by Randolph T. Holhut
American Reporter Correspondent
January 11, 2003
BEST ECONOMIC STIMULUS PLAN? NO WAR WITH IRAQ
DUMMERSTON, Vt. -- President Bush thinks he can rouse the stagnant U.S. economy by eliminating federal taxes on stock dividends.
The cost of doing this - the centerpiece of his 10-year, $674-billion economic stimulus plan - will be about $300 billion over the next decade. You probably don't have to think too hard about who will benefit most.
According to Citizens for Tax Justice, about half of the money will go to the wealthiest 1 percent of Americans, which they define as households earning more than $350,000 a year. The 80 percent of American households earning less than $73,000 a year will get less than 10 percent of the tax relief.
Meanwhile, the Bush administration recently lowered the projected cost of Persian Gulf War II down to about $60 billion. Not because the war's cost has gone down, mind you. The new lower cost is pure fiction, something apparently dreamt up by the White House's Office of Management and Budget because the more realistic $100 billion-$200 billion cost that was given a few months ago was deemed to be too scary.
It may not seem so at first glance, but these two things go together. Why is there a need for economic stimulus? Because of the uncertainties that come with the Bush administration's foreign policy of all war, all the time.
This leads to an almost too obvious conclusion - that the best economic stimulus plan of all would be to not go to war with Iraq and to ratchet down the war talk with North Korea. But it's not the peaceniks making this observation. It's the folks on Wall Street.
"Clearing away the clouds over Iraq would open the path for expansion, regardless of what the Bush administration is proposing," Robert DiClemente, a managing director at Solomon Smith Barney, recently told The Washington Post. "That is undoubtedly the biggest obstacle to expansion right now."
Americans are in a fearful state right now. Unemployment is up. So are energy costs. Businesses are cautious about expanding. And even with auto loans at 0 percent interest and mortgage rates at 40-year lows, most people can't afford to buy new cars or homes. Even the greatest engine of the U.S. economy - Christmas shopping - was a bust this season.
Why is all this happening? Because Osama bin Laden - the man whose name President Bush steadfastly refuses to say - is still on the loose and al-Qaida is still plotting terrorist attacks. Most Americans aren't convinced that the Bush administration is really doing all it can to fight al-Qaida and has instead squandered our resources and global goodwill on an ill-advised campaign against Saddam Hussein.
With all this anxiety, is it any wonder that most Americans aren't making ambitious plans for the future? The well-founded fears of what could happen in a second Persian Gulf War are definitely putting a damper on the economy.
But it could get worse. Yale University economist William Nordhaus recently published an analysis that shows whatever economic stimulus that might be achieved with President Bush's tax cuts would be quickly wiped out by war. Nordhaus wrote that the costs of a war with Iraq could be as low as $100 billion over the next decade, or could be as high as $1.6 trillion. The most likely scenario is that the U.S. economy would take a $391 billion hit over the next two years due to higher energy costs, a stock market decline and the costs of waging war. This would negate any positive effect from the Bush tax cuts.
The Center for Strategic and International Studies (CSIS) recently predicted that a war would result in a drop in stock prices by as much as 25 percent. How fast the markets would recover would depend on the length of the war itself. Even if Gulf War II lasts as long as the Persian Gulf War of 1990-91, CSIS analysts predicted falling stock prices, rising interest rates and a 50 percent drop in economic growth. If the war lasts up to six months, energy supplies are disrupted and there's another serious terrorist attack on U.S. soil, a deeper recession would be a certainty.
The Bush administration doesn't buy any of these scenarios. They believe that a quick, clean and ultimately victorious war with Iraq would lead to a stock market boom and vigorous economic recovery. But they are trying something that's hasn't been done since before the Civil War - waging a major war without increasing taxes to pay for it. Instead of instituting tax increases to pay for the ever-increasing cost of a global "war on terror," the Bush administration is cutting taxes for the rich and social services for the poor.
This is cynical beyond belief, but it is totally in keeping with the way this administration operates.
If you haven't read Ron Susskind's profile of Karl Rove in the January issue of Esquire, do so immediately. This article is the Rosetta Stone for explaining how President Bush's chief political guru - and by extension, the Bush White House - operates. In short, the Bush administration doesn't engage in policy planning and doesn't consider long-term consequences. All that matters is immediate political gain and every decision made in this White House is predicated on this.
Rove is betting that a war with Iraq can be accomplished painlessly and still allow for more giveaways to the rich. And all this can be done without the economic hangover that doomed George H.W. Bush's reelection in 1992. A glorious military victory in Iraq and economic recovery at home will assure a second term for President Bush.
It's an awfully rosy scenario that disregards many things. What happens if the Iraq war gets messy? Can we afford the cost of a U.S. occupation force in Iraq that could be there for a decade or more? What about the unfinished business in Afghanistan? And the growing North Korean threat? And al-Qaida?
Wars rarely unfold as planned. But this is a lesson that seems lost on the Bush administration. They are playing a dangerous game. A few may benefit, but the rest of us will be stuck paying in many ways for the consequences of rushing off to war without thinking first about the ultimate costs.
Randolph T. Holhut has been a journalist in New England for more than 20 years. He edited "The George Seldes Reader" (Barricade Books).