Thursday, December 13, 2007

The Costs of the Iraq War

The Costs of the Iraq War
By Jerome Grossman

About two thirds of Americans now regard the U.S. invasion and occupation of Iraq as a serious mistake. The mistake was planned and organized by President George W. Bush and his administration with the help of too many Democrats who went along with his imperial fantasy. Too many Americans, carried away by superpower imperial glory, expected an easy victory at low cost.

They were wrong. Whether or not military victory will have been achieved at some future time, the costs have been high and far more than the anticipated benefits.

Some of the costs are painfully obvious. About 4,000 U.S. military deaths, about 40,000 U.S. military wounded, Iraqi insurgents and civilians killed and wounded estimated at one million; Iraqis who have fled their homes and their country to foreign lands estimated at two million; cost to the U.S. taxpayer estimated at one or two trillion dollars depending on eventual length of the war; the dramatic decline in U.S. reputation among the 1.3 billion Muslims and most nations, a decline that is harming U.S. business and diplomatic interests.

Some of the costs are less obvious. The power and influence of Iran in the Middle East has been greatly increased. The Sunni regime in Iraq that was a buffer to Iranian expansion was overthrown and succeeded by a Shiite regime friendly to Shiite Iran. If and when the U. S. military leaves Iraq, the new Shiite bloc might threaten traditional U.S. allies, Saudi Arabia, Jordan and Egypt.

Perhaps the most important costs to the U.S. have been the increase in the price of oil which has doubled since 2002, driven up by the Iraq war to $90-$100 per barrel. As the American consumer increases his insatiable consumption of oil and gasoline, the flow of these liquids is matched by the flow of U.S. dollars to oil suppliers.

When the oil producers were buying U.S. Treasury bonds, the effects were minimal. However, the oil royalty have modified their financial strategy by using their U.S. dollars to buy U.S. assets, taking large positions in Citigroup, News Corp., Procter & Gamble, Hewlett-Packard, Pepsi, Time Warner, and Walt Disney, to name only a few. Land, real estate, and skyscrapers are also targets. And the sophisticated investors have hired prominent American bankers, media experts and Washington lobbyists to protect their interests in the U.S. This represents an historic transfer of wealth, unprecedented in human history, financial conquest without firing a shot.

Monday, December 10, 2007

Subsidizing Iowa

Subsidizing Iowa
By Jerome Grossman

The political eyes of the nation focus on the farm state of Iowa where voter caucuses will choose delegates to the Democratic and Republican conventions on January 3. The Iowa caucuses are important because they are the first selection of delegates in the country. For many elections Iowa has determined the political trend by giving enormous political publicity to the winner, boosting his/her chances in the New Hampshire primary and beyond.

As in other states, the candidates are evaluated according to personality, electability, endorsements, organization and positions on issues. In this election, the main issues discussed are the Iraq War, immigration policy, and health care.

But the holy issue in Iowa is not discussed because virtually every candidate has pledged to maintain and increase the enormous subsidies for corn and ethanol production given by the federal government. Only one presidential candidate has declared his opposition, Senator John McCain, and the most recent poll gives him 5% in Iowa, far below his national average.

This year, Iowa's farmers and ethanol refiners will receive tax breaks and subsidies amounting to $2 billion. For ethanol this amounts to $.51 per gallon. Iowa gets back from the federal government. $1.10 for every dollar it pays in taxes; the state is not paying its fair share for the military, education, health, etc. and is actually making a profit on the tax system.

Iowa’s representatives in Congress have guarded the state's interests well, particularly their senators, Charles Grassley (Republican) and Tom Harkin (Democrat). They have important seniority as chairs of powerful committees so that it does not make any difference which party is in power. They have it covered.

The corn subsidies were originally installed to protect small farmers from foreign competition and from the big farmers with lower costs. However, as the small farmers disappear, the subsidies enhance the profits of the biggies.

Production of ethanol from corn is controversial. Federal law requires that this biofuel be 10% of all gasoline sold and the industry is trying to get this raised to 20 or 30%. The fundamental purpose of ethanol is to reduce reliance on foreign oil suppliers. However, some experts question the value of ethanol. They point out that the conversion of corn to ethanol requires so much energy that there are no net savings, that the conversion process requires too much water, that ethanol rich blends are corrosive for metals and plastics, could hurt car durability.

These programs have driven up the price of corn and products derived from corn significantly. Corn prices have doubled and diversion to ethanol is raising the overall cost of food as well as diverting grain from poor countries. Today corn syrup is used to sweeten jams, condiments like ketchup, and soft drinks. It is also a favorite ingredient in many so-called health foods. Big increases in the price of foods with corn syrup will affect the diets of millions of American families, and much bigger grocery costs as well.

As ethanol refining plants spring up all over Iowa, conservation of oil and energy is not receiving necessary attention. Subsidization of rational policies for the solution of local or national problems is an appropriate management tool. In this case, the objectives would be national energy independence and efficient use of energy. The technology exists to dramatically cut auto emissions, to reduce automobile consumption of gasoline, to reduce use of electricity, to operate machines with less energy. Let the federal government subsidize these energy-saving installations initially, modernizing our energy system. Simply replacing every old – fashioned electric light bulb in the country with the latest technology is already making a difference. We could do it with a fraction of the trillions of dollars we are spending abroad on oil, on oil related warfare and occupations, on support for client oil-producing states.

The Iowa caucus campaigns would be a prime place to raise these questions. Is there a candidate from either party with the courage to defy conventional Iowa political wisdom, who will demonstrate innovative thinking and the ability to manage the energy problem, by leading the country in a serious discussion of a serious problem? The solution to the energy problem is not in the Middle East but here at home where we can apply our technological skills for the benefit of all 50 states.


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