“If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution.”  With this statement, Treasury Secretary Henry Paulson provided European and Canadian financial institutions the possibility of an infusion of American taxpayer dollars as part of the proposed $700 billion Wall Street Bail Out Plan.  This aspect of the plan highlights the close ties between economic and foreign policy issues.

The foreign policy gorilla in the economic room is monies spent on Operations Iraqi Freedom and Enduring Freedom (Afghanistan). The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations since 9/11(July 14, 2008), a Congressional Research Service (CRS) report to Congress, notes Congress has approved $859 billion for Department of Defense (DoD) operations to date.  It also states, as of April 2008, DoD estimates it spends and average of $12.1 billion per month on the war effort.  It further relates Congressional Budget Office (CBO) cost estimates for the war in the 2008-2017 time period range from and additional $570 billion to $1.55 trillion depending on troop levels. Whether one supports the war or not, the current $859 billion bill must be paid and some amount of future costs in billions will be incurred, even if Senator Obama’s plan of a phased withdrawal is enacted.

In the competition for funds to pay these war costs, the Wall Street bail out and the price tag for various domestic programs proposed by both presidential candidates (e.g. tax cuts, infrastructure investments, health care initiatives) hard choices will have to be made. Despite Secretary Paulson’s explanation, many Americans still resent the possibility of the government using their tax dollars to rescue foreign banks from ruin.  The debate on the necessity for the wars in Iraq and Afghanistan continues.  In the midst of all this, the United States must get its house in order, but it cannot withdraw from the world. The next President and Congress have their work cut out for them.