Watching Your Foreign Policy Obliterate Your Domestic Policy

The Washington Post ran an interesting story today on how Bush's grand plans in Iraq could very well undermine the effects of his (alleged) stimulus package. The essential point of the article is that:

"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."

It would appear therefore that the Bushies are operating in a happy times scenario, whereby we invade Iraq and topple Hussein quickly, and move into a relatively painless occupation, with little collateral impact to our country and its economy. Under this scenario, Bush uses his burgeoning public approval as a victorious leader to push his plan through over the already-stated disapproval of John McCain and swing Democrats like John Breaux. Given how this package was developed and is being sold, we can see how such a detachment between the happy times scenario and foreign policy reality can take place.

We know from earlier reports that the economic plan was developed largely by Rove and the closed circle in the political shop, and not the (depleted) economic team. This would explain the cynical sales job towards seniors, as William Saletan in Slate pointed out, and the misleading statements (repeated by the media) about the "average" tax cut to families, (as if most families will see anything like that). You would have to think the economic experts in the Administration, no matter how supply-side they may be, would still know (if they were asked), that the costs and uncertainties of the Iraq war and deteriorating fiscal conditions of many states would mitigate against any benefits from the Bush plan.

Even if the actual military campaign goes quickly due to a coup, and not a street-by-street slugfest in Baghdad, the post invasion costs will be steep and born almost exclusively by the US Treasury until we can plunder the oil to pay for it. Any hoped-for uptick in optimism amongst consumers by the Bushies stemming from a quick resolution of the war would also be quashed by the expected next strike(s) by Al Qaeda in response to our occupation.

But even those hopes for better times would be contingent upon more hiring, and more consumer spending. And it is hard to see how either of those are furthered along in the short term by the Bush plan's lack of real stimulus relative to debt creation and a foreign policy that strives on constant planned chaos.

Steve Soto

Posted January 08, 2003 12:26 PM | Comments (5)