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 AMY GOODMAN: Our guests are the Nobel economics laureate Joseph Stiglitz, professor at Columbia University, and Linda Bilmes, professor at Harvard’s Kennedy School of Government. They’ve written a book together they’ve published today, The Three Trillion Dollar War: The True Cost of the Iraq Conflict.
I want to ask you about more of President Bush’s comments from Thursday. He said the United States is not heading into a recession.
PRESIDENT GEORGE W. BUSH: I don’t think we’re headed to a recession. But, no question, we’re in a slowdown. And that’s why we acted and acted strongly with over $150 billion worth of pro-growth economic incentives, mainly money going into the hands of our consumers, and some money going to incent businesses to invest, which will create jobs.
AMY GOODMAN: Joseph Stiglitz?
JOSEPH STIGLITZ: Well, first of all, the economy is almost surely heading into a recession. I was at the American Economic Association meetings. In the past, the probability of going into recession was fifty-fifty. The general consensus is now 75 percent probability of going into recession. But whether we go into recession or not, the real fact is that it is a major slowdown. It’s going to be one of the—I think clearly the deepest downturn in the last quarter-century. The loss of output, the difference between the actual output and our potential output, will be at least one-and-a-half trillion dollars, and that’s not money we’re talking about in this Three Trillion Dollar War. This is a serious problem. And I think at the core of this is the war. You know, in the election campaign, people said there are two big issues: the economy and the war. I think there’s one big issue, and that’s the war, because the war has been directly and indirectly having a very negative effect on the economy.
JUAN GONZALEZ: Well, could you talk about that somewhat, because you obviously go into that in your book, the impact of the enormous borrowing that occurred to finance the war at the same time that the President put through tax cuts—unheard of that we go into war and we cut taxes, rather than raise them—and also just the impact then that spread throughout the entire economy in terms of the housing crisis that we’re into now?
JOSEPH STIGLITZ: Well, this was one of the big points that came up in the joint committee hearing that we were in yesterday.
AMY GOODMAN: You testified yesterday before Congress.
JOSEPH STIGLITZ: That’s right. And this was one of the big points, that in every other war there has been what you might call shared sacrifice. Some people obviously sacrifice more, putting their lives at risk, but everybody was asked to sacrifice. This is the first time that, at the time we went into war, we actually cut taxes, rather than raised taxes. And even as we were cutting taxes, we already had a very large deficit. So that means this war has been totally financed by deficit. And that’s really been the trick that the Bush administration—it wanted people to think that there were no economic trade-offs. We could have a war for free.
JUAN GONZALEZ: And those deficits, the financing came increasingly from abroad, right?
JOSEPH STIGLITZ: Very much so, at least 40 percent from abroad. So that means that Americans will be paying those abroad interest and—the other aspect of that that’s really important to realize is that while we were saving zero, or household saving went down to zero, the government had negative saving and we were borrowing, the pools of wealth that were being created were in the Middle East, China. So when we have an economic problem, like the fact that Citibank and Merrill Lynch had to be bailed out, they had to turn to these others, to the sovereign wealth funds that were held by other countries, and that makes us more dependent on abroad.
AMY GOODMAN: Who is profiting from this war?
JOSEPH STIGLITZ: Well, actually, there are two big gainers in this war and only two: the oil companies and the defense contractors. And you see that where the pools of wealth are being created. One of the big pools of wealth are in the Middle East, the countries that are the oil exporters. We are transferring hundreds of billions of dollars from American consumers, businesses, to the oil exporters. You can look at it as simple as that.
AMY GOODMAN: Which countries?
JOSEPH STIGLITZ: Well, Saudia Arabia, Iran, Venezuela. You know, if you asked who were the countries that we would not want to help, many of them would be on the list that we have been helping.
AMY GOODMAN: So, what do you think of our headline today: President Bush helps the Axis of Evil? Iran and Venezuela, they benefit from the war in Iraq
JOSEPH STIGLITZ: They are the big beneficiary. That’s very clear. You know—
AMY GOODMAN: His Axis of Evil, I should say.
JOSEPH STIGLITZ: Exactly. And one of the things that—you know, as economists, we talk about opportunity cost, what you could have done with $3 trillion to win the hearts and minds, to advance security. One of the aspects of this—everybody talks about security. While we were focusing on weapons of mass destruction that did not exist in Iraq, another country joined the nuclear club: North Korea. And so, it shows you, you know, there’s limited resources, time and effort, and we were focusing on the wrong problem. While we were focusing on Iraq, the problems in Afghanistan got worse, and the problem of security in Afghanistan is much worse than it was five years ago. So there’s not only an economic opportunity cost; there’s a security opportunity cost.
JUAN GONZALEZ: Well, I’d like to ask you about the—how the presidential candidates are dealing with this. Obviously, both on the Democratic side, both of the remaining candidates, are saying that they’re going to pull out of the Iraq war, although, as we’ve examined on this show, what they define as pulling out is not quite really pulling out. It’s still maintaining considerable forces and also continuing to build the US military budget, whereas we’re already spending as much on our military budget as the rest of the world combined. Why anyone would want to spend more is beyond me. But your sense of how the candidates are positioned to be able to—in terms of their campaign rhetoric—to deal with some of these problems, Linda?
AMY GOODMAN: Linda Bilmes?
LINDA BILMES: Well, I think that both the Democrats are clearly interested in examining the issues around how much money we would have to spend to stay in Iraq, but I’m not sure that they are looking at it the way we would advise them to look at it. What we would say is that right now we spend $12 billion a month in Iraq alone, $16 billion if you include Afghanistan.
JOSEPH STIGLITZ: And that doesn’t include the cost down the line.
LINDA BILMES: Which doesn’t include the cost down the line, so if you include just the cost that we’ve already incurred for veterans and replenishing equipment and so forth, it’s double that. It’s $25 billion a month. So two more years of staying in Iraq is another $600 billion. Three more years, and you’re getting close to a trillion dollars more.
I guess what we would urge is for the candidates to consider whether US security objectives would be best served by spending that additional $600 billion to $900 billion by retaining our troops in Iraq. You know, it seems to us that one could look at many other ways to spend that kind of money that would achieve our objectives better.
And this, I will say, was brought home to me yesterday, when a Navy Seal, former student of mine, came into my office. He had just been back from fifteen months in Iraq. And the Navy Seals do a very, very difficult job. And he had been in Anbar province, where he had captured the number two al-Qaeda in Iraq leader in Anbar province. This was a big, big catch for him. And he lost a number of men. It was a very, very difficult period for him. And he said—I said, “Well, what happens to him now, to the al-Qaeda in Iraq Anbar guy?” And the Navy Seal said to me, “Well, you know, we can keep him locked up for maybe a year, but after that he’ll be out.” So he said to me, “I don’t know if we’re doing the right thing, if there’s something right or wrong in our strategy here, because inevitably we’re just delaying. We’re just delaying the inevitable problems down the road.” So I think we would strongly urge the candidates to consider that opportunity cost of spending another $600 billion or $900 billion.
JOSEPH STIGLITZ: Can I pick up on the point that you made that we’re spending about one-out-of-two dollars spent in the world on defense? The point is that we are now spending so much money on weapons that don’t work against enemies that don’t exist. The Cold War is over, but we haven’t really changed our defense posture, how we’re spending money. We could spend less and get more security. So it’s not a question of security; it’s a question of spending money intelligently.
JUAN GONZALEZ: But isn’t it true that throughout the history of the United States wars have been the means by which certain sectors of the American economy actually get government financing to develop their technology that they then turn into profit once the war ends? And, you know, for instance, when I see Boeing creating the virtual fence along the border, where did they get that technology from, if not from back in the Persian Gulf War and previous wars that they developed, so that it’s almost like the arms manufacturer is looking for government subsidy for their new technological development?
JOSEPH STIGLITZ: Well, the question is, it would be much more efficient to directly subsidize them to develop the technologies that we need right now. There’s a, you know, major global problem of global warming. If they use some of the ingenuity that they’ve been using to create smart bombs to create smart technologies, clean technologies, we’d all be a lot better off. And so, you know, I think direct spending makes a lot more sense than doing it this very roundabout way.
JUAN GONZALEZ: But you wouldn’t get the taxpayers to finance it, unless you had an enemy that you had to unite against on the exterior.
JOSEPH STIGLITZ: Well, no, the world—there is a problem of saving the planet now. I mean, I think that’s a pretty big threat.
AMY GOODMAN: Joe Stiglitz, you mentioned Halliburton. Talk more specifically about these corporations. Of course, Halliburton, the Vice President’s company.
JOSEPH STIGLITZ: Well, I mean, one of the big issues here is how you elect contracts. You know, I think, as I said earlier, that privatizing the military makes no sense. You know, there are certain things where the private sector should be involved, certain things that should be run by the government. And throughout history, one of the things which is not good to privatize, one of the things that should be run by the government, is the military. It’s not a voluntary interaction. You know, if you produce a good that the consumers want, that’s where the private sector does very well. But the interactions between Blackwater and the people in the street in Iraq are not voluntary interactions. It’s not where the market works well. So, in general, privatizing of the military makes no sense.
But if you’re going to do privatizing, you want to do it efficiently. And there, you want to have competitive bidding. But the Bush administration has over and over again used sole-source contracting. And it’s even worse than that. Often these are cost-plus contracts. So they’re sole-source, cost-plus. And cost-plus, what does that mean? They get reimbursed for whatever they spend, plus. Meanwhile, one of the things that we discovered was that the number of auditors has actually gone down, so while the number of contracts has gone up—estimated over 100,000 contractors—the number of auditors has gone down. And not surprisingly, the incidence of waste, fraud, corruption has gone way up. And you see that in the stock market price. You know, if this were a competitive market, they wouldn’t be making much profits. But the fact that their stock prices have done so well says there have been a lot of profits in this war.
LINDA BILMES: Yeah, and if I could jump in here.
AMY GOODMAN: Linda Bilmes.
LINDA BILMES: This raises one of the other real problems with the war, which is how it has been financed. The administration has—and this is the first war that has ever been financed in this way—has financed the entire war with these so-called emergency supplementals. Now, emergency supplementals circumvent the normal budget process and the normal budget caps, and they’re intended for situations like Hurricane Katrina, where you want to get the money so quickly to the area that you don’t have time to actually scrutinize the money in detail. But we’ve had now five years, twenty-five emergency supplementals. Now, what does this mean? This means that the budget folks of both parties in the Congress and in the Congressional Budget Office and other places don’t have time to actually look at, well, for this particular task, how much does it cost to get it done? So it’s absolutely inevitable that you would have profiteering, corruption, cost overruns for these huge contracts, which are let with virtually no scrutiny whatsoever.
AMY GOODMAN: You end your book, The Three Trillion Dollar War: The True Cost of the Iraq Conflict, with the chapter, “Learning from Our Mistakes: Reforms for the Future.” What are the remedies right now, Joe Stiglitz?
JOSEPH STIGLITZ: Well, there are actually a whole set of reforms. We divided them into two categories: one, in terms of how we treat our veterans; the other one is how we approach the budgetary process, the information process. So, for instance, one of the recommendations is, you know, if you’re going to go fight a war that lasts for more than a year, you can’t use emergency appropriations. If you’re using emergency to statement things aren’t going the way you planned, you ought to give a statement to Congress: why were we wrong? Where did we go wrong in our plans?
Secondly, we think it’s absolutely imperative that Americans have the information to know what this is costing them. It doesn’t determine whether you make—how you—you know, whether you go to war or not, but it’s a critical piece of information, and it has to be comprehensive, It has to be based on not only the cost today, but the cost in the future, the cost to the veterans, disability, the costs hidden in all of the other departments. Social Security Disability payments are going to be going up by tens of billions of dollars. So you want a comprehensive budgetary cost. But you also want to know what are the costs to the rest of the economy, because there’s an incentive to push costs from the budget to the rest of society. If the VA doesn’t have enough money, people are going to wind up, if they can afford it, buying some of this themselves. Because you save money on body armor, families that could have went out and bought the body armor. The cost to our society is the same. In fact, the cost to society is worse, forcing it onto individuals, because some of them couldn’t afford it.
AMY GOODMAN: You support an immediate withdrawal from Iraq, yet you say you would support a Democrat candidate for president; why? That’s voting against your views. They’re not calling for immediate withdrawal.
JOSEPH STIGLITZ: Well, the point is, we have a choice between what I would call a quick withdrawal and being there for a hundred years. If we have a hundred years, this $3 trillion number is just—you know, we’re assuming here a fairly quick scale-down of our activities over the next decade. But we’re saying by 2017, that’s the end, whereas—and when we do our $3 trillion calculation, if you’re talking about McCain’s, you know, a hundred year—we’re there for a hundred years, we’re talking about an order of magnitude larger. And I think the critical issue in writing this book is, one has to make that decision, is, say, if we’re going to be here for another hundred years, is that the best way of increasing our overall security?
AMY GOODMAN: I want to thank you both for being with us on this national broadcast exclusive. Joseph Stiglitz and Linda Bilmes’s book is The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Joseph Stiglitz, the Nobel economics laureate, professor at Columbia University; Linda Bilmes, professor at Harvard’s Kennedy School of Government. Source: http://www.democracynow.org/
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