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The Honolulu Advertiser

Posted on: Thursday, September 26, 2002

War with Iraq: What threat to the economy?

Whether a war with Iraq would help or hinder the U.S. economy, of course, shouldn't be the primary criterion in the go, no-go decision.

The costs of this war are "irrelevant," says Treasury Secretary Paul O'Neill, because freedom is at stake.

Assuming, however, that Iraqi leader Saddam Hussein is many years away from directly threatening the freedom of Americans, then the freedom O'Neill doesn't want to risk giving up is the freedom to shape the rest of the world more to our desires.

That's the thrust, of course, of Bush's newly published national security strategy.

Before launching a potentially costly war toward that end, Americans should be free to compare the costs to the benefits of such an enterprise.

Initial costs are already evident. Oil prices are climbing, consumer confidence is falling, the stock market is struggling and recovery from last year's recession is at risk.

A prolonged spike in oil prices, of course, would be a serious blow to the industrialized world. A successful war against Iraq, however, were it to put that country's enormous reserves in friendly hands, might make such a cost worthwhile by breaking the hold on oil prices of OPEC.

The endgame of a war against Iraq, unclear now in its outlines, is also crucial. All kinds of dark scenarios exist for a toppling of Saddam followed by chaos and increased Muslim hatred for America. But building a stable, democratic "role model" in Iraq might promote peaceful coexistence with the Muslim world. It remains to be seen whether the Bush administration, with its aversion to "nation building," has a workable postwar plan.

Occupation of a resentful Iraq or the containment of spillover regional disturbances, however, could mount substantial costs for years.

More broadly, there's social danger in attempting to fight a war without paying for it. The American economy was seriously harmed in this way by Lyndon Johnson's escalation of the Vietnam War without a tax increase, and again by Ronald Reagan's battle with the "evil empire."

By failing to finance a war against Iraq with a tax increase, we'll take the cost out on our poor. Already the number of Americans living in poverty is increasing, and incomes for the middle class are slipping. If Bush's extravagant tax cuts for the well-to-do are allowed to stand as war costs mount, then the nation faces even worse budget deficits and the social safety net will be trimmed even more.

The coming war will substantially aggravate the gap between rich and poor Americans, while exacting an unknown price in money and lives. The benefits, outside of ridding the world of a man we love to hate, are at this point theoretical and in large part dependent on factors over which Bush has little control.