In November 2008 the Iraqi leaders and parliament signed and passed a Status of Forces of forces Agreement (SOFA) with the US to have American forces withdraw from Iraq within three years, by 2011.
Given that the daily cost of the war in Iraq is $341.4 million per day, it could, over time, pay some of the debt the US is incurring from the seemingly bottomless economic bailout.
The SOFA between the US and Iraq was approved and finalized by the Iraqi parliament on Nov. 27, 2008. The agreement requires all 140,000 military personnel to withdraw from Iraqi cities and towns by June 30, 2009, and from Iraq entirely by December 31, 2011.
Although there is speculation that Prime Minister Nouri al-Maliki is tentative about the strength of the agreement:
Maliki remains lukewarm about it and does not fully trust the Americans when they say that they will withdraw from Iraq in 2011...
Maliki, however, has no choice but to give the US the benefit of the doubt, investing in the promises of dialogue made by Obama.
that is a whole other topic for discussion.
One cost estimate for the Iraq War is more than $580 billion (nearly ten-fold the 2003 Pentagon prediction of $60-$95 billion).
Even if it does take three years, injecting over half a trillion dollars into a failing economy could help to solve many of the problems that current economic policies will undoubtedly incur.
The money can be used to pay back some of the enormous debt the US has (more recently) amassed from China. According to the Washington Post:
China passed Japan to become the U.S. government's largest foreign creditor in September, the Treasury Department announced yesterday (11/18/08)...
China's new status -- it now owns nearly $1 out of every $10 in U.S. public debt -- means Washington will be increasingly forced to rely on Beijing as it seeks to raise money to cover the cost of a $700 billion bailout. China, in fact, may be the government's largest creditor, period. The Treasury does not keep records on domestic bond holders. But analysts said China's holdings are so vast that the existence of a larger stakeholder in the United States now seems unlikely...
China is effectively co-financing the $1 trillion annual U.S. deficit and massive government bailout of the financial system. It is doing so in part with money earned from exports to the United States, which last year imported five times as much as it exported to China.
Half a trillion could also stave off any impending inflation that might occur given the Fed's recently admitted money-printing quick fix for the current crisis. From the New York Times (12/16/08):
The Fed bluntly announced that it would print as much money as necessary to revive the frozen credit markets and fight what is shaping up as the nation’s worst economic downturn since World War II...
The Fed has already announced or outlined a range of unorthodox new tools that it can use to keep stimulating the economy once the federal funds rate effectively reaches zero. On Tuesday, Fed officials said they stood ready to expand them or create new ones to relieve bottlenecks in the credit markets.
All of the tools involve borrowing by the Fed, which amounts to printing money in vast new quantities, a process the Fed has already started. Since September, the Fed’s balance sheet has ballooned from about $900 billion to more than $2 trillion as it has created money and lent it out. As soon as the Fed completes its plans to buy mortgage-backed debt and consumer debt, the balance sheet will be up to about $3 trillion.
The withdrawal of troops from Iraq could also mean that reconstruction money promised for any future redevelopment of Iraq could possibly refill the coffers of the US economy. The amount of money spent on reconstruction in the five years of war, $50 billion, is mentioned in this interesting exchange in the Iraq Inspector General's 12/13/08 report Hard Lessons:
(Lt. Gen Jay) Garner presented Rumsfeld with four rebuilding scenarios, from "do what absolutely needs to be done and no more" to "redo the whole country of Iraq."
"What do you think that’ll cost?" Rumsfeld asked, regarding the fourth scenario.
"I think it’s going to cost billions of dollars," Garner said.
"My friend," Rumsfeld replied, "if you think we’re going to spend a billion dollars of our
money over there, you are sadly mistaken."
In the five years following that remark, the United States appropriated nearly $50 billion for Iraq’s relief and reconstruction.
The SOFA mentions construction only in vague terms with no solid future dollar amount. So, if we assume the US will no longer pay $10 billion a year for reconstruction, the US could have well over $600 billion available within the next three years to fix the economic mess we will undoubtedly be in.