When you're facing the threat of recession, you need to have an expansionary monetary and fiscal policy. Pre-Keynesian, Hooverite views are dead everywhere except on 19th Street in Washington.

For instance, one of the costs of the war is that soldiers today get very seriously injured but stay alive, and we can keep them alive but at an enormous price.

The country has large unfunded liabilities - social security, health care, and there will have to be some adjustments to these problems. What is scary though is how much worse things have gotten in the last eight years, and the Iraq war is one of the main factors.

Fortunately, America remains a robust democracy, where most individuals are not afraid to speak out. What we have done in Iraq has, however, compromised out standing as an advocate of basic human rights - the prime minister of one country responding to criticism of America for its human rights put it, it was liking having Dracula guard the blood bank. The loss of America's moral standing has been one of the great losses of this war.

The international institutions go around the world preaching liberalization, and the developing countries see that means open up your markets to our commodities, but we aren't going to open our markets to your commodities. In the nineteenth century, they used gunboats. Now they use economic weapons and arm-twisting.

I understand why political leaders in the beginning want to be cheerleaders to generate optimism. But to admit that they didn't understand the depths of the problem afterwards, I found a little bit surprising.

For that to happen, growth has to be very strong. To get back to normalcy, we will have to have extended growth of more than 3 percent. That's not in the cards.