Fellow Independent writer Justin Schon in the UMich Dems Blog gives his solution to get us out of this economic crisis:

“My solution for this is pretty simple, although it is much easier said than done. First, with a withdrawal of troops from Iraq, work to help Pakistan stay calm as they transition power from one party to another, and more work with Iran to ease anxieties there, oil prices should fall because of increased stability in the region. […] With these downward pressures on prices, the worries about inflation should subside.”

I think a lot of liberal bloggers mistakenly look at the Iraq War as one of the major sources of our economic woes. It is true, as Justin points out, that the War in Iraq has increased oil speculation and reduced consumption. These effects, however, are small when compared to the increased consumption of India and China as they continue their own industrial revolution. With this is mind, it is important to note that however you feel about the war, the amount of spending has created spending on strictly American goods and jobs held by mostly American people.

Withdrawing our troops from Iraq has many merits, but a panacea for our economic woes is not one of them. So how do we deal with our economic crisis? Well, we should first point to the fact that the housing bubble bursting has lead to a decrease in housing investment, and those faced with subprime debt are drastically reducing consumption to deal with mounting interest rates on their debts. Recall that the fed originally reduced rates to deal with the 2001 recession to deal with our mounting trade deficit, not increased oil prices. Also recall the definition of GDP: C + I + G + X - IM. Where imports (IM) increased, lower interest rates caused increase consumption (C) to offset this imbalance. Yet in addition to increased consumption, the lowering of interest rates led to an increased housing investment filled with debts that many people could not afford to pay, leading us to our current situation. With the federal interest rate already quite low, there is simply worry that low rates could simply lead to another scenario where consumer consumption is not in line with consumer income.

The entire point of this explanation is that this economic situation is quite difficult to avert. For a non-economist’s relatively uneducated opinion, I would take the stance that given the dangers of the post-2001 interest rates leading to unbalanced consumption, the government indeed does need to give incentives in the form of tax rebates and incentives to those most likely to spend the money (read: the lower and middle classes). Of course we need to deal with this loss in revenue, so let’s repeal those Bush Tax Cuts to the top 2 income quintiles as well. But aren’t Obama’s and Clinton’s healthcare plans also going to use some of these funds and more as sources of revenue? Yes, and this is where economic decisions get hard. Perhaps with only short term stimuli, the loss of revenue won’t be big enough to put a major dent in healthcare implementation. But if it does, is it better to go (further) into debt and (try to) avert a coming recession? Should we raise taxes slightly more to pay for healthcare, or should we scale back the healthcare plan? I’m not quite sure, but I (unpopularly) think that we have to risk debt.

Of course, Bush’s economic policies are largely to blame for the current crisis (sometimes government intervention=good, tax cuts DO NOT pay for themselves, etc.), but we still need a way out of it.

And if the increase in consumer spending through a tax credit is only temporary, how do we increase growth? Justin has some good ideas:

“At the same time, more alternatives must get implemented to provide more options in the United States for power sources. This would decrease the demand for oil, which as the students feverishly working through Microeconomics should know, will decrease prices. Then, by eliminating the tariff on Brazilian ethanol and building up a capacity to produce ethanol from sources other than corn in the United States, the prices of corn and wheat will fall, corn because of decreased demand and wheat because of increased supply.”

I’ll add to that some basic initiatives such as an increased investment in our economy, targeting funds for sectors that create jobs that cannot be outsourced, that will start a(n) [insert name here] revolution, and will yield a return on investment long after these funds are completely spent.

But back to the original point. I don’t see how withdrawing from Iraq will create the immediate stimulus we need that will get us out of a rapidly approaching economic crisis.