Iraq Fallout conflict broadly affects U.S. economy, society
(Washington-AP, Feb. 15, 2003 4:00 PM) _ Suddenly, the Iraq conflict is being blamed for just about everything.
Rising oil and gold prices. The stagnant economy. The stock market's swoon. Cracks in the NATO alliance. Increasing anti-Americanism. Elevated terrorism fears.
They all have been laid to war preparations.
Clearly, the potential for military action is a tremendous weight on consumers, businesses and American institutions. The growing consensus is that things will not get much better as long as the crisis persists.
But is the opposite true? Would a brief and decisive war _ or Saddam Hussein's exile _ revitalize the economy, spark a market rally and ease world tensions?
Federal Reserve Chairman Alan Greenspan seems to think so, at least for the economy.
He told Congress last week that war fears pose "formidable barriers" to recovery, but predicted the economy would rebound with stronger growth once those uncertainties were resolved.
Greenspan further suggested that new tax cuts _ for instance, those sought by President Bush _ were therefore unnecessary at this time. That statement gave Democrats ammunition and Bush allies anguish.
Some Wall Street analysts expect a rally once bombs start falling on Baghdad, pointing to other stock surges coinciding with the outset of wars. Markets can cope with war or peace, it seems, but never uncertainty.
Economists say Iraq is the biggest factor inhibiting a broader recovery, although serious economic problems remain that are not attracting as much attention.
"When there is one huge dark cloud, it's hard to see if there are any little clouds behind it," said David Wyss, chief economist at Standard and Poors in New York. "My feeling is that Iraq is our biggest problem, but not our only problem."
Wyss and other economists point to manufacturing overcapacity, the loss of private sector jobs and continuing oil production shortages in Venezuela.
"It's possible that Iraq is just a metaphor for many of our concerns," said Mark Zandi, chief economist at Economy.com, a nonpartisan consulting firm in West Chester, Pa. "I think if we get by Iraq quickly and it's relatively painless, that should help the economy get into higher gear. But that higher gear may not be high enough."
The march toward war figured in the administration's raising of its terror alert level to high. The administration alleges links between the Iraqi government and terrorists, seizing on a new purported Osama bin Laden tape urging Iraqis to attack Americans as further evidence of such connections.
War preparations and Bush's focus on Iraq also may be hurting his domestic proposals, which have run in to heavy congressional resistance, even from members of his own party. His proposals for eliminating taxes on stock dividends, overhauling Medicare and setting up new retirement savings accounts have become particularly hard sells.
Political analysts note that presidents traditionally endure much flak on domestic initiatives during times of war. There is less cash to go around after national security needs are met and opposition party members unwilling to criticize a wartime president on foreign policy focus their criticism on domestic issues.
If a war is brief and successful, then Bush "would garner great kudos," said Tom Mann, a political analyst with the Brookings Institution. "But if we continue with sluggish growth, a jobless recovery, growing deficits and competing demands for federal resources, the president is going to find that the further we get away from 9-11 and an attack on Iraq, the more problematic are politics at home."
For his part, Bush asserts that "this economy needs help" and largely blames the 2001 recession, the Sept. 11 attacks and "a loss of confidence in the markets because of the corporate scandals."
Meanwhile, his aides find themselves in the awkward position of having to play down optimistic predictions by Greenspan and others that a quick victory in Iraq will spur economic recovery _ in an effort to try to salvage those Bush tax cuts and other "stimulus" measures.
"As you know, economists don't always agree," said R. Glenn Hubbard, chairman of the White House Council of Economic Advisers. "Geopolitical risks are a key source of uncertainty to the economy, but I don't think they're the only ones."