Rallying 'Round the Flag

And so the convention center was a hive of government employees and the smiling salespeople waiting to meet them. Above the bustle, banners announced the presence of mega-companies such as Philips, Raytheon, Glock, Mitsubishi, CompuDyne and many more. Everyone had converged on Washington to think about explosions, fires, piles of rubble, chaos, deadly germs, radiation. And then to translate those thoughts into the more soothing contemplation of moneymaking. And, of course, to enjoy the shops and restaurants.

IS IT BAD TO PROSPER IN A CRISIS, to thrive on adversity? The moral factors are not clear. Doctors do well in an epidemic, and everyone says thank you. On the other hand, a lawyer who passes out cards in the emergency room after a school bus crash is slime. So what about Washington? Are we more like the healers or the ambulance-chasers?

However you answer that one, the link between bad news and good times is central to this city's history. The Civil War worked wonders for the development of Washington. In 1860, on the eve of the catastrophe, Washington had just two paved streets, no standing police force and an open sewer behind the White House. A Union private, arriving from New York shortly after the first shots were fired at Fort Sumter, was disappointed to find the capital "little better than a country town." Within a few months, however, 100,000 soldiers had followed him to Washington, and the transformation had begun.

That boom surely felt a bit like our own, at least in the beginning: tense, anxious, rife with intrigue and rumors of an impending attack. And yet, the hotels were packed, the saloons bustling, the theaters sold out. Inventors streamed to the capital carrying prototypes for repeating rifles, machine guns, artillery and bombs. The big hotel run by the Willard brothers at 14th Street and Pennsylvania Avenue became "a 'seething cauldron' of commercial intrigues," in the words of writer Ernest B. Furgurson, "jammed with cigar-smoking salesmen and lobbyists touting materials of war." In his history of Civil War Washington, Freedom Rising, Furgurson described a frenzied scramble for the barrels of money that Lincoln poured into saving the Union -- fantastic sums for the time, more than $1 million a day.

James "Big Jim" Fisk, for instance, was a failing salesman for the Boston retailer Jordan, Marsh. He heard Lincoln's call for volunteers and, rather than joining a regiment, "remembered the thousands of unsold blankets he had once seen moldering in the store's attic," Furgurson recounted. "Confident that the army would be needing blankets, he came to Washington and set up at Willard's. Stocking the best suite in the house with food, liquor and lighthearted ladies, he became a generous, cork-popping host" to squads of freshly minted government purchasing clerks. Fisk "soon disposed of the moldy blankets for such an absurd profit that the firm was delighted for him to stay on."

"You can sell anything to the government at almost any price you've got the guts to ask," Fisk confided. He wasn't the only person who noticed. One-third of all military contract spending went to overcharges in the early months of the Civil War, a congressional investigation later concluded.

As the war continued, Washington grew into the nerve center for the largest armies the continent had ever seen. Thousands of clerks collected hundreds of millions in new taxes, and spent the money on countless tons of weaponry, food and supplies. True, these Washingtonians weren't dying at places like Antietam and Chickamauga, and not every dollar they spent was spent wisely, honestly or well. But money was the tide that bore the North to its victory, so their frenzy was not in vain.

Some of those clerks stayed in Washington after the crisis was over -- the population of the city grew by 80 percent from 1860 to 1870. Thus, a pattern was begun: What Washington gains in bad times, it never gives up. We see the pattern repeat 70 years later, during the back-to-back disasters of the Great Depression and World War II. Again, Uncle Sam opened wide the money tap. As before, clerks and contractors flocked to the capital for jobs or a piece of the action. The population rose by nearly two-thirds from 1930 to 1950, to more than 800,000 people in the District, with more in the newly sprouting suburbs. The size of the federal workforce in Washington nearly doubled in the five years from 1940 to 1945, from 139,000 to 265,000.

David Brinkley noted in his book about World War II, Washington Goes to War, that many economists predicted a gloomy future for the Washington region once peace returned and the bureaucrats went home. But "they did not understand the basic nature of government," Brinkley explained. "They did not see that with the wartime innovation of the withholding tax, previously unimaginable amounts of money were being extracted from the American people with relatively few complaints. Federal tax collections in 1940 had totaled $5 billion. In 1945, $49 billion. And it was all spent."

It is almost always all spent. The great lesson of Washington, according to veteran lobbyist Ed Rogers, who has watched budgets be made by both Democrats and Republicans, is that "whoever wants to spend the most, wins."

Instead of a postwar recession, the boom continued in peacetime -- a fact, Brinkley noted, that stamped many government leaders as disciples of the British economist John Maynard Keynes. In simplest terms, Keynes advised governments to increase spending during economic downturns as a way to stimulate growth. Sure enough, Washington's unbridled spending on the war had cured the national depression. A generation would go by before Washington saw the rise of a competing school of thought. Economist Robert Mundell's "supply-side" economics contended that, instead of borrowing and spending to spur the economy, government should cut taxes and let the private sector allocate the cash.

Today's Doom Boom might be seen as an experiment in combining the two--substantial tax cuts and massive spending. The supply-siders in the Bush administration and the Republican Congress have dramatically cut taxes while simultaneously saturating the capital with new spending. Two stimulants instead of one. Like sugar-coated chocolate, like diet pills washed down with coffee, this combination has been so economically potent that the whole region is practically vibrating. Most economists are forecasting yet another year of brisk growth in the Washington area, with tens of thousands of new jobs added, new office buildings filling with new tenants, and home prices stabilizing at or near record highs.

The Wall Street Journal recently reported record revenue for the lobbying industry. There's a $68 steak on the menu at Charlie Palmer's on the Hill. And, as I write this sentence, there is a construction crane going up outside my downtown Washington window.

Can this be what bin Laden had in mind?

ANYONE WHO HOPES TO DEFEAT the United States must have a strategy for neutralizing our money. In 1941, Adm. Isoroku Yamamoto, commander of the Japanese Combined Fleet, prepared the surprise attack on the American Navy at Pearl Harbor. Having completed two tours at the Japanese Embassy in Washington as naval attache, Yamamoto had no illusions about American money muscle. Therefore his strategy was to cripple the U.S. fleet just long enough for Japan to seize control of Southeast Asia, which was rich in the natural resources, such as oil and rubber, that Japan needed for its dreams of empire. The best Japan could hope for, Yamamoto told his superiors, was to set the United States back 18 months -- and then seek a treaty. Beyond that, American industry was too strong to be defeated.

As it turned out, the United States needed just six months, not 18, to snap the spine of Yamamoto's navy, but the admiral was correct on the larger point. By 1943, a year and a half after Pearl Harbor, American factories had increased their production of tanks a hundredfold, and were turning out more tanks in a year than Germany produced during the entire war. Construction of warships was up more than tenfold: In 1943, the United States built 15 aircraft carriers -- nearly as many as Japan produced in its entire history. America built nearly 86,000 airplanes in 1943, roughly equal to Japan's output for the whole war. As military historian Alan Gropman of the National Defense University has documented, all this happened despite bureaucratic bungles and nagging inefficiencies from the top of the production chain to the bottom. Still, 18 months after Pearl Harbor -- as the U.S. economy approached its peak wartime effort -- this country was "manufacturing munitions almost equal to the combined total of both its friends and adversaries," Gropman wrote.

And the U.S. economy has only grown mightier since then.

However, bin Laden and company have a very different strategy than Japan did, a "policy in bleeding America to the point of bankruptcy," as bin Laden put it in a videotaped address to the American people just before the 2004 presidential election. It is a sort of judo, a leveraging of weakness into strength, known as asymmetric warfare, in which small investments by al-Qaeda defeat huge investments by the United States. Asymmetrically speaking, the cost of destroying the tallest buildings in Manhattan, in 2001, was little more than a plane ticket and a box cutter, given ideologues willing to do it. So it didn't matter that, according to intelligence estimates, the U.S. military was outspending al-Qaeda by more than 10,000 to 1.

Since then, the United States has increased spending on security by more than two-thirds, but our foes are still working that same judo, blowing up commuter trains and military convoys with surplus explosives and junk from around the house: backpacks, trash bags, cellphones, toy cars. The United States has hundreds of billions of dollars' worth of surveillance equipment on the ground, in the air and orbiting in space, but none of those gadgets can find bin Laden or his deputy, Ayman al-Zawahiri. The only time we see or hear from them is when they smuggle another cheap audio or videotape to al-Jazeera television. As Secretary of Defense Donald Rumsfeld summed up in a 2003 memo to his staff: "The cost-benefit ratio is against us! Our cost is billions against the terrorists' cost of millions."

Exactly, bin Laden said in the videotape. It worked during the 1980s in Afghanistan. Using "guerrilla warfare and the war of attrition" jihadists "bled Russia for 10 years until it went bankrupt and was forced to withdraw in defeat," the al-Qaeda leader said.

Can they do the same to the United States?

You may not be surprised to learn that experts disagree about how much damage our budget deficits are doing to the country. Over time, large deficits soak up capital that could go to more useful investments, and America potentially becomes vulnerable to the demands of overseas lenders. But that doesn't mean that, as bin Laden seemed to suggest, the United States is as fragile as the old Soviet Union was. As the Bush administration points out, the U.S. economy has survived more intense spending binges than this one. "Spending as a percentage of the economy is lower than it was under four of the last five presidents," White House strategist Peter Wehner argued in a recent memo, "and the high-water mark for the budget deficit as a percentage of the [economy] . . . is significantly less than was the case in the 1980s."

So the immediate problem may not be bankruptcy. It might be frustration, if Americans conclude that the massive expenditures since 9/11 aren't buying results. While the federal government has been flexing the money muscle of the United States -- hyperstimulating the Washington economy -- the enemy has drawn strength from the economic and political weakness of the Arab world. There's that judo, again. Our strong economy is cranking out software and sensors, bollards and cranes, but weak Muslim economies are cranking out extremists just as fast or faster. "The combined gross domestic product of the 22 countries in the Arab League is less than the GDP of Spain," the 9/11 Commission noted in its 2004 report. "Forty percent of adult Arabs are illiterate, two-thirds of them women. One-third of the broader Middle East lives on less than two dollars a day. Less than 2 percent of the population has access to the Internet."

The Joint Chiefs of Staff recently completed a broad review of American strategy in the war on terror. In the fifth year of Washington's Doom Boom, the generals concluded that we need to be building up Muslim countries with at least as much enthusiasm as we have shown for building up the corridor between Dulles and the Pentagon. If the United States could figure out how to transplant a bit of the energy and prosperity of the Doom Boom to the failing countries of the Middle East, it would do us more good in the long run than bollards in every driveway and scanners on every roof.

This will take a long time, the Joint Chiefs acknowledged, but America will not win this war until ordinary Muslims can safely bet on a moderate future. "The conditions that extremist networks exploit to operate and survive have developed over long periods," the new strategy declared. And so "the effort to alter those conditions will require a long-term, sustained approach," as well.

Leaders from across the political spectrum talk about a Marshall Plan for the Middle East, but, as scholars Derek Chollet and James M. Goldgeier explained in a recent essay, the task may be even more complicated than the successful rebuilding of war-ravaged Europe, if only because building a modern country is more complicated than rebuilding it. They quoted former German chancellor Helmut Schmidt explaining the difference. "Europe possessed a long-standing entrepreneurial heritage, a base of business acumen, a high level of general education and technological knowledge as well as engineering capabilities," Schmidt said. "No Marshall Plan can succeed where such prerequisites do not exist."

Let's hope the government is spending a lot of money on smart people to solve this problem.

If so, maybe someday these smart, prosperous people can live in posh apartments and walk to work in new offices and shop in upscale stores -- all built on the site of the old Washington Convention Center, demolished in 2004. Not long ago, I visited the site at 10th and Eye streets NW. Thanks to the Doom Boom, it is one of the most valuable undeveloped pieces of real estate in America, prime downtown acreage in a thriving city, close to subways and hotels and theaters. My purpose in wandering over was to picture the latent possibilities of such emptiness in this time of extraordinary growth. I tried to think of the space as seeded with future wealth and luxury, requiring nothing but the current government money rain to bring it bloom.

Instead, I found myself thinking: Here's what it looks like after a Washington landmark is destroyed. A huge, fenced scar. An aid to the imagination, should you need one. A glimpse of how failure might look in the battle with bin Ladenism.

David Von Drehle is a Magazine staff writer. He will be fielding questions and comments about this article Monday at 1 p.m. at washingtonpost.com/liveonline.