Friday, February 08, 2008
Oil prices are at approximately $88 a barrel, although they have dropped from the record high of $100 earlier this month. As Nobel laureate Joseph Stiglitz recently noted in Vanity Fair, “The soaring price of oil is clearly related to the Iraq war. The issue is not whether to blame the war for this but simply how much to blame it.”
Before the war, economists were predicting that oil prices at just $75 a barrel could potentially send the U.S. economy into a recession. Therefore, the current economic situation should not come as a complete shock to the Bush administration. A look at economists’ pre-war predictions:
“A war against Iraq could cost the United States hundreds of billions of dollars, play havoc with an already depressed domestic economy and tip the world into recession because of the adverse effect on oil prices, inflation and interest rates, an academic study [by William Nordhaus, Sterling professor of economics at Yale University] has warned.” [Independent, 11/16/02]
“If war with Iraq drags on longer than the few weeks or months most are predicting, corporate revenues will be flat for the coming year and will put the U.S. economy at risk of recession, according to a poll of chief financial officers.” [CBS MarketWatch, 3/20/03]
“If the conflict wears on or, worse, spreads, the economic consequences become very serious. Late last year, George Perry at the Brookings Institution ran some simulations and found that after taking into account a reasonable use of oil reserves, a cut in world oil production of just 6.5 percent a year would send the United States and the world into recession.” [Robert Shapiro, former undersecretary of commerce in the Clinton administration, 10/2/02]
“Gerd Häusler, the IMF’s director of international capital markets, said that ‘purely from a financial markets perspective, a serious conflict with Iraq would not be a very healthy development.’ … Häusler said there could be a repeat of what happened in 1990 following the Iraqi invasion of Kuwait, when there was a sharp rise in oil prices.” [World Bank, 9/02]
MoveOn has a petition here to tell Congress to “quickly pass a stimulus package” that helps mitigate this “Iraq recession.”
UPDATE: Martin at Scholars and Rogues has more.
QUESTION: Dana, how can the president give a great financial boost to help the ailing economy when it’s being held down by $9 billion a month to pay for the Iraq war? How is he going to really bring that together?
PERINO: Well, I don’t — you know, we’ve been at war, as you know, since September 11th, the day after September 11th, when the president decided we were going to take the fight to the enemy. And during the past several years, both in Afghanistan and Iraq, during those years that we’ve been at war, this economy has been very strong. We’ve had 52 consecutive months of job growth.
And fighting the war and making sure our troops have what they need is going to be imperative to the safety of this nation. The president does not apologize for spending money on national security.
Going forward, what the president wants to do in this short-term package is to make sure that we get enough money moving in the economy so that we can avoid the potential risks of a downturn.
QUESTION: I’m not saying apologize, but that is a fact that on your books, if you’re saying you have a checkbook, you’re writing out your checks for the $9 billion a month, and then you still have other things. You say you want to give incentives to businesses, financially, I guess, and tax relief to consumers. How do you balance those books, though…
PERINO: I think I would flip it around and say I think that members of Congress might be able to find some of their pet projects and their earmarks that they could eliminate, that could help with this package. We’re talking about, you know, 1 percent of GDP that’s going to be robust enough to be able to have an impact.
But the president is certainly not going to shortchange our troops. One of the most important things he can do is make sure that the economy stays strong, that it supports all Americans and it certainly supports the troops.
And it supports the economies overseas as well, in terms of if you look at places like Iraq, we’ve been able to help them over the past several years, as they’re getting their democracy under way, but their economy is starting to improve as well. And so we can start transferring over to the Iraqis more of that responsibility. And the Iraqis right now, I think today, are talking through their budget for 2009. And they’re moving forward in a way that we would want them to. And they were going to take up a lot more responsibility to pay for their own security and their roads and bridges and their schools, all the things that we pay for here.