In foreign policy, liberals often believe that disputes with foreign actors can and should be settled through negotiation and compromise. That’s because international relations isn’t a zero-sum affair. Conflict is costly to both parties, good relations bring benefits to both parties, so disagreement is generally amenable to compromise
Debates about domestic policy take place within a polity among its members, and this influences the policy debates in too many ways for IR scenarios to come into play. This is especially true in a mature democracy, like the US, where the idea that the two sides will actually start killing each other in large numbers is precisely zero. But under Matt's assumptions is does sort of make sense to compare them, which is why he is wrong.
There are a couple of problems. First, power is relative, not absolute. Modern day France, for example, is more powerful than Ancient Rome in absolute military terms, but that's not a relevant measure. France isn't competing with Ancient Rome. But even if you say that power isn't important in the modern world, it still doesn't mean that both countries are better off not fighting a war.
It is entirely possible that in a war between two countries, the winner is better off in absolute terms. For example, if it hadn't been for the US and its allies, Iraq would have been better off after invading Kuwait. Yes, Kuwait was worse off, and its loss was probably bigger than the gain to Iraq, but Iraq still gained.
The idea that the sum of two countries' happiness, prosperity, etc is bigger before a war than during and after, while true, is not particularly important in the calculation. What is important is whether the predicted cost of the war is smaller than predicted gain from the war to one of the states. Please note that I write predicted costs/gains because there is an element of risk involved.
Now, in fairness to Matt, he does write "disagreement is generally amenable to compromise," so he's not arguing that disagreement doesn't win out over compromise, but nevertheless his confidence in the mutual benefit of peace may be a bit overstated.

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