, but so far they can't point to any concrete benefits. The longer they wait, the more those negative perceptions will harden.

Some of them, too, have an unduly rosy picture of American life, with all its wealth and technology - which leads to a belief that the US could get Iraq's electricity and water supplies, and everything else, running perfectly at the flick of a switch if it wanted to. Never mind the complexities and the practicalities; if the Americans haven't done it, it must be because they're only interested in Iraqi oil.

Meanwhile, US officials seem unsure what they are really up against in Iraq. Or perhaps they do realise it but can't yet bring themselves to admit it.

"Each new attack is raising questions about whether the violence... is a last gasp from Saddam Hussein loyalists or signs of a spreading revolt," Associated Press reported on Sunday. "The Pentagon is puzzling over how many resisters there are, how well they are organised and how they can be stopped."

Paul Bremer, the new ruler of Iraq, argues that the apparent survival of Saddam lies at the root of the problem. People are afraid to cooperate with the Americans in case he returns and punishes them.

This sounds pretty hollow - rather like the Israeli claims that suicide bombers are motivated by financial greed and lust for the virgins in paradise.

It is simply a way of avoiding the real issue, and we can be sure that if Saddam were killed or captured, Mr Bremer would find other reasons to explain away the attacks on US forces. Accusations of meddling by Syria and/or Iran would be promising alternatives.

A report last week by Kroll, the prominent firm of security consultants, ruled out the possibility that Iraq will move rapidly towards full stability, and mapped out two gloomy scenarios over the next six months, both of which it described as equally probable.

One is a "Wobbly Landing", where "the process of building a democratic state is difficult; US forces are heavily involved, and economic recovery develops at an uncertain pace".

The other is an "Iraqi Revolt" where "efforts to build a representative government fail; crime and violence grow; American troop withdrawal and stabilisation become a priority, bringing with it high risks and uncertainties for investors".

There is nothing particularly new or revelatory in either of these scenarios. Both were easily predictable before the war started and, indeed, many people predicted them.

Officials in Washington were not allowed to take such warnings seriously because they didn't fit the neo-conservative view of the world in which everyone would not only love the Americans but behave like them if only they could be freed from the grip of dictators and Islamic zealots.

As the US defence secretary, Donald Rumsfeld, noted last April when he shrugged off the looting in Iraq that followed the invasion, freedom is untidy.

"Free people are free to make mistakes and commit crimes and do bad things," he said. "They're also free to live their lives and do wonderful things."

What he didn't mention at the time is that they are free, too, to resist American occupation.
 
Amid the usual negative drone of the US media, one sound has been noticeable by its absence lately. That is the sound that emanated from the mosques in the early days of the occupation calling for revolt, death to the Americans and an Islamist state. Those radical clerics have toned it down considerably lately. I suspect they were called in and given their marching orders,"Play ball, maybe even go on our payroll and we'll leave you alone. Keep this radical stuff up and we will shut you down."

One of the signal failures of the occupation has been the inability to get our own media on the air. We should have had an Armed forces TV station broadcasting from the beginning of the war, and put it on bigtime afterwards, with a couple of Arabic channels as well. In addition, we should have jammed or destroyed the Iranian TV that beams propaganda into Iraq daily. Why this has not been a priority is beyond me.
 
Quote from AAAintheBeltway:

Amid the usual negative drone of the US media, one sound has been noticeable by its absence lately. That is the sound that emanated from the mosques in the early days of the occupation calling for revolt, death to the Americans and an Islamist state. Those radical clerics have toned it down considerably lately. I suspect they were called in and given their marching orders,"Play ball, maybe even go on our payroll and we'll leave you alone. Keep this radical stuff up and we will shut you down."

One of the signal failures of the occupation has been the inability to get our own media on the air. We should have had an Armed forces TV station broadcasting from the beginning of the war, and put it on bigtime afterwards, with a couple of Arabic channels as well. In addition, we should have jammed or destroyed the Iranian TV that beams propaganda into Iraq daily. Why this has not been a priority is beyond me.
More...

In a country where there are an estimated 5 million un-registered AK-47s held amongst the populace, as well as portions of Saddam's arsenal still unrecovered, the results of a precipitous US withdrawal - or an attempted handover to forces incapable of handling the situation - could be extremely bloody, not to mention extremely damaging to US interests and the interests of the Iraqi people themselves..

Partly for fear of the alternatives, the Shia are not generally calling for the US to leave. They know that the country would quite possibly break apart and devolve into chaos and civil war, with the Kurds likely to go their own way along with the northern oil fields, and Baathists and Iranian-supported radicals being in the best position to exploit the turmoil. In this one way, having the Baathists - including the big SH himself - still around actually serves US interests - as a counterbalancing threat - though I'm confident that other political imperatives are overriding, and that capture of SH and his sons remains a top priority. As for the threat from Iran, even setting aside Iran's current problems and the widely understood failure of the theocratic state, the vast majority of Iraqi Shia follow a long "quietist" tradition: The direct role in the state and the rigid heirarchies imposed by the radical, non-Arab Khomeini go against traditional Shia teachings and practice. For these and other reasons, the leading Shia cleric, Ayatollah Hakim, recently reiterated his opposition to the use of violence against the occupation.

On the TV and radio issue, I agree that it's surprising it's not been a bigger priority. Apparently, there is coalition programming available by satellite and in some local areas - along with international channels - but reaching the entire country with a broadcast signal is easier said than done. I also don't know how many Iraqis have TVs.
 
Our fake patriots

Britain is fast becoming Bush's doormat - so why isn't the British right saying a word?

George Monbiot
Tuesday July 8, 2003


The prediction was not hard to make. If Britain kept supporting the US government as it trampled the sovereignty of other nations, before long it would come to threaten our own. But few guessed that this would happen so soon.

Long ago, Britain informally surrendered much of its determination of foreign policy to the United States. We have sent our soldiers to die for that country in two recent wars, and our politicians to lie for it. But now the British government is going much further. It is ceding control to the US over two of the principal instruments of national self-determination: judicial authority and military policy. The mystery is not that this is happening. The mystery is that those who have sought to persuade us that they are the guardians of national sovereignty are either failing to respond or demanding only that Britain becomes the doormat on which the US government can wipe its bloodstained boots.

A month ago we discovered that our home secretary had secretly concluded an extradition treaty with the US that permits the superpower to extract British nationals without presenting evidence before a court. Britain acquires no such rights in the US. The response from the rightwing press was a thunderous silence. Last week, we learnt that two British citizens held in the prison camp in Guantanamo Bay will be denied a fair trial, that they may stay in prison even if they are found innocent, and that they will not be returned to Britain to serve their sentences. There were a couple of muted squeaks in the patriotic papers, offset by an article in the Sunday Telegraph which sought to justify the US action on the grounds that one of the men had been arrested before. The story was spoilt somewhat by the fact that he had been released without charge.

But by far the most significant event passed without comment. Two weeks ago, the defence secretary, Geoff Hoon, told the Royal United Services Institute that he intends to restructure the British armed forces. As "it is highly unlikely that the United Kingdom would be engaged in large-scale combat operations without the United States", the armed forces must now be "structured and equipped" to meet the demands of the wars fought by our ally. Our military, in other words, will become functionally subordinate to that of another nation. The only published response from the right that I can find came from Bernard Jenkin, the Conservative defence spokesman. "The real question he must answer," Jenkin rumbled, "is how he can deliver more with underlying defence spending running behind the total inherited from the previous Conservative government." For the party of national sovereignty, there is no question of whether; simply of how.

Let us imagine for a moment the response of the patriots, had these assaults on our independence been attempted by or on behalf of the European Union. No, let's not imagine it, let's read it. In April, the Daily Telegraph pointed out that a few hundred men under the command of the EU had been deployed in Macedonia. This, it feared, could represent the beginning of a European army. Blair, it demanded, "must logically reject the plans for both political and military union". The Sun was terser. "The new army will need a flag," it said. "How about a white one?" But when Hoon raises the white flag and hands over not a distant possibility of cooperation, but our entire armed forces to another country, the patriots are silent. Why is it that the right has chosen to blind itself to what is happening? And what does it take to persuade it that the greatest threat to national sovereignty in Britain is not the European Union, but the United States?

The double standards are baffling. A few months ago, Paul Johnson, ancient custodian of our independence, wrote in the Spectator that the world "needs hero states, to look up to, to appeal to, to encourage and to follow". A sole superpower, he argued, "is a much safer and more responsible step towards world order than a corrupt pandemonium like the UN or a rapacious and blind bureaucracy like the EU." It is better, in other words, to humbly obey another country than to participate, with negotiating rights and voting powers, in a system of regional or global governance. This notion reflects the creed of the Tory party, some of whose members have been flirting with the idea of leaving the EU and joining the Free Trade Area of the Americas. The difference between the two, of course, is that if we joined the FTAA we would have to accept the outcome of negotiations in which we took no part.

It is the conceit of rightwing commentators that those who contest the surrender of British sovereignty to the US do so not because they are concerned about national self-determination, but because they hate the Americans. Their hypocrisy is breathtaking. On February 4, Michael Gove, in the Times, wrote an article headlined "The '68 reasons why Germany will always fail: Gerhard Schröder's nation has not enjoyed a single success in 10 years", in which he raved about "a historic weakness in the German character" and the "anti-liberal" urge of the German people to follow "a special path, a Sonderweg". Three weeks later he wrote another piece, headlined "Stop the war! Give up bashing the Yanks", in which he claimed that "In defining whether Britain is, or should be, closer in sympathy to the US than the continent, a host of prejudices is unleashed."

So why is it deemed by the right to be patriotic both to oppose the EU and to appease the US? Why has the old reactionary motto "my country, right or wrong" been so smoothly replaced with another one: "their country, right or wrong"? Why does the British right now believe it has a God-given duty to defend someone else's empire?

I think the first thing we must recognise is that the "patriotism" that informs the attacks on the EU is fake. The newspapers that are responsible for most of the hysteria about straight bananas and regulated sausages are owned and run by a Canadian (Conrad Black) and an Australian with American citizenship (Rupert Murdoch). These men seem to care nothing for the "British values" their papers claim to defend. Their conglomerates are based in North America, and they have much less of a presence in continental Europe. They would appear, therefore, to possess a powerful incentive for dragging Britain away from the EU, and handing it, alive and kicking, to the US.

American empire, unlike European convergence, is also unequivocally a project of the right; it establishes the political and economic space in which men like Murdoch and Black can work without impediment. But perhaps most importantly, our fake patriots know where real power lies. Having located it, they wish to appease it. For the very reason that the United States is a greater threat to our sovereignty than the European Union, they will not stand up to it.
 
Iraq Cost Could Mount to $100 Billion
Impact on Other Programs Feared


By Jonathan Weisman
Washington Post Staff Writer
Sunday, July 13, 2003; Page A22


The cost of the war and occupation of Iraq could reach $100 billion through next year, substantially higher than anticipated at the war's outset, according to defense and congressional aides. This is raising worries that other military needs will go unmet while the government is swamped in red ink.

The cost of the war so far, about $50 billion, already represents a 14 percent increase to military spending planned for this year. Even before the United States invaded Iraq in March, President Bush had proposed defense budgets through 2008 that would rise to $460 billion a year, up 74 percent from the $265 billion spent on defense in 1996, when the current buildup began.

At the same time, the federal budget deficit is exploding. This week, officials expect to announce that it will exceed $400 billion for the fiscal year that ends Sept. 30, the largest in U.S. history by a wide margin. Former White House budget director Mitchell E. Daniels Jr. said last month the deficit should be smaller next year, but economists at Goldman Sachs Group Inc. -- factoring rising war costs -- said Friday the deficit may climb even higher than their previous $475 billion estimate.

"It's already unclear whether [the Bush defense buildup] is sustainable," said Steven M. Kosiak, a defense budget analyst at the Center for Strategic and Budgetary Assessments. "Add another $50 billion, and it's doubly unclear."

Administration officials concede that spending levels in Iraq are considerably higher than anticipated. At the onset of war, Dov Zakheim, the Pentagon's chief financial officer, said post-combat operations were expected to cost about $2.2 billion a month. By early June, he had adjusted that forecast to $3 billion. But with about 145,000 U.S. troops still in Iraq, some under fire, costs have continued to climb.

The average monthly "burn rate" from January to April, a span encompassing the "heavy combat" phase of the war, was $4.1 billion, Zakheim said. That is not much higher than current expenditure rate of $3.9 billion a month for the occupation, even though most of the Navy and Air Force contingents have been sent home.

"We've peaked out," Zakheim said, "but we are still there in a way that we perhaps didn't think we would be at this point."

Defense experts worry that the cost of actual operations in Iraq understates the impact of those operations on military and federal spending. Indirect costs of a protracted conflict could include new funding for military recruiting and the retention of exhausted troops ready to leave the services, Kosiak said.

If 100,000 or more troops remain in Iraq a year from now, there will be political pressure to increase the overall size of the Army. Rep. Duncan Hunter (R-Calif.), chairman of the Armed Services Committee, said Friday he would seek to add two new heavy divisions to the existing 10, or as many as 32,000 troops. Hunter inserted language in the defense authorization bill pending in Congress to prohibit any base closings that would harm the Army's ability to field 12 divisions.

During the 2000 presidential campaign, Republicans contended that President Clinton had stretched the military too thin with the deployment of 10,000 troops in the Balkans, Kosiak noted. Now, there are 16 times that many soldiers in Iraq and Afghanistan alone, and the grumbling is beginning again. Sens. James M. Inhofe (R-Okla.) and Jack Reed (D-R.I.) practically pleaded with Defense Secretary Donald H. Rumsfeld for a larger Army when he appeared last week before the Armed Services Committee.

"I know your close communications with the [Army] Reserve component will convince you, as it's convinced me and many of the members of this panel, that there's got to be relief," Inhofe told Rumsfeld.

Right now, the Army's 3rd and 4th Infantry divisions, 3rd Armored Cavalry Regiment, 2nd Armored Cavalry Regiment, 101st Airborne Division, 1st Armored Division and 173rd Airborne Brigade are all serving in Iraq, as are elements of the Army's V Corps, according to the Army. Nineteen of the Army's 33 brigades are deployed abroad. Only one division, the 1st Cavalry, is being held in reserve.

Rep. John M. Spratt Jr. (S.C.), the ranking Democrat on the House Budget Committee and a member of the Armed Services Committee, said the war will likely lead to delays in new weapons purchases and some weapons development.

Loren B. Thompson, a defense analyst at the conservative Lexington Institute, said elements of Rumsfeld's "transformation" of the military into a smaller, quicker force will undoubtedly have to be put on hold.

"The big budgetary question is not what it's costing us today," Thompson said. "It's the costs of reservists not reenlisting. It's the cost of active-duty [troops] giving up on a career that proved just too difficult to sustain, and the costs of equipment that is not being maintained at any level that can be considered adequate."

Pentagon officials are not nearly so pessimistic. Although Zakheim refused to venture how many troops would be in Iraq in a year, Defense Department documents sent to Congress last week indicate the Pentagon "assumes that only a limited number of U.S. forces will remain" there by September 2004. However, Gen. Tommy R. Franks, the retired commander of U.S. forces in Iraq, told lawmakers last week that troops could be in Iraq as long as four years from now.

Zakheim strongly dismissed concerns over morale, troop retention and recruiting.

"The people on the ground really seem to want to stay there," said Zakheim, who recently returned from Baghdad. "Even the people I visited in hospital, their number one objective is to get back into theater. People sign up to do just what they're doing."

Such comments have fueled Democratic criticism that the administration is not facing up to the facts in Iraq, nor is it addressing the hard choices they present.

"It's been hide the ball every step of the way," said Sen. Kent Conrad (N.D.), ranking Democrat on the Budget Committee. "They've consistently understated the cost by a factor of several-fold, and they've done everything they can not to share information."

Said Spratt: "Fifty billion dollars to a $400 billion deficit -- that's a significant addition that should have some bearing on tax cuts and other spending decisions."

Two antiwar activists, Elias Vlanton of Takoma Park, and Niko Matsakis of Boston, are keeping a running tally of the war costs on their www.costofwar.comWeb site. Among the site's assertions: the $67 billion spent this year on the war and Iraqi reconstruction could have put 9.5 million more children in Head Start, financed the hiring of 1.3 million schoolteachers, or covered the health insurance costs of 29 million children.

Next year's costs are more difficult to discern. Although the administration has "a pretty good sense of what's going to be on the ground" Sept. 30, Zakheim said, it will not request funding now for Iraqi operations in the fiscal year that begins Oct. 1. The defense spending bills for fiscal 2004 pending in Congress do not provide money for the occupation.

"We at least need to have some good estimates," Spratt said. "This is a big footnote to the budget. The budget does not adequately reflect all the costs that we know are going to be incurred in the coming fiscal year."

Even Republican aides on Capitol Hill complain that the Defense Department has been far too reluctant to own up to the budgetary costs of the war.

Zakheim defended the administration's budget policymaking as "open" and "above board," saying that ongoing military operations have traditionally been funded through emergency budget requests, not the base Pentagon budget.

"It is far more responsible to the taxpayer for us to get a better fix on what the costs are going be, then come in" with a request, he said. "Maybe in two months' time, things will be so different that everything we're talking about now will be seriously OBE'd" -- overtaken by events.
 
The point being of course that our soldiers are dying so that Americans in general will be safer.

Saddam will never be able to reconstitute his nuke or WMD programs and be able to deliver such weapons to terrorists or use them himself.

Let me guess what the response to this post shall be:

"What nuke or WMD programs?"
 
"A FORM OF LOOTING"

SPIEGEL ONLINE: Professor Akerlof, according to recent official projections, the US federal deficit will reach $455 billion this fiscal year. That's the largest ever in dollar terms, but according to the President's budget director, it's still manageable. Do you agree?

George A. Akerlof: In the long term, a deficit of this magnitude is not manageable. We are moving into the period when, beginning around 2010, baby boomers are going to be retiring. That is going to put a severe strain on services like Medicare, Medicaid and Social Security. This is the time when we should be saving.

SPIEGEL ONLINE: So it would be necessary to run a budget surplus instead?

Akerlof: That would probably be impossible in the current situation. There's the expenditure for the war in Iraq, which I consider irresponsible. But there's also a recession and a desire to invigorate the economy through fiscal stimulus, which is quite legitimate. That's why we actually do need a deficit in the short term - but certainly not the type of deficit we have now.

SPIEGEL ONLINE: Because it's not created by investment, but to a large extent by cutting taxes?

Akerlof: A short-term tax benefit for the poor would actually be a reasonable stimulus. Then, the money would almost certainly be spent. But the current and future deficit is a lot less stimulatory than it could be. Our administration is just throwing the money away. First, we should have fiscal stimulus that is sharply aimed at the current downturn. But this deficit continues far into the future, as the bulk of the tax cuts can be expected to continue indefinitely. The Administration is giving us red ink as far as the eye can see, and these permanent aspects outweigh the short-term stimulatory effects.

SPIEGEL ONLINE: And secondly, you disagree with giving tax relief primarily to wealthier Americans. The GOP argues that those people deserve it for working hard.

Akerlof: The rich don't need the money and are a lot less likely to spend it - they will primarily increase their savings. Remember that wealthier families have done extremely well in the US in the past twenty years, whereas poorer ones have done quite badly. So the redistributive effects of this administration's tax policy are going in the exactly wrong direction. The worst and most indefensible of those cuts are those in dividend taxation - this overwhelmingly helps very wealthy people.

SPIEGEL ONLINE: The President claims that dividend tax reform supports the stock market - and helps the economy as a whole to grow.

Akerlof: That's totally unrealistic. Standard formulas from growth models suggest that that effect will be extremely small. In fact, the Congressional Budget Office (CBO) has come to a similar conclusion. So, even a sympathetic treatment finds that this argument is simply not correct.

SPIEGEL ONLINE: When campaigning for an even-larger tax cut earlier this year, Mr. Bush promised that it would create 1.4 million jobs. Was that reasonable?

Akerlof: The tax cut will have some positive impact on job creation, although, as I mentioned, there is very little bang for the buck. There are very negative long-term consequences. The administration, when speaking about the budget, has unrealistically failed to take into account a very large number of important items. As of March 2003, the CBO estimated that the surplus for the next decade would approximately reach one trillion dollars. But this projection assumes, among other questionable things, that spending until 2013 is going to be constant in real dollar terms. That has never been the case. And with the current tax cuts, a realistic estimate would be a deficit in excess of six trillion.

SPIEGEL ONLINE: So the government's just bad at doing the correct math?

Akerlof: There is a systematic reason. The government is not really telling the truth to the American people. Past administrations from the time of Alexander Hamilton have on the average run responsible budgetary policies. What we have here is a form of looting.

SPIEGEL ONLINE: If so, why's the President still popular?

Akerlof: For some reason the American people does not yet recognize the dire consequences of our government budgets. It's my hope that voters are going to see how irresponsible this policy is and are going to respond in 2004 and we're going to see a reversal.

SPIEGEL ONLINE: What if that doesn't happen?

Akerlof: Future generations and even people in ten years are going to face massive public deficits and huge government debt. Then we have a choice. We can be like a very poor country with problems of threatening bankruptcy. Or we're going to have to cut back seriously on Medicare and Social Security. So the money that is going overwhelmingly to the wealthy is going to be paid by cutting services for the elderly. And people depend on those. It's only among the richest 40 percent that you begin to get households who have sizeable fractions of their own retirement income.

SPIEGEL ONLINE: Is there a possibility that the government, because of the scope of current deficits, will be more reluctant to embark on a new war?

Akerlof: They would certainly have to think about debt levels, and military expenditure is already high. But if they seriously want to lead a war this will not be a large deterrent. You begin the war and ask for the money later. A more likely effect of the deficits is this: If there's another recession, we won't be able to engage in stimulatory fiscal spending to maintain full employment. Until now, there's been a great deal of trust in the American government. Markets knew that, if there is a current deficit, it will be repaid. The government has wasted that resource.

SPIEGEL ONLINE: Which, in addition, might drive up interest rates quite significantly?

Akerlof: The deficit is not going to have significant effects on short-term interest rates. Rates are pretty low, and the Fed will manage to keep them that way. In the mid term it could be a serious problem. When rates rise, the massive debt it's going to bite much more.

SPIEGEL ONLINE: Why is it that the Bush family seems to specialize in running up deficits? The second-largest federal deficit in absolute terms, $290 billion, occurred in 1991, during the presidency of George W. Bush's father.

Akerlof: That may be, but Bush's father committed a great act of courage by actually raising taxes. He wasn't always courageous, but this was his best public service. It was the first step to getting the deficit under control during the Clinton years. It was also a major factor in Bush's losing the election.

SPIEGEL ONLINE: It seems that the current administration has politicised you in an unprecedented way. During the course of this year, you have, with other academics, signed two public declarations of protest. One against the tax cuts, the other against waging unilateral preventive war on Iraq.

Akerlof: I think this is the worst government the US has ever had in its more than 200 years of history. It has engaged in extraordinarily irresponsible policies not only in foreign and economic but also in social and environmental policy. This is not normal government policy. Now is the time for people to engage in civil disobedience.

SPIEGEL ONLINE: Of what kind?

Akerlof: I don't know yet. But I think it's time to protest - as much as possible.

SPIEGEL ONLINE: Would you consider joining Democratic administration as an adviser, as your colleague Joseph Stiglitz did?

Akerlof: As you know my wife was in the last administration, and she did very well. She is probably much better suited for public service. But anything I'll be asked to do by a new administration I'd be happy to do.

SPIEGEL ONLINE: You've mentioned the term civil disobedience a minute ago. That term was made popular by the author Henry D. Thoreau, who actually advised people not to pay taxes as a means of resistance. You wouldn't call for that, would you?

Akerlof: No. I think the one thing we should do is pay our taxes. Otherwise, it'll only make matters worse.

Questions asked by Matthias Streitz

---------------------------------------------------------------------------------

GEORGE A. AKERLOF
Koshland Professor of Economics
2001 Nobel Laureate in Economics

Mailing Address:
University of California, Berkeley
Department of Economics
549 Evans Hall #3880
Berkeley, CA 94720-3880

Tel No. (510) 642-5387
Fax No. (510) 642-6615

E-mail Address:
akerlof@econ.berkeley.edu

curriculum vitae

http://emlab.berkeley.edu/users/akerlof/docs/cv.pdf
 
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