by John M. Curtis
(310) 204-8700

Copyright March 8, 2008
All Rights Reserved.

resident George W. Bush admitted Friday, March 7 that, “It's clear our economy has slowed,” refusing to concede he's sent the country into recession. Former Federal Reserve Board Chairman Alan Greenspan warned about recession Feb. 22, 2006 yet refrained from telling the White House what to do. Few central bankers give political advice, opining about fiscal policy, including whether to fund a costly foreign war. While unemployment remains low at 4.9% by historic standards, the Commerce Dept. reported a February net loss of 63,000 jobs, signaling dark days ahead. Current Fed Chairman Ben S. Bernanke has slashed the Federal Funds Rate—the overnight rate banks charge other banks—to 3%. When the Fed's Open Market Committee meets March 18, Beranke signaled he might cut rates as much as .75 basis points, taking the Prime Rate down to 5.25%.

      Slashing rates hurts the U.S. dollar and fuels inflation, especially in commodities like oil, whose $106 price per barrel broke new records March 7, driving the dollar to record lows against the euro. Crude oil prices—other commodities and precious metals—have gone through the roof because of the dollar's devaluation. “I know this is a difficult time for our economy,” said Bush, “but we recognized the problem early and we provided the economy with a booster shot,” totally ignoring the fiscal cause devaluing the dollar and driving the economy to recession. Issuing tax rebates won't reverse the massive and intolerable spending on the Iraq War. Nobel prize-winning, Columbia University economist Joseph Stiglitz burst Bush's bubble, blaming the economy's collapse on the Iraq War. His March 10 book titled “The Three Trillion Dollar War” gives the gory details.

      While the current price tag for the Iraq War is around $1 trillion, Stiglitz believes the ongoing costs could hit $3 trillion, wreaking catastrophic damage on the U.S. economy. “We don't go to war on the calculations of green-eye shaded accountants and economists,” said Bush before Cruise missiles hit Baghdad March 20, 2003. “It used to be thought that wars are good for the economy. No economist really believes that anymore,” said Stiglitz, confronting conventional wisdom that wars help the economy. Instead of raising taxes to fund the war, Bush's cut taxes in 2003, believing, like a good Supply-sider, that it would stimulate the economy. Despite White House promises to use Iraqi oil revenue to help finance the war, it has drained the U.S. treasury, pushing the economy to recession. Stiglitz believes the war has directly caused the slowdown in the U.S. economy.

      Fed Chairman Ben S. Bernanke is adding $200 billion to banking reserves to offset the liquidity crunch currently squeezing credit. Bernanke hasn't told Bush directly that the war is unsustainable and must be concluded. GOP presumptive nominee Sen. John McCain (R-Ariz.), who received Bush's endorsement March 5, continues to spew patriotic platitudes about “winning the war with honor,” taking, perhaps, as much as 100 years to assure victory. McCain, ranking member of the Senate Armed Service Committee, passed over Boeing and helped award European Aeronautic Defense and Space agency and Northrop Grumman a 10-year, $40 billion contract, costing potentially thousands of U.S. jobs. Boeing was presumably punished for its 2003 fuel tanker scandal in which they allegedly offered Air Force acquisition offical Darleen Druyun a job, costing CEO Phil Condit and CFO Michael Sears their jobs.

      Pulling the U.S. economy out its nosedive is no easy task for Bernanke, forced to slash interest rates and sacrifice the U.S. dollar to save the economy from recession. “To offset that depressing effect, the Fed has flooded the economy with liquidity and the regulators looked the other way when very imprudent lending was going up,” said Stiglitz, lamenting the un-repayable debt. Causing even bigger problems, the U.S. looks to Middle East's sovereign wealth funds for a bailout. “The reason was obvious. The war had led to high oil prices. The war had meant that America had to borrow more money,” said Stiglitz, explaining how, without liquidity, the government had to beg the Mideast for a petro-dollars' bailout. Stiglitz also points out that the U.S. cash-crunch limited the amount of the fiscal stimulus Bush sought to help jolt the economy out of its current coma.

      Spending $12-16 billion a month on Iraq and Afghanistan is unsustainable without catastrophic damage to the U.S. economy. There's no greater threat to U.S. national security than watching the mightiest world economy brought to its knees. Whatever risks exist of Al Qaeda taking over Iraq, there's far greater risk to national security watching the U.S. economy disintegrate. Few Mideast experts, except those pushing the White House agenda, believe that Iraq's Sunnis, Shiites and Kurds will surrender their sovereignty to Al Qaeda. If Iraq's new military and security forces can't, after five years, defend their sovereignty, then there's little left to the U.S. mission. Bush, and now McCain, hasn't acknowledged the Iraq War's damage to the U.S. economy. There's nothing patriotic about failing to change course, draining the treasury and sacrificing the economy.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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