The real harm comes in the wider Arab and Muslim world, where the exaggeration of al-Qaeda's role works directly and devastatingly against American goals. It magnifies al-Qaeda's perceived power, strengthening its own media campaign and feeding its most powerful propaganda instrument. Attributing all these attacks to al-Qaeda certainly doesn't hurt al-Qaeda's image: Iraq is the one place where al-Qaeda's violence is actually widely supported in the Muslim world (a recent PIPA survey found that over 90% of Egyptians thought that attacks on American civilians were against Islam and illegitimate, but over 90% of Egyptians thought that attacks on American troops in Iraq were legitimate). The administration in effect claims more power and military success for al-Qaeda in Iraq than al-Qaeda claims for itself - for which the al-Qaeda leadership can only be bemusedly grateful. Forget al-Hurra - if you're looking for a real public diplomacy fiasco, you'll be hard pressed to do worse than the US acting as al-Qaeda's agent in promoting its Iraqi success.
We constantly hear conservatives condemning talk of withdrawal as "helping the enemy." We don't want to withdraw from Iraq and "hand bin Laden a propaganda victory," or some such. Leaving aside that it's almost impossible to imagine a scenario in which a U.S. withdrawal from Iraq, whenever that may occur, is not spun as a victory by Islamic extremists, as Lynch makes clear, the propaganda victory that Bush is handing al-Qaeda is not a matter of prediction. It is happening. By continuing to cling to and defend a failed policy by inflating al-Qaeda's power in Iraq, by treating al-Qaeda as a top-down organization with command and control capability, rather than a loosely affiliated ideological network, Bush is effectively waving al-Qaeda's flag for them. He got us into Iraq by misrepresenting Saddam Hussein's capabilities, and he's keeping us there by doing the same with al-Qaeda. We know the tragic consequences of the former; we haven't begun to grasp the consequences of the latter.