TCS Daily

Dear Mr. President: Iraq Is Ready for Phase Three

By Max Borders - November 9, 2008 12:00 AM

First, congratulations. After a long campaign you have prevailed. The champagne corks have been popped. The confetti has fallen. Now the work begins. On the issue of Iraq, the question that should linger is not whether the Iraq adventure was a mistake (that's for the historians), but rather: where do we go from here? That answer lies with you.

Despite the missteps of your predecessor, the premature declaration of victory and the years of apparent intractability, President Bush - in the waning years of his presidency - got right up to a critical point in Iraq. Forgive me Malcolm Gladwell, but one might call it a tipping point. One wrong move and we could miss it. Iraq will retrogress. Therefore, because you have inherited a war, building your legacy starts now. Despite the successes of the surge and the relative peace in Baghdad, you could be known as the man who saved Iraq. So a number of subsidiary questions might help us get back the ultimate question set out above.

How did we successfully get to this point of relative stability? How do we keep that success while continuing to transition the country back to full Iraqi sovereignty? And what are the permanent fixtures to leave behind that will set Iraq on a course of lasting peace and prosperity? (It is on this last question that I'd like to linger.)

The relative stability Iraq currently enjoys has mostly to do with changes in both strategy and tactics. Indeed, there is already a narrative among reluctant media that the ascendency of Gen. David Petraeus was significant, because he brilliantly helped to execute the Surge. But the Surge was not just putting a whole lot more troops in Iraq, although that was part of it. The Surge was about taking the gloves off militarily, cooperating with local leaders and letting the political process lumber along, however imperfectly.

Taking the gloves off meant letting soldiers act like warriors as much as they were being asked to act like diplomats. Such didn't, of course, mean creating more Abu Ghraibs or collateral damage. It meant admitting that a war cannot be fought for the sake of international PR. Instead, the soldiers went out with surety and either killed or rounded up terrorists—eggshells crunching underfoot. They learned from their mistakes. They evolved. They decentralized. And they started winning. But most importantly, they went out and did their jobs as they were trained to do.

Getting local leaders involved is about employing local knowledge and collaborating with people who have the greatest stake in peace—i.e. those at the level of community. Tribal sheiks and the Iraqi equivalent of mayors were angry not only at the foreign fighters who were infesting their communities like parasites, but they were feeling impotent; omitted by the "occupiers". With the surge, they were empowered. They were brought back into the fold and assured they had not been forgotten. When you look at people in the eyes and tell them they are important - that they are needed - they can work wonders. And they did. That's how these local leaders became the primary catalyst of change in the Iraqi theatre.

At Iraq's federal level, there is corruption and infighting. But as a transitional phase, corruption and infighting is far preferable to tyranny and torture chambers. So as the political process moves along in a bovine gait, purple will slowly replace red as the color of stained fingers.

So how do we keep the gains in Iraq without sliding backwards? Well, it will certainly require resources—perhaps not at the levels needed in the past. In fact, an infusion of too many resources will continue to corrupt the Iraqi leadership and make the people dependent wards. Still, Iraq needs just enough to keep the country from backsliding. It will also require that the growing number of well-trained Iraqi security forces continues to swell, until an independent force equal to and opposite the remaining threat is achieved. But, maybe more than anything, the way to prevent retrogression is a vision of peace and prosperity. And that vision can only be achieved through building vital institutions.

Once security is established, vital institutions can be established in one of two ways; either: through some sort of institutional gene-splicing, or through a more emergent bottom-up process (or a hybrid of both). While nation-building alone is probably doomed to fail, the question of institution building is, perhaps, a different one. Institution-building is difficult to be sure, but it can be done. Does the world have the luxury of sitting around waiting on institutions to evolve in Iraq? Probably not. Thus: we must hope there is a way to splice vital institutions into Iraq's body politic. Democracy alone is not enough.

Just what do we mean by institutions? Three, in particular, come to mind:

First, establish private property rights. It is absolutely essential that Iraqi law ensure that individual titles to property are available to every person holding land or resources currently in the murky form of unwritten public memory. Liberty and property was a requisite of Anglo-Saxon law, of the American Founders and has been the foundation of all other prosperous countries around the world, since. As Peruvian economist Hernando de Soto says: "[I]nformals who occupy the lands have reached working agreements amongst themselves. If you go and try to expropriate from these people and send in troops to do so, your soldiers will come back in boxes. There is no way to touch these entrepreneurs. They get together and defend their private property with guns. All this indicates that there already is among them a de-facto norm of private property."

Legal institutions make these "informals" formal. And formal property rights mean land is definable, defensible and divestible—that the difference between mine and thine should never again have to come into conflict. In econ-speak it means lowering "transaction costs." Though in the language of the layman it means establishing the foundations commerce. Ordinary people can suddenly be legitimate entrepreneurs, get a loan, build a business and generally enjoy the fruits of prosperity. Of course, prosperous countries are considerably less bellicose than those in what Thomas P.M. Barnett calls "The Gap".

Second, Iraqi's need political freedoms like speech and suffrage. Already, the population is learning that argument, spin and political zigzag are preferable to violent aggression. Such is not to argue that security is likely to be established without force. It is rather to urge that political speech is the bedrock of civilization. Under such an order, ideas flourish. Some ideas will die. Others will take hold. But at least every idea has an opportunity to be heard, even if that hearing is over a game of chess with a Sunni neighbor. And that's all any society can ask for.

Finally, the institutions of justice must be in place. Is it simple matter for any two parties to resolve a conflict via an impartial arbiter? Are the courts free of corruption? Is the legal system robust enough quickly and easily to recognize a small company under its protective auspices? And is the federalism of Iraq strong enough to sustain the local institutions that will continue to check the powers of Baghdad into the future? The institutions of justice are the interstitial tissue of any society, but they can so quickly be forgotten by global bureaucrats who believe dropping food, cash and technical assistants from airplanes is the solution to all the problems of the world.

Of course, peace and prosperity will also depend on keeping relatively low taxes (personal and corporate), strong anti-corruption measures and a way of giving the Iraqi people a greater stake in their natural resources. But nothing is more important than institutions. As Nobel laureate Douglass North says: "When it is costly to transact then institutions matter. And it is costly to transact." So, Mr. President, if peace and prosperity for Iraq is your vision, you have your work cut out for you.

Max Borders is executive editor at Free to Choose Media.



Unintended Consequences
Max Borders actually congratulates us for having gotten bogged in the mire, and says "Now the work begins. On the issue of Iraq, the question that should linger is not whether the Iraq adventure was a mistake (that's for the historians), but rather: where do we go from here? That answer lies with you."

If there were ever any question whether Iraq was a mistake, it has long been dispelled. From every angle it's been a failure.. not the least of which is the decline in America's standing as a leader among nations. You might want to read the latest from Peter W Galbraith, Unintended Consequences: How War in Iraq Strengthened America's Enemies.

He begins by noting that:

George Bush launched and lost America's Iraq War. Losing is just one way in which the Iraq War did not turn out as planned.

* A war intended to eliminate the threat from Saddam Hussein's nonexistent weapons of mass destruction ended up with Iran and North Korea much closer to having deployable nuclear weapons.

* A war intended to fight terror has helped the terrorists.

*A A war intended to bring freedom and democracy to Iraq now has U.S. troops fighting for pro-Iranian Shiite theocrats and alongside unreformed Baathists.

* A war intended to undermine Iran's ayatollahs has resulted in a historic victory for Iran. Iranian-backed political parties control Iraq's government and armed forces, giving Iran a role in Iraq that it has not had in four centuries.

* A war intended to promote democracy in the Middle East has set it back.

* A war intended to intimidate Syria and make Israel more secure has left Israel more threatened and Syria less isolated.

* A war Intended to enhance America's relations with moderate Islam has made Turkey among the most anti-American countries in the world.

* A war intended to showcase American power has highlighted the deficiencies of U.S. intelligence, the incompetence of American administration, and the limitations on the American military.

* A war intended to boost American global leadership has driven U.S. prestige to an all-time low.

* A war intended to consolidate Republican power in Washington for a generation has cost the GOP controol of both houses of Congress in 2006 and seems likely to help elect an anti-war Democrat president in 2008.

* A war intended to make America more secure has left the country weaker.

He proceeds to flesh out this premise very nicely. But if we've been watching at all closely, we know the case he has summarized so well.

And "the answer" doesn't in any way lie with us. Our fate there is now in the hands of the pro-Iranian Iraqi National Congress. They will set the terms upon which we will stay on.. or, after December 31, midnight, we will leave.

Taking the gloves off.
The same can be said for many problems in the USA.

For example, illegal immigration. When the government started to enforce the law, illegal immigrants took notice and began to get worried.

If the law is not going to be enforced, then get rid of the police. Same for the military. If military are just going to used for show, get them out of there.

Trying to enforce laws is a great test as to whether the law should be repealed.

Enforcing Prohibition created black markets, mobsters and made the Kennedy's wealthy, just as drug smuggling made FDRs family wealthy.

The military are trained to kill people and break things. Nations use the military to project power, but that power will only be taken seriously if it is demonstrated.

Running from Lebanon, running from Somalia, running from Iran demonstrated that the civilian leadership were not willing to do what it would take to win.

Only loose if we quit.
Running away as Congress did in Vietnam, as Carter did in Iran, as Reagan did in Lebanon, as Clinton did in Somalia are the only way Iraq will be lost.

BTW, how many AQ members have been killed since 2001?

Here are the reasons Congress voted to attack Iraq:

Intended consequences:
"The following is a list of known terror plots thwarted by the U.S. government since Sept. 11, 2001.",2933,335500,00.html

The NYT is not afraid of publishing classified information if it hurts the current administration, and the country, but it does not publish classified information that shows how effective the administration has been at preventing attacks. Like the Post, NYT couldn't be biased could it?

BHO wants the support of all. Democrats and the loony left set a wonderful example of how to support a president for the past 8 years. I think I will follow their example.

"With great power....
comes great responsibility." Ben Parker

Considering how irresponsible the baby boomer generation has been, I am not surprised the left wants to quit.

Quit? How?
Hey Bub, we're stuck in the tar. We couldn't get out if we tried. What will happen is that Iraq's Shiite government will keep us on for just as long as they think our presence will be advantageous to them. After that, we'll be put out.

If you're pointing with pride to the number of people we've killed since 2001-- some of them undoubtedly Al Qaeda-- just think how many more we've created by bombing all those weddings and villages, how many carloads of ordinary family members we've shot up, and how much of the Middle East has gone from quiet to deadly while under our benevolent reign. That has created far, FAR more Al Qaeda than we may have killed so far. The further we go, the behinder we'll get.

It's a fool's errand. You should go back to the first good book on the advantages of waging wars-- by that old soldier, Miguel de Cervantes. He depicted it as tilting at windmills, thinking they were dragons.

What anti-American, anti-Bush garbage
Examples could be made that the opposite is true in each case. I guess anyone can believe one side or the other depending on what data is cherry-picked.

The war was over in 2003, the occupation is now nearing fruition, The terrorists are the ones lacked in a quagmire in the middle-east and getting pounded - they are unable to focus on any objective outside the sphere.

The facts are simple, the U.S. remains in a strong position as long as Iraq does not revert to a theocracy and continues to improve as a democracy. The American military has proven quite capable thank you, and has been able to maintain their hold in Iraq without 500,000 troops. The U.S. has maintained its alliances and even strengthened many of them through dissent. I could go on, but the point is that the only thing we'vre really lost is money and soldiers and that is a great enough burden to bare.

No, none of your boot-licking liberal points are true; but there are many points to be learned from for sure.

Ah, sweet victory
You really ought to look at the book. There's no more impartial or informed an observer that can be found than Peter Galbraith. He's as Establishment as they come, and has been visiting Iraq for many years.

Revert to a theocracy? The Shiite theocracy is the team we've been backing. They and the Kurds constitute the entire government. And what do you think the team at the center of Iraq's ruling coalition is called? It's the Supreme Council of Iraq.

Galbraith does give you a wealth of fine detail as to the impasse that has been forged between these Shiites and the Baath remnants we've also been backing-- the Awakening Dawn. Events have come about that preclude the possibility of democracy in the foreseeable future. Our erstwhile allies have achieved a Mexican standoff.. and neither are about to blink.

What the American forces have proven is that with massive high tech firepower, it is possible to break things and hurt people on such a large scale that no one will confront you directly on a field of battle. That's all. The problem is, Iraqis have had several thousand years of experience defeating problematic outsiders by other means. And they have greatly more effective means than putting force before force.

All sides know the US will be leaving some day soon.. perhaps next year, perhaps in 2010. Or in 2011. So we have become irelevant to their politics. All factions (except the Kurds) are now planning for a post-occupation Iraq. Those Kurds are the sole "alliance" that wants us to remain.

Bottom line, the Iraq we invaded posed no actual threat to us. But the Iraq we leave behind will be a focal point for a Middle East forever beyond American control. And predominantly Shiite.

The uses of analysis
"Running from Lebanon, running from Somalia, running from Iran demonstrated that the civilian leadership were not willing to do what it would take to win."

In Lebanon and Somalia, it was easily determined that we have nothing to be won. So we cut our losses and left.

In Iran we didn't run. Our proxy fell in a revolution, and we decided (wisely) not to attempt reinstating him. He was old and ill, and universally despised by his people.

If the world were ever to become convinced that America's only goal was the military conquest of the planet, they would band together and destroy us. It follows from that observation that we stand to gain more at the peace table than from further conquests. Conquests, I would remind you, that we can no longer afford unless our creditors are willing to let us proceed.

Where do you get "quit"?
Wants to quit? There's nothing further to be gained by prolonging our presence in Iraq. They're not going to like us any more, the longer we stay. There's no way they're ever going to be more like us, the longer we stay. The people who want us are few, while the people who want us gone are many. All we can do there is expend more lives and wealth.. and make more enemies.

There are things that just can't be attained by power alone. Our goals were never well defined. We just went in with some stupid thought of "winning". It's like starting a fire, and going in with the notion of winning the building.

What we could do, on the other hand, would be to try a fresh approach.. one premised on the idea that the US can gain more by winning some hearts and minds than it can by killing more people, and breaking more stuff.

That half of America that thinks in terms of fighting, winning and so forth needs to grow up. The world is growing very tired of fighters and winners.

The Left wants to quit
..and always has. 'Cut & Run' is still 'cut & run' no matter how much you try to spin it otherwise.

"The world is growing very tired of fighters and winners."

yeah, because most of the world is comprised of the losers in that equation. Doesn't change the fact that military force solves more conflicts than any other factor. They are like negative TV ads at election time -- everybody hates them, but they work. Just ask Vladimir Putin for his views on this subject. Ask the Georgians as well, while you're at it.

Hey, Bub, when has the middle east been quiet?
If the USA were not there, and had never intervened, Kuwait would be a province of Iraq. Tens of thousands more Shiites would have been killed by their government.

Sadaam had a nuclear program ready to begin again, and since Iran was building nukes, Iraq would have to as well. Libya would have nuclear weapons.

The middle east would have been real peaceful with Al Queda camps all over training their followers.

And if the USA would have just left those peaceful Arabs alone, they might all be toast as Israel would have had to deploy nuclear weapons to defend themselves.

Graveyards are very peaceful.

"The people who want us are few, while the people who want us gone are many"
That's not what I hear from the US soldiers on the ground.

They are the ones who see the real people every day.

Too bad you don't pay attention to the poor and the helpless that US forces are helping every day.

Unintended consequences
""But your most disgraceful case was in Somalia; where— after vigorous propaganda about the power of the USA and its post cold war leadership of the new world order— you moved tens of thousands of international force, including twenty eight thousands American solders into Somalia. However, when tens of your solders were killed in minor battles and one American Pilot was dragged in the streets of Mogadishu you left the area carrying disappointment, humiliation, defeat and your dead with you. Clinton appeared in front of the whole world threatening and promising revenge , but these threats were merely a preparation for withdrawal. You have been disgraced by Allah and you withdrew; the extent of your impotence and weaknesses became very clear. It was a pleasure for the 'heart' of every Muslim and a remedy to the 'chests' of believing nations to see you defeated in the three Islamic cities of Beirut , Aden and Mogadishu.""

"In Lebanon and Somalia, it was easily determined that we have nothing to be won. So we cut our losses and left."

We did have something to win, our reputation in a part of the world that respects power.

You talk of 'conquest'. In all the wars the USA was involved in since WWI, not one acre of land was added to the USA. As a matter of fact, the USA returned sovereignty to the Philippines and many other Pacific island states. Some conquest!

Off topic but otherwise important
Just to remind folks. Earlier this year, there was a 'stimulus package'. Remember? Those checks mailed out to taxpayers?

Also remember that Roy stated and kept on defending no matter what actual history has shown that the stimulus checks would work. That people will spend it, that businesses would int turn sell more and then expand to meet 'further' demand.

Remember that many of us (myself included) predicted otherwise. We stated that the vast majority of people would use it to pay off debts/bills or just put it into savings. Hence, there would be no huge (or even major) demand in sales and that businesses would not count on it nor make expansion plans because of it.

Roy basically took the position that we were wrong.
Well, Roy. The Univesity of Michigan did a study on what people did with those checks and have concluded most put them into savings.

"Personal saving was $45.6 billion in May, compared to $48.1 billion in stimulus payments in May. Personal saving in June was $23.0 billion, compared to $27.9 stimulus payments in June. In stark contrast, personal saving averaged only $2.9 billion per month during the first four months of the year."

The exact same thing occurred in 2001 with those 'stimulus' checks.

As a macro-economic policy, sending out stimulus checks -- while politically popular no doubt -- doesn't do a fig with regards to boosting demand and thus 'pump priming' the economy as you Roy and others constantly claim it does. It does not even close, even.

So, the next move is Roy's. Either he accepts he was wrong or he makes excuses and dodges the harsh proof that proves he's wrong.

I am just fulfilling my promise that I'd hold him accountable back then as I am doing now.

How is this relevant for today? Well, Obama wants to follow in FDR's footsteps and launch a HUGE stimulus package. He will fail as Bush's TWO 'demand side' stimulus packages have failed. As FDR's failed.

But there are plenty of Roys in the world who will NEVER admit to that. Ever.

How it pertains to the topic
The democratic Congress betrayed South Vietnam, Clinton ran out of Somalia and did nothing when US citizens were attacked in Africa and Saudi Arabia and Yemen.

BHO campaigned to cut and run as does Roy.

Proof and results don't matter when all that matters is how you 'feel' about it.

I see things differently
I hope this view is wrong and so should you. I will agree that there is a lot in place that could go miserably wrong, but there are a lot of things that have gone right as well. All is not lost, except in your obvious glee to see it go terribly bad.

I agreed with you back in 2003, Iraq was the wrong place at that time, but I also saw that we were going to have to deal with them eventually. That is something you have always denied in spite of the evidence to the contrary that existed at the time and has been proven since.

Oh but there is
you said - "Wants to quit? There's nothing further to be gained by prolonging our presence in Iraq."

If what you posted above is true, the U.S. need to stay for a long while. I don't believe it is and I'm for a slow and steady draw down of forces. However, if the unholy alliances in Iraq are going to make it some satallite of Iran than that must be prevented.

No roy, it is the half of America that believes in everything can be solved with flowers and good vibes that needs to grow up. That sh!t didn't work in the 60s and 70s and it will not work now. The world is laughing and rubbing their collective hands at the prospect of a toothless America and U.N.

Obama and the dems are threatening to return us to the hand wringing and whinning days of Jimmy Carter. I guess you believe America is better off as a doormat than as a world power.

Charity Begins At Home
One old proverb goes, "charity begins at home" - that is, love expands outward from basic units of society.

The imperatives presented in this article are sound and wise. The only problem is spreading them in a land across the sea when they are in peril at home.

The new administration is already circulating plans as the leftist Chicago illuminati start relocating to D.C. Talk of confiscated 401k accounts, an additional stimulus package, immediate repeals of Bush's executive measures and more are floating on the airwaves.

It seems private property, legal justice, and low taxes are a good plan: just not the plan Americans voted for this year.

Charity is voluntary
The USA depends upon world trade.

Tyrannical states that disrupt global trade create a national security risk for the USA just as the Barbary pirates did.

The need to destroy Iraq
You saw we were "going to have to deal with them" eventually? You really should read a history of our involvement in Iraq.

Were you aware that the first occasion we meddled in Iraqi affairs was when our CIA sponsored the assassination of Abdul Karem Qassim, back in 1963? It was the United States who first brought the Baath to power. So they were our people, and when Saddam came to power over the rest of them, in 1968, he was our guy too.

This is the kind of thing that has happened every time we decide we have to "deal with them". The CIA overthrew a very moderate nationalist in Iran, Dr. Mossadegh, and as a result we ended up with the Supreme Council in charge. Our meddling in Arab affairs has caused them immense suffering ever since the day we took over from the British.

Iraq today is an ungovernable mess. Given a disastrous history of meddling, first by the British, it would probably have been that way anyway. The colonial experience, with its artificially drawn borders, its corruption and theft of resources by powerful Westerners, has not been kind to any country. But this time around it's the United States who owns the chaos. We knocked the old regime flat, which to most people was a blessing, but then we failed to rebuild it in any image. We just left the mess in place, through a lack of interest in nation building.

But you say you have evidence that makes the destruction of Iraq to have been a strategic necessity ( spite of the evidence to the contrary that existed at the time and has been proven since). Maybe you should show me that evidence.

Ruling through terror
"..if the unholy alliances in Iraq are going to make it some satallite of Iran than that must be prevented."

You're woefully uninformed on this one. It was the United States that brought the pro-Iranian factions to power. It is they who maintain us there, and they who will decide whether and when we are to leave. They are the government we put in power.

The ruling coalition is made up of members of SIIC (formerly SCIRI) and Dawa, two Shiite groups Iran sheltered during the Saddam years. Iran sponsored them and armed them, and we placed them in power when they showed up in Baghdad.

Both brought with them their own death squads (militias). And it is these militias that form what we currently call the Iraqi "armed forces". Sunnis (which in fact are mostly "former regime elements") are restricted to forming a few groups in the Sunni areas. They aren't allowed in Shiite areas.

The units of each group freely execute members of the other branch of Islam. If they're mostly quiet now, it's because the work of separating the two communities has been nearly finished.

Meanwhile in Kurdistan, all but independent, Kurdish death squads roam freely while killing Yazidis, Christian Chaldeans and Assyrians, Iraqi Turks and Arabs, to make the area free of anyone but the Kurds.

That's what we made. Now in your view we have a choice of either becoming "doormats" or continuing on the path of crushing weaker nations to show off our brutality. Isn't this precisely what we used to think of the *****? That they were militarists out of control, bent on world domination? And that nothing would stop them but force?

You know that it is. And I am not one of those. Only I'm trying to stop you through peaceful change.

Interfering in the affairs of others
" If the USA were not there, and had never intervened, Kuwait would be a province of Iraq."

No. If the US had not initially intervened, back in 1963, by backing a Baathist coup that killed Abdul Karem Qassem, Saddam would never have come to power. Iraq would have become a multi-ethnic republic built along socialist lines. The national wealth, of which there was a great amount, would have been used in the development of the people. Qassem was a good guy.

"Tens of thousands more Shiites would have been killed by their government."

Tens of thousands of Shiites have been brutally murdered since 2003. And tens of thousands more of Sunnis have been murdered by the death squads of the current government, in their guise as the police and the army.

At every turn, our meddling has made things worse. It's time for the Iraqis to solve their problems by themselves.

Neither a borrower nor a debtor be..
I felt my ears burning, so thought I'd better check out what was being said about me.

I don't recall being very strongly in favor of a stimulus package last year. I do recall telling you how it would work-- that much of the money would be spent and some of it used to retire debt. And I thought both of those would be useful goals.

Your description of "savings" brings up an image of people stuffing money into socks. In fact what happened, overwhelmingly, was that people overly deeply in debt quite wisely elected to pay down that debt.

And I think, in retrospect, that certainly must be helping them through this current crisis, where we have a debt panic, and all of a sudden people are losing their jobs just when all the debts are due.

Of course, we had a very different situation back then. The entire financial world wasn't melting down yet. So am I in favor of a stimulus package today? That would depend entirely on how it was structured.

I very strongly favor targeted stimuli. Throwing money out to anyone and everyone doesn't do all that much-- in time, everyone has to pay it all back-- but extending unemployment benefits would be a very good idea. It would target the relief to those who really need it. And maybe stave off a fresh round of foreclosures due to job loss.

So maybe you should give us a link to my actual words, way back when. I'm sure you've kept a link on file.. otherwise you wouldn't be so ready to invoke my words from yesteryear. We can both take a look, and see just what I used to think about stimulus packages.

Here's another thought. If last year's stimulus was mostly used to pay down debt, wouldn't that have had a salutory effect on staving off the current crisis-- characterised as it is by too many bad debts? In fact it would have injected much-needed funds into the coffers of overextended lenders everywhere-- by allowing their debtors to pay them down.

Of couse, the socialists will create utopia.
Just as they did in Russia or Venezuela or Cuba or Zimbabwe or....

The definition of 'savings'
"If last year's stimulus was mostly used to pay down debt"

They mostly put it in savings, with debt payments second.

The definition of savings is people putting it in savings accounts. The Fed tracks that data and the University of Michigan looked it up. That is why I quoted it.

And it wasn't last year Roy, it was THIS year that you tooted the horn that it would work and you kept denying it wouldn't when myself and others presented historical proof that predicted otherwise. It was a huge thread. You even accused me of not understanding lower-middle class people as one of your 'arguments'.

"Throwing money out to anyone and everyone doesn't do all that much"

Funny, you were strongly holding the OPPOSITE position.

I don't have the links and I can't search the forums with the search tool, unfortunately. If I find them, I'll post them here.

Anyone else care to back me up on this? Roy's 'memory' is failing....or mine is.

The game is stalemated
Your belief that military force can solve things flies against all the lessons of history. The gore and destruction of today's wars ALWAYS set the stage for the wars of tomorrow. There is never any defeated population that consents to be losers forever. They always rest and recover until they can start the next round of the wars for liberation.

Putin, for example, hasn't won any meaningful victory. The Chechens and those like them will end up biting him in the ass when the next opportunity arises. So let's not glorify his barbarity toward the minorities of the Caucasus.

In Iraq we have destabilized a situation where one minority ruled cruelly over all the others, and substituted an unstable status quo where they can never be far from civil war, because no one really rules. If a calm ever breaks out it is temporary at best.

The center of the country was quiet because Al Qaeda was "on the run". That was last week. This week, more car bombs and death.

The north is quiet because the Kurds are in control. But if they consolidate their gains, by declaring independence, the Turks will rush in. And if they consolidate their gains by seizing Mosul and Kirkuk, the Sunnis will rush in.

The south is the most stable now. And that is because a Shiite theocracy has come to power. Women appearing on the street with their faces showing are actually being killed. It's not that far from Taliban rule, and will only get more so once the last of the Brits have gone.

There's nothing we can do about any of this. We don't have the resources or the understanding to change the minds and lives of 26 million people at war with one another. Wisdom comes with the decision to recognize that truth and just walk away.

It's just like Vietnam, where we got to this stalemated point in 1968 but, due to political considerations, kept on shedding blood until 1975. The extension of our stay then didn't do a thing other than to prolong the agony.

It was another of our unwinnable (and immoral) wars.

"The north is quiet because the Kurds are in control."
Why are the Kurds in control?

It couldn't have anything to do with the use of military force could it? US and UK forces protected the Kurds after the first Gulf War.

"Putin, for example, hasn't won any meaningful victory. "

His use of force in Georgia had significant effect in Poland. Poland, understandably, doesn't trust Russia and Poland wants some backup. NATO can't provide such force, but the USA can.

Are you sure about that?
You're telling me the "savings" being measured amount only to money being put into savings accounts. Not 401K contributions, not stock or bond purchases, not paying down debt. Are you very sure? Nobody puts money into a svaings account any more-- maybe a CD or a money market, but not a savings account.

"According to the BEA (the relevant gov't agency), personal saving is defined as "personal income less the sum of personal outlays and personal current taxes". No mention of dynamism or choice. In fact, on page 9 of this paper outlining their definitions and methodology, 401k contributions are explicitly counted in wage and salary accruals (i.e.: a part of personal income)."

Household savings = household income minus consumption. Until I see something official to the contrary, I'll believe that the difference amounts to people paying down debt. You would be aware, of course, that very few Americans even have "savings accounts"? What they have is $10,500 in revolving debt per family, plus if they're lucky, various investment vehicles like IRAs or mutual funds.

Re my steadfast belief that economic stimulus packages ALWAYS are good, I don't recall ever having said anything like that. It wouldn't be me, for starters. I tend to think for every situation there's a unique remedy, and a good thing one time may be a very bad one the next.

And it's true, I was modestly in favor of last year's stimulus as a response to last year's crisis. Or, as you say, earlier this year. It seems like time is going faster, or slower, or something. Anyway, months back.

I'd be in favor of extending unemployment benefits this time around.. because tens of thousands of Americans are now losing their jobs. And if they lose their homes too, that doesn't do the country any good. But an untargeted stimulus, doled out to everyone rich, poor or in between.. it's a wasted effort.

Savings, Roy.
1) Read the article. It quotes the Bureau of Economic Analysis and it was consistent with the results of the University of Michigan Survey of Consumers.

2) The stimulus checks didn't go into people's 401ks. Maybe into their IRAs. So why count the 401ks?

3) You're just trying to weasel out of the main point: You said people would SPEND it on consumables and then, as a result, the magic of 'pump priming' would occur. It did not.

4) Where the economy was before the 'crisis' does not bode well to your point of view either. If the pump-priming had worked, unemployment would be going DOWN right about now as businesses' expansion plans kicked in from earlier this year. There was no such expansion, because the 'pump priming' didn't happen. It is a bogus concept.

It's hard to tell when you're being sincerely boneheaded and when you're just pretending to be. The manner of conquest has changed greatly over the centuries.

Modern conquerors no longer own the property. That obligates one for all the expenses involved in ruling the population. What we do now is economic conquest-- the neoliberal colonization of weaker countries through proxies like the IMF, World Bank and WTO. We put into place transnational legal regimes that allow mutlinational corps to extract mineral wealth at pennies on the dollar. Thus the initial plan to attack Iraq because of its oil. And while that one didn't work out as planned, most of the other plans have.

We do own Indonesia, for instance, in that the extractive wealth flowing from that country benefits our businesses-- as well as those of the other colonials, China and Japan. And so we fund the Indonesian Army to do our dirty work. Because we find that to be cheaper than using our own army.

If you want to find out which countries we own, you can look up either of two databases. One is the list of military bases abroad. The other is the list of recipients of foreign aid.

Because in reality none of those are recipients of anything like foreign aid. That is money loaned to those nations to put them in our debt. And most of it never even leaves America. It goes into a fund dedicated toward earmarked projects, from which it gets paid out to US contractors to do work abroad. What the locals get to do is to work hard, trying to pay back what the US government paid to US industry for doing work the US controlled IMF decided needed doing.

There are studies and then there are studies
This study, from an earlier rebate program (2006) seems to point toward a different conclusion:

"In the first study, Johnson, Parker, and Souleles (2006), the authors looked at data on household expenditures from the Consumer Expenditure Survey. They found that, in terms of spending on nondurables, a little more than one-third of the average rebate was spent in the first quarter after receiving the rebate, a result closely matching the direct survey results of Shapiro and Slemrod. However, in contrast to those results, Souleles and his coauthors found that more than two-thirds is spent by the end of the third quarter after receipt."

I would still maintain that what the government measures, under the rubric of "savings", is the difference between after-tax income and expenditures. Thus the principle portion of paying down debt would be an expenditure, while the interest portion would end up in the "savings" category. At least that's what they say they are measuring.

And what I do recall saying was that people would spend a lot of their rebate and use the rest to pay down debt. I'm still googling, but I've yet to find anything that tells me that did not in fact happen.

I will agree, if TCS had a better organized archive it would be a lot easier to look up our past words. But they don't. So I see little need to quibble endlessly on that particular point.

I would offer this, though. Your last sally was "If the pump-priming had worked, unemployment would be going DOWN right about now as businesses' expansion plans kicked in from earlier this year. There was no such expansion, because the 'pump priming' didn't happen. It is a bogus concept."

That was the justification for it. But pump priming on the order of a hundred billion failed to do justice to the immensity of the looming debt crisis. We've dumped far more than that on the fire since, but haven't even begun to make any headway in blowing it out.

So the failure of the stimulus doesn't point to any failure in the theory of priming the pump. All it says is that one gazillion dollars in loans, spurious paper sold on those loans, and all the other hedges and derivatives spun from the chaff have gone bad. And nothing less than the miraculous appearance of one gazillion dolars in sound money will alleviate the problem.

In other words, we are currently up the creek.

Free trade is economic conquest?

Cut the crap
1) The money didn't go to WalMart or was spent elsewhere on new consumption. It was saved or debts from past consumption were paid off. Your attempts to spin this to the contrary just won't fly.

2) According to your 'theory', the effects of the 'pump priming' HAD IT REALLY WORKED AS YOU CLAIM would have shown a positive impact right up to the point the financial meltdown occurred, correct? So why didn't that happen? If you can't answer that, then that proves my contention that the whole entire pump-priming thing is nonsense. In fact, REAL history proves it.

Found a posting that is close

Shows that we were having that discussion for several weeks, apparently. I'll dig back further.

Here's a TCS Daily article that backs me up exactly. Somehow, I don't think it got published to us. There are NO comments.

BINGO! Found it
Found the smoking gun:

My fav Roy quote that has been thoroughly dksproven:

"You really do live in a different zip code. Sorry, I'm very familiar with the spending habits of the bottom half. They're a case study in suppressed demand due to inadequate access to funds. When they get a little cash, they spend it on necessities.

The more fortunate among them may use it to pay down debt. But even then, the money shows up as a credit on someone else's ledger. The money is in no case just socked away. That only happens among the Upper Percentiles.

This is the reason pump priming gains in effectiveness the more it goes to the bottom dwellers. I would advocate first paying those eligible for EITC and those getting Social Security. Virtually every dime going to those populations ends up in someone's cash register. And that's the kind of stimulus that keeps companies from cutting back their work force."


Time to step up to the plate and be a man, Roy.

It doesn't work because Keyne's Law violates Say's Law
"Finally, the (Keynesian) proponents of the bill emphasize the need to increase spending, in order to increase consumption, and ultimately GDP. However, economic growth occurs because saving and capital accumulation increase, leading to intensified production and output, and thence to increasing real incomes. To say this differently, Mr. Lazear, the President's chief economist, says increased spending will effectively engender increased output, which will "create a situation where the economy can grow further in the future". This is sometimes known as "Keynes' Law", and is in fact the obverse of Say's Law of Markets. Say's Law states, correctly, that output, once created, affords buying power in other product markets to the "full extent of its own value." The source of wealth, therefore, lies in production. Rather than vitiating Jean-Baptiste Say, Keynes could have learned from him: increasing consumption is an effect, not a cause, of economic growth.

To the non-economist, this is a subtle distinction, but much error has been spawned from the spectacular fallacy of Keynesian spending which, as Keynes himself erroneously wrote in 1943, has the capacity for "turning stones into bread." In fact, policies which impel spending at the expense of saving are harmful to GDP growth just as surely as eating today's seed corn hurts next year's harvest."

My theory?
1. Funds that go to pay off past consumption do go into someone's pocket. And from there they must go out again to do further work. So these funds do act as a countervailing force to the forces that freeze investment funds. They constitute an infusion of investment funds, ready for work.

2. I like the quotes you put around my "theory". In fact it's not mine but Mr Keynes'. And it has been demonstrated innumerable times. It works both in the real world and the world of theory.

But I realize I'm failing to deal with a simplistic mind. For you, either an action must be totally successful or it fails utterly. And in real life, things just don't happen that way.

Certainly that proportion of bailout funds that was spent in stores on new purchases provided income for both the investors and the employees of those stores. And a third of it came directly back to the federal government in the form of income tax receipts.

So then, the part that got spent did useful work. And the part that paid down debt also did work. The proportion that ended up in old fashioned savings accounts did its own kind of work, providing liquidity during the bak crisis that ensued.

Given the size of the stimulus, it could do no more than alleviate a problem that otherwise would have been worse. But it did do positive work. I guess you're not familiar with vectors in a multivariable problem.

But I can see already that none of this is cutting it with you. So please disprove some link in the following chain:

A consumer buys something. Part of the money goes toward wages, part toward the manufacturer, part toward the owners of the store and part toward the various governments that tax transactions. All benefit from this spending of money.

Therefore when the money is not there to get spent, all suffer in some degree. General Motors, for example, is almost a thing of the past as no one is buying their products. The workers, the owners, the consumers and the government are all sufering as a result of this lack of sales.

If money is produced and enters the system, circulation improves. And if it is invented by fiat, and circulates three or four times, 100 cents gets returned as revenues for every dollar invented.

THEREFORE: the only thing that is required to avoid an inflationary spiral resulting from this expansion in the money supply is fiscal discipline. The government must retire the new money after it has been used.

I'll await your refutation.

You think THAT proves your case?
Interesting. The comment you found reflects my opinion today, as it did then. It in no way contradicts anything I've been saying. And in no way does it support anything you've been saying.

The lower one goes on the totem pole, the more people run out and spend any found money they come across. One rung up, they use it to pay down debt. It's only as you near the top of the ladder that they sock it into investments. They only do that when their demand for more personal goods has already been satisfied.

But people with bills to pay? They pay their bills.

I don't see your point. At all.

Nice theory
But that's all it is. FYI, we're not growing right now. We're shrinking. And what we need to do is to arrest the losses in economic circulation, preparatory to getting the engine started again.

If we were at the point where we were trying to grow the economy faster.. and if we found that the reason it was not growing faster was that it was starved for investment funds.. in THAT case we would infuse it with fresh investment funds.

But that isn't the case. One prime cause for the current slowdown is the same as it was back in 2002: inadequate consumer demand. So in this case, before we can begin to "grow" the economy, we must first stabilize the patient.. by allowing consumers to buy enough goods to keep industry in the business of making those goods. That's the only thing that's going to actually save jobs.

In other words my opinion is that one has to be a total dolt to insist in abstract theory when the reality of what's going on, and what is needed, is staring us all in the face.

Our object now is not to grow. It's to increase the circulation of funds throughout a stalled economy.

Winning the War: Phase 3
Before we can figure out how to win in Iraq, I guess the first thing we should do is to define what is "winning".

Our Fearless Leader defined it thusly, in a speech in August, 2007: "For all those who ask whether the fight in Iraq is worth it, imagine an Iraq where militia groups backed by Iran control large parts of the country."

Toward that end we have encouraged the elected government of Iraq to form a strong, central military force. Of course, it turns out that that coalition is dominated by SCIRI.. the Supreme Council for the Islamic Revolution in Iraq. And this, if we're unfamiliar with that group, is a party of Shiite exiles who spent many years in Iran.. and who enjoy Iran's backing as their favored party in Iraq.

And SCIRI has a militia.. the Badr Corps. Of course, now it's mostly known under another name.. the Iraqi Army. So in sum, the Iraq we are currently allied with is a client of.. er.. Iran.

And Iran hasn't had to do a single thing to bring this about. They've been trying to dominate Sunni Iraq for the past 350 years and more.. without success. And victory has been handed to them without the need to expend a single life. Or riyal.

Currently our main goal is to promote a strong central government in Iraq. And this would be the same as Iran's goal. As they dominate the central government they would obviously prefer that it be a strong one.

So.. Phase Three? That would be figuring out some way to explain all this to the American public.

Oh come on
I will not dig this up again, do it yourself. Iraq was playing musical chairs with inspectors, at the same time the so called "international community" was pressuring the U.N. to lift sanctions on Iraq because it was "Killing Iraqi babies". The evidence at the time suggested Saddam was holding out, but the pressure by left-wingers around the world was still going to push the U.N. to lift all sanctions.

Recovered documents showed this was exactly what Saddam was waiting for. As soon as the sanctions were lifted he had an immediate plan to begin re-constituting his WMD program including the nuke program. Yellowcake that was presumably never sold to Iraq was found there - huh, imagine that!!

Yeah, eventually Saddam was going to force that same "international community" and the U.N. to deal with him. That likely would have meant the U.S. and he would have been in a much better position to defend with possibly nukes and probably, at least, "dirty" radioactive weapons. Now that is a real delightful prospect.

We've had this discussion before.

That's right. You didn't then as you don't now.
"It in no way contradicts anything I've been saying. And in no way does it support anything you've been saying."

Exactly. You claim that the stimulus would actually stimulate the economy. Keynes Law as it is called. I presented past proof of examples of that failing and predicted that you would be wrong now as others were then - that the stimulus checks would not do what you said they would.

I am proven correct. You were proven wrong. That is the whole point. Of course, I now know that you won't admit to that. Your worldview is too important.

Never admit defeat
You're being tendentious to the point of tedium. Yes, undeniably, when money is put into the hands of people who need it, they are going to either spend it immediately (increasing demand for products and thus stimulating the GDP), pay down debt (putting money into the hands of lenders, to be re-lent) or saved/ invested (presumably, where it can fill the sails of soft financial markets). In each case, it does work. And the lower the income of the group being targeted for relief, the more effective such a stimulus will be.

Ideally it would all go to people who can't buy things for the reason that they have neither the money nor the available credit. In such a case none of the funds being issued would be "saved".

In the face of that obvious condition it's obstinate and childish to insist, as you do, that "I am proven correct. You were proven wrong." I found a problem fairly quickly with your so-called proof, and you haven't given me any adequate interpretation that makes it correct.

If the stimulus that occurred didn't have a dramatic and obvious effect, it could well be that it was insufficient. And I would incline toward that interpretation for the following reason:

1) The underlying problem, barely glimpsed at the time the stimulus was enacted, was a fundamental and fatal overstatement of the valuation of the absolutely huge market in derivatives and exotics.. just a portion of which is the $62 trillion-with-a-T market in credit default swaps. And,

2) The size of the actual stimulus was something shy of $62,000,000,000,000.00.

In short: economic stimuli are a fine cure for certain problems, and especially for ordinary economic downturns that are characterised by poor demand and slow economic activity. But they are not suitable for the immense problem that it turned out we actually had.

Wandering off point
You're getting away from your point there, good buddy.

You began by saying that we could only "loose" in Iraq if we quit. But if you glance down to the bottom of this page and read my comment "Winning the War: Phase 3",you'll find that all the money and lives we have spent so far there have been squandered, and have only brought about a victory for our presumptive arch-enemy, Iran.

Poor planning did all that. The troops did what they were told to, and continue doing so. But it's not helping. So then, as you no doubt have heard before:

When you find you've dug yourself into a hole, the first thing to do is to stop digging.

I will never let you off the hook for this BULLSH*T, Roy
"In each case, it does work"

NO. It does not! The data proves it. Both historical and in this particular case WHERE YOU SAID IT WOULD.

So, that not only gives me the right to say you were wrong then. But it also gives me a right to call you a total LIAR now.

Stop lying, Roy. I mean it. You ARE lying. I don't believe I've ever accused of that before (but I've come close a few times). But now, you just handed over all the ammo I needed to declare you are doing just this and YOU REFUSE TO EVEN ACKNOLEDGE that.

"I found a problem fairly quickly with your so-called proof"

THEY DIDN'T SPEND IT ROY! THEY DIDN'T SPEDN IT! There is no 'problem'...other than your outright DENIAL.

"In short: economic stimuli are a fine cure for certain problems, and especially for ordinary economic downturns that are characterised by poor demand and slow economic activity. But they are not suitable for the immense problem that it turned out we actually had."

NO ROY. Back then there was not 'problem we actually had' and it had nothing to do with YOUR insistence that the stimulus would work AS YOU SAID IT WOULD prior to our 'problem' surfacing in Sept. You did not distinguish about 'certain problems' either. You declared that THIS stimulus would WORK specifically BECAUSE people WOULD spent the money. You even went as far as to declare "I don't know what zip code you live in.." as some bogus reason why it couldn't be otherwise.

YOU ARE FULL OF CRAP. This is not a disagreement between equally competing valid points of view. You are just full of crap.

You suggested Iraq would be a happy socialist state if the bad old USA ...
would have left them alone.

The Cold War world was much different than today.

What was the USSR doing in 1963 around the world?

"Khrushchev claims to have a 100-megaton nuclear bomb "
"U.S.S.R. informs John F. Kennedy it's withdrawing several thousand troops from Cuba "
"Syrian Arab Rep Revolution Day - Military coup in Syria "
"2 Russian reconnaissance flights over Alaska"
"John F. Kennedy offers Israel assistance against aggression "

That's how it takes place, yes
marjon.. It would be useful if you could flesh out your comments with more than a mere five words. But yes, economic conquest is today disguised under the banner of Free Trade, in the fine print.

The handful of concepts you define as being "free trade" are certainly good precepts.. although not invariably appropriate to any given situation. But the problem is, the United States does not actually follow Free Trade policy. The FTAs (free trade agreements) it implements are heavily tilted in favor of American gains. And at the expense of developing world nations. The idea is to put them at a perpetual disadvantage, so they never become competitors.

Note: this is not just America bashing. The European Union does exactly the same thing.

There are certainly clauses in the FTAs we offer developing countries that are favorable to them. Otherwise they would never sign them. But implicit in them is a threat.. that if they do not sign them we will isolate those nations to the point they wither and die.

And this is no idle threat. We have done just that, many times.

A good example would be cotton. Nations agree that raw cotton is to move across all borders without payment of any tariff, and to be accepted by all nations without duty. But there's nothing in any agreement precluding subsidies.

As a result, heavily subsidised US cotton gets dumped on the world market below production cost.. at rates so low that not even Malian peasants can compete. As a result, Africa and India's cotton crops can't be sold. Those peasants who could be growing the cotton now just scrape by, growing subsistence crops.

You need to support your argument better
"NO. It does not! The data proves it. Both historical and in this particular case WHERE YOU SAID IT WOULD."

You're getting very excited. But this is a place where we need more light, not more heat.

The information you provided depended for its thesis on the data being marked "savings" as being actual savings. I.E., money seuestered from use. But this is not what the government measures. It measures net, after-tax income against purchases.

This the column marked "savings" really includes repayment of debt.. which does form a major part of the use to which the stimulus was put.

My comment explained the positive purposes to which money used in that way could accomplish. And my comments months ago, which you are vainly searching as we speak to catch me out in a single word, did maintain that some of the stimulus would get spent immediately, while other of it would be used to pay down debt.

I find it preposterous, in a land where the average family in America owes over $10,000 in household debt, to imagine that the overwhelming majority of this money has just been put in a sock. And your arguments to that effect fail to move me.

You could tell me you've found proof that everyone took the cash out in the back yard and burned it, and I would still be skeptical. Just telling someone, and I quote you, "YOU ARE FULL OF CRAP" is insufficient to carry the day.

But feel free to give it a fresh try, this time with fresh arguments that counter my own.

Sadly, I'm taking the time between now and Tuesday to visit the beach. And this is a destination where I don't stay plugged in. But if I remember, when I return I'll revisit this page once more, and try to seriously consider your every argument.

Here's a useful hint: find and track seasonally adjusted consumer expenditures before, during and after the period when checks were being issued. That would form a body of evidence ("proof" being a clumsy word) I'd have to take pretty seriously.

On "proof"
This has been bothering me a little. You keep using the word "proof" where it does not apply.

Certainly your instructors have informed you that "proof" is a concept whereby mathematical-- or even economic-- concepts may be logically proven.

But the idea only refers to the world of the mind, where some idea may be totally right and another totally wrong (disproven). This approach has no place in the analysis of the real world.

We wet-life beings live in a very sloppy place. And some ways of looking at what we do with our time are kind of right, some pretty close to right, and some kind of wrong. There is no 100% proof of how we behave.

I am absolutely certain that some person out there has taken his stimulus check, gone down to the bank and put it into a CD. Maybe it's just til next month when he goes in for surgery, maybe it's to provide a cushion against the indefinite future. But the fact that some people will be doing this does not obviate the notion that lots of other people will be buying drugs with it, putting it on the lottery, having their kids steal it or losing it in a house fire.

Overall, we may safely assume most people will put this found money to some purpose. I think I personally sent it right back to Uncle Sam to pay my quarterly taxes. And if I did so (and this should strike you as being important), by doing so I freed up other money to be spent on purchases.

Do us both a favor. Don't talk as though anything has been proven. We can show each other evidence, and some of that evidence will surely contradict other of that evidence. But none of it constitutes absolute proof.

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