Poor George Bush. He has been roughly treated in two reports this January. The Carnegie Endowment for International Peace (CEIP) has done an exhaustive study of the evidence on weapons of mass destruction (WMD) in Saddam Hussein's Iraq and found that it "was not an immediate threat," exactly the opposite of what the Bush regime had contended. And the International Monetary Fund (IMF) has issued a Staff Report on U.S. fiscal policies which details the "deterioration" of U.S. finances and says that the "hard-won gains of the previous decade have been lost and, instead of budget surpluses, deficits are again projected as far as the eye can see."
So, the eminently respectable and prudent, quite centrist, CEIP, says in effect that the U.S. invasion of Iraq was based on false charges, and implies strongly that the Bush regime knew they were false. And the citadel of capitalist orthodoxy, the IMF, has treated the U.S. government to the kind of public reprimand it usually reserves for dubious Third World regimes. It says in effect that the basic economic policies of the Bush regime are dangerous for the U.S. and the world. One can't say that Bush and company have gotten a good report card for their activities of the past three years. Let us review each report in detail.
CEIP says that, if Iraq's WMD program represented a "long-term" threat, it did not present an immediate one. CEIP says that "Iraq's nuclear program had been suspended for many years....[and that] Iraqi nerve agents had lost most of their lethality as early as 1991." This is because the first Iraqi war and the UN inspections and sanctions "effectively destroyed Iraq's large-scale chemical weapons production capabilities."
What then about the presumed intelligence to the contrary? CEIP analyzes the "dramatic shift [in] intelligence assessments" in 2002 and says that the "intelligence community appears to have been unduly influenced by policymakers' views...[and that] officials misrepresented threats from Iraq's WMD and ballistic missiles program over and above intelligence findings."
It further states categorically that "there was and is no solid evidence of a cooperative relationship between Saddam's government and Al Qaeda." And it goes on further to say that "there was no evidence to support the claim that Iraq would have transferred WMD to Al Qaeda and much evidence to counter it."
So CEIP concludes that there was "no evidence to suggest that deterrence was no longer operable....There were at least two options preferable to a war undertaken without international support: allowing the UNMOVIC/IAEA inspections to continue until obstructed or completed, or imposing a tougher program of 'coercive inspections.'"
In short, CEIP validates every major argument made by France, Germany, and Russia in the Security Council and every major argument by opponents to the war inside and outside the United States. Of course, as we know, the Bush regime now says that the unfindable weapons of mass destruction are not really important (not something they said up to the war and indeed for months afterward). They now say that the point of the war was to overthrow Saddam Hussein. Of course, many opponents also said that had always been the point of the war. And former Secretary of the Treasury Paul O'Neill now confirms this by reporting that from the first days of the Bush regime, the president told his cabinet that he was looking for some way, some excuse, to overthrow Saddam Hussein. Bush is still denying this. He says he decided this only after Sept. 11. Whenever he decided it, it is not and was not a legitimate objective of foreign policy, since it was contrary to the most elementary precepts of international law.
It is bad enough for Bush to be rapped over his schoolboy's knuckles by a dubious, centrist think tank. It is more humiliating to be rapped over the knuckles by the guardians of world financial orthodoxy. What does the IMF report say? It says that the tax cuts plus defense expenditures may have spurred an economic recovery but "at the eventual cost of upward pressure on interest rates, a crowding out of private investment, and an erosion of longer-term U.S. productivity growth." And this will make the U.S. "less well prepared to cope with the retirement of the baby boom generation...."
The IMF agrees that the 2001 recession may account for some of the budgetary turnaround, but only "about half" of it. Another fourth comes was increase discretionary spending and the final fourth from tax cuts. Well, aren't tax cuts good for the economy? Bush's people shout this regularly. No, says the IMF: "It remains an open question whether the tax cuts adopted since early 2001 will have significant supply-side benefits. Although the cuts in income tax rates will - at the margin - improve incentives to work, the labor participation rate is already high, and empirical studies no not suggest that it is highly tax elastic." I guess this is why there are no jobs as a result of the tax cuts.
The IMF continues: "The modest efficiency gains that might arise from the recent tax cuts will also have to be weighed against the effects of a prolonged period of fiscal weakness....With U.S. fiscal deficits expected to persist into the foreseeable future, will any supply-side benefits be outweighed by the effect of weaker public saving on interest rates and investment?"
And, of course, what happens in the U.S. is of concern to everyone else. "[L]arge U.S. fiscal deficits also pose significant risks for the rest of the world....Higher borrowing costs abroad would mean that the adverse effects of U.S. fiscal deficits would spill over into global investment and output." The U.S. is headed to a debt level of 40 percent of GDP, "an unprecedented level of external debt for a large industrial country....This trend is likely to continue to put pressure on the U.S. dollar, particularly because the current account deficit increasingly reflects low saving rather than high investment."
The IMF then launches into its worries about the solvency of social security and medicare. This is familiar ground for an IMF report, since the IMF always worries about too much welfare expenditures. And no doubt the Bush regime also worries about this. But the IMF spells out what it would take to close the fiscal gap: either "an immediate and permanent 60 percent hike in the federal income tax yield, or a 50 percent cut in Social Security and Medicare benefits." And so, the IMF prudently concludes: "Given the magnitude of this adjustment, it would seem likely that both revenue measures and sustained spending restraints would need to be considered."
Wow! In order to get out of the mess Bush has created, the U.S. would both have to raise taxes considerably and take a national cut in the standard of living. The IMF gingerly points out that one of the problems is that "the war on terrorism has compounded spending pressures, but these and other spending priorities will need to be weighed carefully if the adjustment burden is not to fall more heavily on the revenue side." In short, to keep the tax hike from being too big, the U.S. has to cut costs on the military. The IMF concludes that the "the U.S. fiscal problem is still manageable [but] the room for manoeuvre is narrowing quickly."
If the U.S. were Sri Lanka or even Brazil, the IMF would insist on "structural readjustment" before allowing any more loans. But the United States doesn't need loans from the IMF as long as the Chinese and the Japanese continue to invest in the U.S. dollar. So, the message of George Bush to East Asia is "please continue to bail us out." We shall see if East Asia hears him. Or more to the point, what price they will want him to pay.
