War fever weakens ailing economy

October 21, 2002|By Miriam Pemberton

WASHINGTON - The Democratic leadership was open about its motives in rushing through a congressional affirmation of President Bush's war plans in order to get the issue out of the way so the elections can turn on the economy.

The problem with this strategy is that it's hard to present yourself to the electorate as an economic champion when you've just voted for a war that is so likely to inflict further damage on an extremely vulnerable economy.

The damage is already being done. Oil prices have been flirting dangerously around the $30-a-barrel mark, a price that has been associated with the last four recessions. Each time a Bush administration official makes it sound as if an attack is imminent, the price spikes.

When Vice President Dick Cheney delivered his first major speech on the subject in late August, for example, oil prices jumped 65 cents. The chief U.S. economist for Deutsche Bank, Peter Hooper, estimates that each dollar added to the price of oil costs consumers about $12 billion a year.

The airline industry is the most panicked over these developments, warning politicians that a war would send them into a complete financial crisis. They were still trying to recover from the shocks of the Persian Gulf war (which cost them $14 billion) when Sept. 11 hit (which cost them $20 billion).

The entire transportation sector - which greases the wheels of the economy - is affected when oil prices climb, and the increases get passed to consumers.

The trucking industry is already adding a fuel surcharge onto its price to compensate for the effects of a war-driven disruption in supplies.

In addition to these indirect costs of a war with Iraq, what will it cost the United States to wage the war?

Our allies paid 80 percent of the cost of the Gulf war; there is no sign that they will do so again.

Lawrence Lindsey, chairman of the administration's Council of Economic Advisers, estimated that the war could cost between $100 billion and $200 billion, or 1 percent or 2 percent of our gross domestic product.

He seemed serenely confident that this would be no problem.

The U.S. economy is barely moving. Growth is slowing to nearly imperceptible levels. Average household incomes are now contracting for the first time in a decade. The combination of huge tax cuts and massive military spending increases have turned four years of budget surpluses into a budget deficit projected to be $157 billion for the last fiscal year, which ended Sept. 30.

Public opinion polls show increasing misgivings among Americans about the need for a rush to war. Majorities want to give U.N. weapons inspections more time to work, and to work in concert with our allies.

Even larger majorities (70 percent in a recent New York Times/ CBS News poll) said they felt more threatened by our weakening economy than they did by Saddam Hussein.

Many respondents also said they worried about the effects of a war on our economy.

They know what congressional leaders appear not to: that war and the economy are, or need to be, parts of the same conversation. The weight of the evidence makes clear that if we embark on this war, we will be endangering our economic health.

Miriam Pemberton is a research fellow at the Institute for Policy Studies and military editor for Foreign Policy in Focus.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.