Let’s start with Bush’s plan to get foreigners to lend us money for the war, rather than our paying cash for it. Bush doesn’t say this, of course, but it’s what his policy amounts to. We’ve just run the biggest federal budget deficit ever: $530 billion, if you include the money that the rest of the government borrowed from Social Security’s alleged trust fund.
Bush wants an extra $87 billion for the war at the same time that he’s cutting taxes and hitting up foreigners for contributions. We’re supposed to have shared sacrifice between civilians and military when we’re at war. Our troops are sacrificing in Iraq and Afghanistan–but aside from reservists’ families, civilians aren’t sacrificing on the home front. Bush argues that lower taxes mean a stronger economy for returning soldiers. But outsize government borrowings undermine the economy long-term.
Because foreigners finance a growing part of our deficit, we’re in effect asking them to lend us money for the war. Which way do you think we’re more secure in the long term? Having our kids in hock to the eyeballs to foreigners who financed our war? Or paying cash now? Looks like an easy call.
Now, $87 billion is a lot of money. But it’s not a lot compared with the three rounds of Bush tax cuts, which total about $3 trillion. According to a study by the Tax Policy Center, a liberal think tank whose numbers are universally respected by budget techies, we could raise close to $87 billion a year with a 5.25 percent surcharge on income-tax bills. For every $1,000 of income tax you pay, you’d fork over an extra $52.50. Tax rates would still be well below their 2002 levels. We could leave the war tax in place until our major Iraq expenses are over. Or mix and match by partly rolling back some of the other cuts. It’s certainly not enough to even begin to derail the economy.
Bush’s idea of fighting a war on borrowed money, bad as it is, looks positively brilliant compared with Washington’s newest fantasy: making $10 billion of our aid to Iraq a loan rather than a grant. The Senate has adopted this idea and the House has more or less approved it. Bush, to his credit, opposes it as being futile and counterproductive. Which it would be.
The word “loan” makes for good sound bites, but it’s nuts. First, it damages us in the eyes of the world because it’s greedy and unseemly: how can you invade another country, hire your own people to fix it and stick the invadees with the tab? Second, who’s going to sign the I.O.U. on behalf of the Iraqi people? Finally, “lending” $10 billion to Iraq rather than just forking over the cash won’t save us any real money. Debt-ridden Iraq is almost certain to default. The Congressional Budget Office, which rules on such things, would doubtless count all or almost all of the $10 billion as a budget expense because of the small likelihood of the loan’s being repaid.
So let’s suck up our gut and pay instead of looking for a free lunch. This argument has nothing to do with whether we should have invaded Iraq or what we should do now that we’re there. It’s about money, not politics.
