Economic Costs Could Weaken Bush Politically

www.washingtonpost.com By David Von Drehle Washington Post Staff Writer Sunday, March 16, 2003; Page A13

 	Oil industry analysts say a quick and clean war would probably result in significantly lower gasoline prices at the pump. (Greg Wahl-stephens -- AP) 

The crisis in Iraq has become a sharply personal test for President Bush, placing public trust in his judgment -- perhaps a president's most important asset -- at the heart of the issue.

Friends and critics generally agree that a bad outcome could undermine trust in his leadership not only abroad but also at home, with ramifications from Capitol Hill to Wall Street to Main Street and the ballot box. If events tend to show that Bush has miscalculated, that his critics sized up the risks better than he did, it would undercut confidence in his approach to domestic issues: the lagging economy, reform of major entitlement programs, homeland security and so on.

If, on the other hand, his judgment were vindicated by success in Iraq -- a quick war, minimum loss of life, and a relatively calm aftermath -- Bush could be rewarded with a surge in confidence among investors and consumers. Oil industry analysts say a quick war with a mild aftermath would probably lead to a significant drop in oil prices, and many economists believe Wall Street would respond.

Even the best results, though, might not return Bush to the stratospheric level of support he enjoyed from Americans in the aftermath of Sept. 11, 2001. The fierce debate over Iraq has catalyzed opposition to Bush in a way that earlier events did not, which could limit the potential impact of a victory on domestic issues. Given the narrowly divided Congress, "war in Iraq is not going to make his Medicare proposal more palatable back home," said Bruce Reed, chief domestic policy adviser in the Clinton administration.

In effect, Bush has staked his judgment against the judgment of a daunting roster of world leaders. At a recent news conference, he repeatedly answered questions about world opinion by citing his personal convictions. "I make my decisions based upon the oath I took," he said. ". . . I believe Saddam Hussein is a threat. He's a threat to the American people. He's a threat to people in his neighborhood. He's also a threat to the Iraqi people."

It is unusual for a president to be so completely identified with a war, according to historian Douglas Brinkley. The Mexican-American War of 1848, he noted, was widely known as "Mr. Polk's War," because President James K. Polk essentially made it happen. "This might be called Mr. Bush's War."

He continued: "If things don't turn out right and the economy stays sour and terrorist acts are going on around the world, it gives the opposition party a lot of issues."

Worry over home-front effects of the war begins with the price of oil.

Few, if any, factors mean as much to the economy, or land so squarely on the wallets of consumers. Some critics of the war worry that Hussein could sabotage his own oil fields if faced with defeat, and attack the fields in Saudi Arabia and Kuwait. If enough damage were done to seriously disrupt Middle East oil production, the global economy would almost certainly slide into a recession, economists generally agree.

However, if the disruption were limited to Iraq, oil prices would probably drop -- something voters and investors would like to see. According to James Placke, an Iraq expert and oil analyst at Cambridge Energy Research Associates, prices are already quite high because of a recent strike in the Venezuelan oil fields and general fears about war.

"Now Venezuela is coming back," he said. "A war premium of four or five dollars is already factored in. If war goes well from the U.S. perspective, the price would drop almost immediately below $30 per barrel." The price is currently around $32 per barrel. Once the 1991 Persian Gulf War got underway, Placke said, "the price dropped $10 a barrel overnight," and Hussein's decision to torch the Kuwaiti fields "didn't really have much effect."

While the U.N. debate has frayed alliances and given Wall Street the jitters, it has actually reduced the danger of an oil crisis by delaying a war. The end of winter typically reduces global demand for oil by about 2 million barrels per day, roughly the equivalent of the entire production of Iraq. Other OPEC members have pledged to increase production if necessary to maintain a steady supply.

In the longer term, many experts expect that the cost of reconstructing Iraq, including care of refugees, troops to keep the peace and repairs to bombed infrastructure, would add scores -- even hundreds -- of billions to a federal deficit already spiraling out of control. Some administration supporters worry that Bush would turn from a relatively successful war only to find himself stymied domestically by red ink and a Democratic Party gearing up for the next election.

"We saw with his father that winning a war with Iraq doesn't necessarily mean you're out of the woods," said one Republican with close ties to the White House.

Democrat Reed agreed. "It's possible the war could strengthen his hand in his own party," he said, thus allowing Bush to pass some legislation on straight party lines. "But things will get back to normal pretty quickly. As soon as the White House gets back to a partisan agenda, the partisan divisions will reemerge."

Democrats would also be affected by the course of a war. Among the nine announced candidates for the presidential nomination are some antiwar candidates, some pro-war candidates and a few with highly nuanced positions somewhere in the middle. Events in Iraq will strengthen some and damage others; Iraq could be the issue that reinvigorates the Democratic left after a decade of Clintonian political moderation.

Bush, ultimately, has staked his political future and his legacy on Iraq; failure would probably spell the end of his project to shift the balance of power in American politics decisively rightward and establish a lasting Republican majority. At home as well as abroad, this has become a defining moment.

"They've raised expectations very high," said Walter Russell Mead of the Council on Foreign Relations. "They've answered doubts about policy with assurances that it's a short war. Usually you lower expectations. They've raised them."