This is part of an essay I had to write for scholarship stuff about "How would war with Iraq affect the American economy?"
----------------------------------------------------------------------------------------
September eleventh, anthrax scares, frequent Taliban threat videos, and most recently the Discovery disaster. Tragedies are threatening America from overseas and in our own homeland. These threats of homeland security fling President Bushs decisions about Iraq to the forefront of our minds. President Bush has advocated this war as a war against evil. Yet, many Americans today are asking the question, How will this war affect our nation? Fortunately, the members of this nation can view this war with promise of a better future, in spite of todays anguish.
Americas economy is still the strongest in the world. A shortage in the supply of Iraqi crude would not place a great deal of stress on our powerful economy. Politicians have created the fear that oil prices will drastically spike if the United States invades Iraq in hopes of placing Bush in a worse light. Iraqs actual oil supply is much less important than these Bush opponents would lead us to believe. The fact remains that Iraq supplies only 2% of world oil production and very little for export. Saudi Arabia, on the other hand, produces nearly 10% of world supply. According to a CNBC article dated October 21, 2002, OPEC supplies roughly a third of the world's oil supplies, 70% of which comes from the Persian Gulf countries of Saudi Arabia, Kuwait and the United Arab Emirates. Furthermore, the article announces that Russia recently became the world's largest producer of oil, producing about 7.5 million barrels of oil each day. Oil traders are concerned with the OPEC and Russian supplies, not Iraqs meager supply. Supply will be fine, as long as Saudi Arabia remains untouched. In fact, Mike Rothman of Merrill Lynch takes this sentiment further by saying, "Iraqi crude could be made up in less than forty-eight hours by the producers. Once there is shooting and Saudi Arabia is still producing, most any supply premium will dissipate . . . You can make up for Iraqi oil, but not for Saudi oil."
Unfortunately, Oil is not the exclusive economic issue for this war. War costs money. According to Boston Globe reporter Robert Kuttner, Most economists think two factors are keeping the economy out of recession - for now: very low interest rates and the administration's unintended deficit-spending. The federal budget (not counting Social Security) has a projected deficit of $314 billion this year. This is due largely to the gigantic impact of the tragedies through which the nation has suffered. With a war, the deficit will only grow. Economists expect A war with Iraq to cost billions of dollars a day, so we could easily spend $200 billion on war in 2003. That is also a controllable fraction of the $1.74 trillion dollars in tax cuts that Bush has proposed. Additionally, when viewed with respect to the GDP, the cost of this war will probably be lower than the price of Vietnam. The mighty, American economy is definitely able to handle the costs of this war.
Americas current economy is close to full production, but consumer loyalty has been faltering with the uncertainty war ineluctably brings. War weariness causes consumers to be afraid of investing money back into the economy. It is this fear that hurts our economy more than any lack in the supply of oil ever could. Without a steady supply of trust from consumers, companies are bound to deteriorate in the market, regardless of the quality of their product. Nevertheless, in the past, war has also brought the economy a boost due to unemployed citizens finding work manufacturing weaponry. However, with the current employment rate being so high, a war would not give the economy as much of a boost as in years past. Another aspect of Americas situation is that suppliers are using our resources. We do not currently have enough resources to boost a production in military goods. This would inevitably draw resources away from the consumer market, and create slight shortages. Shortages, of course, raise prices, which lowers consumer spending . . . and so the vicious cycle begins. The only guarantee against a falling economy during the war is to maintain a high level of faith in the market.
Another factor often left unconsidered is the postwar effects of the outcome of the war. If America wins the war, then the oil industries in Iraq will probably engage in free trade. Assuming that America defeats Iraq, the Allied countries will remove the trade embargo, currently still in place since the Gulf War. Without an embargo and after the removal of the current dictatorship, the oil industry in Iraq will grow to create a stronger oil supply and consumer confidence in American markets. Obviously, the economy would thrive in this instance. However, in the unlikely event that America loses the war, American markets would suffer devastating losses. Losing a war is a sure-fire way of causing the economy to collapse. The results of such a humiliating defeat are obviously atrocious.
------------------------------------------------------------------------------------------
I'll stop there cause the rest of the essay doesn't deal with the economy really. Just stuff I learned and thought that I could share it with you and maybe enlighten your view of this war.
----------------------------------------------------------------------------------------
September eleventh, anthrax scares, frequent Taliban threat videos, and most recently the Discovery disaster. Tragedies are threatening America from overseas and in our own homeland. These threats of homeland security fling President Bushs decisions about Iraq to the forefront of our minds. President Bush has advocated this war as a war against evil. Yet, many Americans today are asking the question, How will this war affect our nation? Fortunately, the members of this nation can view this war with promise of a better future, in spite of todays anguish.
Americas economy is still the strongest in the world. A shortage in the supply of Iraqi crude would not place a great deal of stress on our powerful economy. Politicians have created the fear that oil prices will drastically spike if the United States invades Iraq in hopes of placing Bush in a worse light. Iraqs actual oil supply is much less important than these Bush opponents would lead us to believe. The fact remains that Iraq supplies only 2% of world oil production and very little for export. Saudi Arabia, on the other hand, produces nearly 10% of world supply. According to a CNBC article dated October 21, 2002, OPEC supplies roughly a third of the world's oil supplies, 70% of which comes from the Persian Gulf countries of Saudi Arabia, Kuwait and the United Arab Emirates. Furthermore, the article announces that Russia recently became the world's largest producer of oil, producing about 7.5 million barrels of oil each day. Oil traders are concerned with the OPEC and Russian supplies, not Iraqs meager supply. Supply will be fine, as long as Saudi Arabia remains untouched. In fact, Mike Rothman of Merrill Lynch takes this sentiment further by saying, "Iraqi crude could be made up in less than forty-eight hours by the producers. Once there is shooting and Saudi Arabia is still producing, most any supply premium will dissipate . . . You can make up for Iraqi oil, but not for Saudi oil."
Unfortunately, Oil is not the exclusive economic issue for this war. War costs money. According to Boston Globe reporter Robert Kuttner, Most economists think two factors are keeping the economy out of recession - for now: very low interest rates and the administration's unintended deficit-spending. The federal budget (not counting Social Security) has a projected deficit of $314 billion this year. This is due largely to the gigantic impact of the tragedies through which the nation has suffered. With a war, the deficit will only grow. Economists expect A war with Iraq to cost billions of dollars a day, so we could easily spend $200 billion on war in 2003. That is also a controllable fraction of the $1.74 trillion dollars in tax cuts that Bush has proposed. Additionally, when viewed with respect to the GDP, the cost of this war will probably be lower than the price of Vietnam. The mighty, American economy is definitely able to handle the costs of this war.
Americas current economy is close to full production, but consumer loyalty has been faltering with the uncertainty war ineluctably brings. War weariness causes consumers to be afraid of investing money back into the economy. It is this fear that hurts our economy more than any lack in the supply of oil ever could. Without a steady supply of trust from consumers, companies are bound to deteriorate in the market, regardless of the quality of their product. Nevertheless, in the past, war has also brought the economy a boost due to unemployed citizens finding work manufacturing weaponry. However, with the current employment rate being so high, a war would not give the economy as much of a boost as in years past. Another aspect of Americas situation is that suppliers are using our resources. We do not currently have enough resources to boost a production in military goods. This would inevitably draw resources away from the consumer market, and create slight shortages. Shortages, of course, raise prices, which lowers consumer spending . . . and so the vicious cycle begins. The only guarantee against a falling economy during the war is to maintain a high level of faith in the market.
Another factor often left unconsidered is the postwar effects of the outcome of the war. If America wins the war, then the oil industries in Iraq will probably engage in free trade. Assuming that America defeats Iraq, the Allied countries will remove the trade embargo, currently still in place since the Gulf War. Without an embargo and after the removal of the current dictatorship, the oil industry in Iraq will grow to create a stronger oil supply and consumer confidence in American markets. Obviously, the economy would thrive in this instance. However, in the unlikely event that America loses the war, American markets would suffer devastating losses. Losing a war is a sure-fire way of causing the economy to collapse. The results of such a humiliating defeat are obviously atrocious.
------------------------------------------------------------------------------------------
I'll stop there cause the rest of the essay doesn't deal with the economy really. Just stuff I learned and thought that I could share it with you and maybe enlighten your view of this war.
