In wartime the cost for reporting false information can be catastrophic. And wartime is also when everybody has a very strong motivation to lie, and even some moral rationalizations for such. This news article put the US in a situation where the US had to say "our media is lying, our military ally is lying, our anonymous senior intelligence source is lying, and our enemy is telling the truth" or start WW3.

The one and only reason they did so is because the cost of this lie would have been too high. If the cost had simply been "Russia will be even more demonized" do you think, even for a second, that they would have "corrected the record"? And beyond this, also consider that the news sources running these stories had to realize the potentially massive implications of this. Yet they seemingly themselves did effectively 0 fact checking before running with it.

No, the system is most assuredly not working. The only system that is working is the desire to avoid Mutually Assured Destruction.

I'm always confused by arguments like that. The only way it works is if you assume bad faith (c.f. your six uses of the word "lie") on the part of everyone involved.

Isn't the much (!) simpler answer that the journalist had what he thought was a juicy scoop, the editors wanted to run it for clicks and eyeballs, and the system of checking and verification broke down. But that's just a mistake, and it happens everywhere in journalism. And it was corrected rapidly, by everyone involved.

You want this to be somehow morally different because of the "ZOMG WW3" situation, I guess? But I don't see how that works logically. People are going to make mistakes even in wartime, the question is if we trust folks in power to handle those mistakes correctly.

And, to repeat: people in power absolutely handled this responsibly. That's a good thing, not a bad thing, and I think we're much better off by rewarding that responsible use of power vs. screaming hyperbole.