Chris Duquette recently panned the arguments that Joseph Stiglitz put forth in The Three-Trillion Dollar War claiming that the Iraq War has cost, well, three trillion dollars. ("The Price Of War? Obscuring the Debate with Fuzzy Math," Washington Times, 9 May 2008.) However, Duquette's criticism does not stand up to scrutiny. First off, let me point out that although I have heard of Stiglitz's book, I have not actually read any of it, and I have not made up my mind about Stiglitz's arguments. OK, now let's get to Duquette's criticism.
First, Duquette denies "the charge that the Iraq war has boosted the price of oil on world markets." To support his argument, Duquette merely points out that "Iraq's oil production has returned to pre-war levels." Yet the price of oil depends on many other factors, as well. For example, although Iraq is producing roughly as much oil as it produced before the war, it is doing so under much worse security conditions. Shippers must take greater risks to transport crude from Iraq's southern fields to the Persian Gulf and pay greater rates for insurance. Pipelines face the threat of sabotage and must be secured. Oil infrastructure damaged by wear, sabotage, or fighting needs to be repaired. To be honest, I don't know by how much all of this increases the price of Iraqi oil (or the price of oil on international markets), but Duquette apparently simply ignores these factors. He claims that oil prices have risen "because of a one-two punch of rising global demand and the weakening dollar." I don't deny that these factors have affected prices (and I might also add the lack of sufficient refining capacity), but I imagine that the poor security conditions under which Iraqi oil is produced and transported have contributed to the rise, as well.
Next, Duquette criticizes Stiglitz's argument that "the Iraq war has turned the U.S. economy toward recession." Duquette correctly notes that "economists define a recession as two straight quarters of negative economic growth." Duquette then cites Department of Commerce statistics that real GDP growth for the last three quarters was 4.9 percent, then .6 percent, then .6 percent again. Duquette claims that "that's below trend, but it's not recessionary." True, but according to Duquette, Stiglitz never claimed that the U.S. economy was in a recession, only that it was "turned . . . toward recession." So to me, DOC's statistics appear to support Stiglitz or at least not to strongly contradict him. Furthermore, although Stiglitz and Duquette are both economists, not everyone sticks to the formal definition of "recession." For example, according to a survey conducted by Research Pros Inc. in late February 2008, "a majority of top US executives believe the American economy is already in a recession or will slide into one within six months." ("US Executives Braced for Recession: Poll," Agence France Presse, 6 March 2008.) According to a March 2008 CNN/Opinion Research Corporation poll, "about three-quarters of all Americans think the economy is now in a recession and the number who feel that way continues to grow." ("CNN Survey: Three out of Four Say U.S. Economy in Recession," Xinhua General News Service, 17 March 2008.) And Berkshire Hathaway chairman and CEO Warren Buffett said in early March "that the U.S. economy is essentially in a recession even if it hasn't met the technical definition of one yet." (Josh Funk, "Buffett Says US Economy Essentially in a Recession, Expects Tough Ride for Insurers," The Associated Press, 3 March 2008.) Whether you want to stick with the formal definition or not, Stiglitz appears to be on solid ground here.
Next, Duquette notes that "the Iraq war's cost . . . equates to 1.0 percent of GDP," implying that the war costs relatively little. Yet one percent is a huge fraction of the national economy. True, other wars have cost more, but that doesn't mean that they were cheap or even a bargain. (Of course, economic costs pale in comparison to human costs, but Stiglitz and Duquette are focusing only on economic costs.) Duquette also points out that "even with the Iraq war, today's defense share of GDP [which he cites as 4.0 percent] is lower than at any point during the Cold War." That hardly reassures me, since I would be appalled if we were spending a greater fraction of GDP on defense now than when we were facing off against a global superpower.
Finally, Duquette complains that "Mr. Stiglitz links the Iraq war to President Bush's tax cuts and faults the two for the increase in the federal budget deficit." Duquette's only criticism of this claim, however, appears to be that "the Iraq war costs $150 billion per year" while "the 2001 and 2003 tax cuts together cost close to twice that." OK, so Duquette is saying that the tax cuts had roughly twice as much of an impact on the budget deficit as the war. I fail to see how that rebuts Stiglitz's claim that both contributed to the increase in the budget deficit.
Let me reiterate that I have not read Stiglitz's book and have no opinion about his arguments. I simply do not know enough about them to judge whether I think that they hold water or not. However, I have read Duquette's rebuttal, and his arguments seem to leak like a sieve.
Next, Duquette criticizes Stiglitz's argument that "the Iraq war has turned the U.S. economy toward recession." Duquette correctly notes that "economists define a recession as two straight quarters of negative economic growth." Duquette then cites Department of Commerce statistics that real GDP growth for the last three quarters was 4.9 percent, then .6 percent, then .6 percent again. Duquette claims that "that's below trend, but it's not recessionary." True, but according to Duquette, Stiglitz never claimed that the U.S. economy was in a recession, only that it was "turned . . . toward recession." So to me, DOC's statistics appear to support Stiglitz or at least not to strongly contradict him. Furthermore, although Stiglitz and Duquette are both economists, not everyone sticks to the formal definition of "recession." For example, according to a survey conducted by Research Pros Inc. in late February 2008, "a majority of top US executives believe the American economy is already in a recession or will slide into one within six months." ("US Executives Braced for Recession: Poll," Agence France Presse, 6 March 2008.) According to a March 2008 CNN/Opinion Research Corporation poll, "about three-quarters of all Americans think the economy is now in a recession and the number who feel that way continues to grow." ("CNN Survey: Three out of Four Say U.S. Economy in Recession," Xinhua General News Service, 17 March 2008.) And Berkshire Hathaway chairman and CEO Warren Buffett said in early March "that the U.S. economy is essentially in a recession even if it hasn't met the technical definition of one yet." (Josh Funk, "Buffett Says US Economy Essentially in a Recession, Expects Tough Ride for Insurers," The Associated Press, 3 March 2008.) Whether you want to stick with the formal definition or not, Stiglitz appears to be on solid ground here.
Next, Duquette notes that "the Iraq war's cost . . . equates to 1.0 percent of GDP," implying that the war costs relatively little. Yet one percent is a huge fraction of the national economy. True, other wars have cost more, but that doesn't mean that they were cheap or even a bargain. (Of course, economic costs pale in comparison to human costs, but Stiglitz and Duquette are focusing only on economic costs.) Duquette also points out that "even with the Iraq war, today's defense share of GDP [which he cites as 4.0 percent] is lower than at any point during the Cold War." That hardly reassures me, since I would be appalled if we were spending a greater fraction of GDP on defense now than when we were facing off against a global superpower.
Finally, Duquette complains that "Mr. Stiglitz links the Iraq war to President Bush's tax cuts and faults the two for the increase in the federal budget deficit." Duquette's only criticism of this claim, however, appears to be that "the Iraq war costs $150 billion per year" while "the 2001 and 2003 tax cuts together cost close to twice that." OK, so Duquette is saying that the tax cuts had roughly twice as much of an impact on the budget deficit as the war. I fail to see how that rebuts Stiglitz's claim that both contributed to the increase in the budget deficit.
Let me reiterate that I have not read Stiglitz's book and have no opinion about his arguments. I simply do not know enough about them to judge whether I think that they hold water or not. However, I have read Duquette's rebuttal, and his arguments seem to leak like a sieve.
No comments:
Post a Comment