After months of delays, allegations of fraud, and labor disputes, the gigantic new US embassy in Iraq finally opened on January 5, 2009. The mammoth structure covers 104 acres — the size of 80 football fields — and has been called “a monster of a modern fortress”, “the US castle of Babylon” and “the imperial mother ship dropping into Baghdad”. Surrounded by concrete walls topped with razor wires, the embassy is in many ways symbolic of the US misadventure in Iraq.

Yet again, the US has spent an excessive amount of money — completely disproportionate to our diplomatic needs in the rest of the world. The new Baghdad embassy cost $732 million to construct , and it will cost the US taxpayers $1.2 billion per year to operate. It will house a full-time staff of 1200 Americans plus two thousand or more contractors. This is the biggest and most expensive US embassy in the world. (The second largest US embassy is now being built in Beijing, China, for a cost of $434 million –and it is considerably smaller than the one in Baghdad).

A ceremony to celebrate the opening of the new US embassy was held the day after a suicide bomber killed 40 people at a Shia shrine just 4 miles north of the embassy’s walls.

Many seem taken aback by the depth and severity of the current financial turmoil. I was among several economists who saw it coming and warned about the risks.

There is ample blame to be shared; but the purpose of parsing out blame is to figure out how to make a recurrence less likely.

President Bush famously said, a little while ago, that the problem is simple: Too many houses were built. Yes, but the answer is too simplistic: Why did that happen?

One can say the Fed failed twice, both as a regulator and in the conduct of monetary policy. Its flood of liquidity (money made available to borrow at low interest rates) and lax regulations led to a housing bubble. When the bubble broke, the excessively leveraged loans made on the basis of overvalued assets went sour…

Read the entire commentary on CNN

Is this any Way to Rebuild Iraq?

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The country has a huge budget surplus. Why isn’t it paying for its own reconstruction?

By Linda J. Bilmes and Joseph E. Stiglitz

August 15 2008

Across the Middle East, from Abu Dhabi to Yemen, the dizzying rise in oil prices has fueled a construction and employment boom. Yet in Iraq, one-quarter of the population remains jobless, and Baghdad gets only 11 hours of electricity a day. Four million Iraqis have been displaced from their homes and are urgently in need of resettlement. After five years of war, the country is still desperately in need of rebuilding. 

Read Bilmes and Stiglitz’ full op-ed in the LA Times.

What Counts as ‘Success’ in Iraq?

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The Boston Globe

By John Tirman

A VOLUBLE attempt to describe the Iraq war as a success is widely apparent, and will increase as the Republican National Convention nears. John McCain is staking his campaign on this assertion. There is little doubt that the level of violence in Iraq has subsided noticeably in the last 12 months. But is this “victory”?

Two notions are in play. First is whether what exists now, or will in the near term, is a favorable and sustainable outcome and is due particularly to the “surge” of US troops since early 2007. Second is whether the price of this outcome is acceptable.

On the first matter, the reductions in violence are mainly due to the withdrawal of Moqtada al-Sadr’s militia and the cooperation of many Sunni tribes in ridding Iraq of foreign extremists. A fervent debate among experts is indecisive about why Iraqis pulled back from the wicked killing of 2006 and early 2007. Some is due to a change in US strategy. But all the actors with explosives began to see the futility of their tactics, apparently, and have altered course.

No one knows how sustainable these gains might be. Will Sadr reenter the fray once US troops are drawn down? Will Sunnis return to resistance if Shia political dominance continues?

Civil wars of long standing tend to persist if a broad and enforceable political settlement cannot be reached, and so far none is in sight in Iraq. So the prognosis for more armed conflict, perhaps many years in duration at a low level, remains troubling.

One outcome that seems irreversible is the primacy of Iran. This was widely predicted before the war was started, and it is now apparent. All of Iraq’s leaders, including the president, a Kurd, are friendly with Iran and regard it as an important ally. In Bush circles, this new prominence for Iran is never linked to the war, as if occurring by itself.

So the visible political outcome in Iraq (setting aside the original target of the invasion, the nonexistent WMDs) is not usefully described as a success. There is a level of violence and political fragmentation that in other places would not be hailed as victory. And these recent gains may be temporary.

Perhaps more important are the costs of the venture. The facts are sobering. About 5,000 Americans have been killed, including military personnel, contractors, and aid workers. Another 30,000 or more are wounded, and estimates of those with post-traumatic stress disorder are as high as 300,000. The financial costs are estimated to reach $3 trillion eventually.

For Iraqis, of course, the costs are colossal. While there is a dispute among experts about how many Iraqis have died as a result of the war, the numbers range from 200,000 to one million, and very likely a mid-range estimate is correct. The Iraqi government reports one million or more war widows. About 3.5 million Iraqis have been displaced by the war, most of them living in difficult circumstances in Jordan and Syria. A new study from the Brookings Institution labels the refugees – many impoverished – as a “looming crisis” for the entire region.

More than half the school-age children in Iraq cannot attend school, due to a lack of security, and 40 percent have no access to safe water. A survey conducted in 2006 by the Ministry of Health found a doubling of mortality, much of it due to violence but about an equal amount to disease and accidents, indicating a gradual collapse of the healthcare system.

Globally, the run-up in oil prices is attributable in part to the war, which not only devastates developing countries but has also contributed to a food crisis worldwide. The war has distracted the United States from other issues, as the recent Russian muscle-flexing in the Caucasus illustrates.

Since the war is not over, no one can predict where all these gruesome figures and trends will end up. But the price everyone has paid for this war so far has been exceptionally high. The actual political results for Iraqis remain doubtful. To a dispassionate observer, this does not look like “victory.”

This website is inspired by the book The Three Trillion Dollar War and will continue to tell the story of the costs of this war. Apart from its tragic human toll, the Iraq War will be staggeringly expensive in financial terms. In The Three Trillion Dollar War, Nobel Prize winner Joseph E. Stiglitz and Harvard professor Linda J. Bilmes cast a spotlight on expense items that have been hidden from the U.S. taxpayer, including not only big-ticket items like replacing military equipment (being used up at six times the peacetime rate) but also the cost of caring for thousands of wounded veterans—for the rest of their lives. Shifting to a global focus, the authors investigate the cost in lives and economic damage within Iraq and the region. Finally, with the chilling precision of an actuary, the authors measure what the U.S. taxpayer’s money would have produced if instead it had been invested in the further growth of the U.S. economy. Written in language as simple as the details are disturbing, this book will forever change the way we think about the war.

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