And then there is the deficit spending. This is the first war in American history that has been 100 percent deficit financed. Deficit spending for a whole variety of reasons can have a dampening effect on the economy. For the first time since the Revolutionary War, we have essentially had foreign financing of a war.
These are reasons why the war might’ve been expected to exert a damping effect on the economy. Government officials, the Federal Reserve in particular, have the responsibility of maintaining the economy at full or as close to full employment as possible, regardless of what’s going on.
So what did the Fed do? It lowered interest rates; it flooded the economy with liquidity to offset these other depressing effects. It did it pretty well, but in a certain shortsighted way. It did it by looking the other way when very bad lending practices were going on. A combination of loose monetary policy and lax regulations led to the subprime crisis.
The Fed obviously wanted to convince itself that they weren’t doing anything wrong. They said, “Oh, it’s not a bubble, it’s just a little foam.” Greenspan encouraged people to take out variable-rate mortgages at the time when interest rates were at a low and had only one way to go.
All of this thinking was totally myopic. It was clear that we were living on borrowed money and borrowed time. Meanwhile, we were spending hundreds of billions of dollars that were going straight to the oil-exporting countries. At the same time, Americans were taking hundreds of billions of equity out of their houses. Mortgage equity was being used to support consumption. It was only a matter of time before the day of reckoning would come, and now that day has arrived.
McCain is a Vietnam-War hero and has impressive foreign-policy credentials. Is it possible for the Democratic presidential nominee to change the terms of the Iraq debate, to make it about economic issues, not national security?
I do think the economic issue is critical. But you cannot de-link economics and security and overall national well-being.
The point isn’t that the war is going to bankrupt us overnight. The point is that the war is costing us a lot. Whether it’s $3 trillion or $5 trillion or somebody wants to nitpick about our numbers and come up with $2 trillion . . .
The fact is that the money could have been spent in ways that would’ve enabled us to address some of the major problems that our country is just not dealing with.
Child health care? The cost of a few days of fighting would make a difference.
Expanding our influence in Africa? Several days of fighting would pay for us to double our aid.
Fixing Social Security? We could put social security on a firm financial basis for the next 50 to 75 years for about one-sixth of an Iraq war — or less. There are some problems that are very big that, because of the war, we are not addressing. America has limited resources — not using those resources well means we are going to be less secure.
To return to your question, this really has nothing to do with heroism.