Thursday, May 08, 2008

A brief note on Iraq loans 

I am puzzled by the whole idea that we should expect Iraq to pay for reconstruction through loans rather than grants, as Rep. Tim Walz suggested yesterday, and which has been floated by senators including our Norm Coleman. The parallel story I would tell is to think about my own desire to educate my child versus the state's interest in an educated workforce. Both of us have the same interest; using a state subsidy to finance my child's education shifts the price I pay for education, but if the state does not want to buy as much as I would myself, it's just giving me money. The child gets the same education either way, it's only a question of who pays. The question is a question of marginal analysis.

Who has a greater stake in Iraqi reconstruction at the margin? If you believe the GWOT is aided by the establishment of a functioning democracy in Iraq, it seems reasonable to argue that Iraq would choose less reconstruction and transformation than would be best for U.S. interests, and so it makes more sense for the U.S. to pay. Besides, the Walz formulation of Iraqi oil money helping us finance war in Afghanistan sounds a little too mercenary. That would be made only worse if you do not believe our anti-terrorism strategy is advanced by stabilizing Iraq.