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War's Cost May Dwarf Stimulus Effect
(Jonathan Weisman, Washington Post, 8 January 2003)
Bush is plowing ahead with an ambitious 10-year, $674 billion economic stimulus plan even as U.S troops pour into the Persian Gulf region preparing for war. . . . The president's determination to push more tax cuts as the nation prepares for war has struck some economists as folly, since the economic shock of war would likely dwarf the impact of Bush's stimulus plan. Moreover, no tax policy at the moment could actually address what many economists believe to be the greatest drag on the nation's economy: the uncertainty of war. . . . But it is becoming increasingly difficult to address those domestic needs without first confronting the problems abroad, economists said. . . . The cost to the Treasury of a war with Iraq could be as low as $100 billion over the next decade or as high as $1.6 trillion, he concluded. Most likely, the economy would take a $391 billion hit in the next two years, Nordhaus predicted, which would dwarf the cash infusion the president is offering. . . . A recent analysis by experts convened by the Center for Strategic and International Studies predicted that any war would knock down stock prices by as much as 25 percent, more than undoing the anticipated benefit of the dividend tax elimination. . . . But if the war lasted even six to 12 weeks, stock prices would continue to fall, interest rates would rise and economic growth would slow by 1 3/4 percent, the CSIS analysis said. A worst-case scenario -- in which the war dragged on for 90 to 180 days, oil supplies were significantly disrupted, and serious terrorist attacks ensued -- would push the economy back into recession, regardless of economic policymaking. . . . "Whenever the president talks about war, he talks about a spirit of shared sacrifice," Gale said. "But for rich people, shared sacrifice appears to be accepting tax cuts, and for the poor, it seems to be accepting cuts in social spending. [And, of course, it is the sons and daughters of the poor who will be dying in battle.] There seems to be a disconnect bordering on the dishonest."



posted by Lorenzo 12:44 PM


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