Wishful Thinking By Top Dems

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Posted by Tony from dsc04-lai-ca-3-167.rasserver.net ( on Wednesday, October 09, 2002 at 5:01PM :

Wishful Thinking By Top Dems

Miriam Pemberton is a research fellow with Foreign Policy In Focus, a project of the Institute for Policy Studies.

The Democratic Party’s leaders think they know how to seize the partisan upperhand: get a vote authorizing an attack on Iraq out of the way, so that the elections can focus on “their issue,” the economy.

On the very day that Senate Majority Leader Tom Daschle predicted strong bipartisan support and a quick vote for a resolution on Iraq, he took to the Senate floor and attacked the Bush administration for its inattention to the economic security of Americans.

This is a strategy of wishful thinking. The problem is its first leg undercuts the second. By supporting the Republican war fever, the Democrats are doing their part to endanger the economic recovery. They are revealing what poor economic stewards they are. Any military action abroad will come at great cost to the domestic economy.

Market behavior has been sending this message loud and clear. With news that the Iraqi government had accepted the return of U.N. weapons inspectors without conditions, oil prices, which had been rising dangerously near the $30 per barrel mark, dropped. Oil prices over $30 have been associated with the last four recessions.

The next day, when the Bush administration gave the Iraqi announcement the back of its hand, oil prices rose again. And that same day, the Dow Jones average dropped more than 150 points. Each $5 a barrel increase in oil prices cuts the already slim profits of non-energy companies by two percent per year, according to the consulting firm Economy.com as reported in Business Week.

Lawrence Lindsey, chair of the administration’s Council of Economic Advisors, predicted a war with Iraq could cost us one or two percent of our gross domestic product. This would not be a problem, he assured us. But there's a nice analogy between an economy and a bicycle. When a bicycle is tooling along at a nice clip, the analogy goes, it can ride over small bumps without a problem. When it's barely moving, these small shocks will topple it. Our economy is hardly tooling along. The stock market has just finished its worst quarter since the crash of 1987, and average household incomes fell for the first time in 10 years. The combination of massive tax cuts and massive defense spending increases have turned a federal budget surplus into a deficit. Economic growth rates continue to shrink.

Our economic bicycle, in other words, is barely teetering along. And a war with Iraq, with the potential to turn into a wider war, would be quite a bump. The markets know this. Polls are showing that majorities of Americans know this. Only our government leaders seem not to. Such is the false choice and folly of a political strategy that seeks to sever the debate on Iraq from a debate on America’s economic well-being.

-- Tony
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