War Talk Provides Cover Fire

The Bush administration dominates the news every time it says anything about its prospective war with Iraq. As an example, the “strategy” document released Friday, calling for preemptive action against terror, was mostly a rehash of the president’s speech of June 1. And yet discussion of its particulars dominated the weekend, as other news was mostly buried.

And maybe that’s the real brilliance of the Bushies--changing the subject away from the economy, stupid.

Consider: The Dow Jones industrial average fell below 8,000 last week and closed Monday at 7,872. Just Sunday, Peregrine Systems, a San Diego-based software company, filed for bankruptcy. As an example of the cratering in high tech, Peregrine sold off a subsidiary unit for $350 million after having paid $1 billion for that same unit in August 2001. Speaking of lost billions, WorldCom revealed last week that it probably misreported $9 billion in revenue, not $7 billion. Meanwhile, leading economic indicators and housing starts have fallen for three months in a row. Finally, oil prices went above $30 a barrel Monday, up 40% since the start of the year.

If this news seems secondary, maybe there’s a reason for that. But not a good reason, according to Sen. Robert C. Byrd (D-W.Va.). The octogenarian legislator offered his own explanation on the Senate floor Friday: “The president was dropping in the polls and the domestic situation was such that the administration was appearing to be much like the emperor who had no clothes.” Speaking in his usual flowery prose, Byrd described the coming of “the war fervor, the drums of war, the bugles of war, the clouds of war.”

Was there a sudden surge of war threat to match the surge of war talk? Not in Byrd’s view: “I sat in on some of the secret briefings, and nobody from the administration has been able to answer the question: Why now?” And yet even if the military threat of Iraq has been hazy, the political impact of eclipsing the economy has been quite clear. “What has that done to the president’s polls?” Byrd asked, and then answered: “Seventy percent.”

Perhaps Byrd is too cynical. But economic concerns may yet punch through. That’s the message of an article in the Sept. 23 issue of Barron’s, the Wall Street-oriented weekly, which speculated on the cost of war, describing four economic scenarios: “the good, the bad, the ugly and the horrible.”

The good scenario estimates war outlays at $200 billion. That’s more red ink atop a deficit already projected to be more than $300 billion in both fiscal years 2002 and 2003. The other scenarios--bad, ugly, horrible--revolve mostly around recession-producing oil price and interest rate spikes, spikes that could become new, higher plateaus. So maybe the Bush administration is wise to keep shifting discussion from the home front to the war front.

In a story placed prominently in Monday’s Financial Times, National Security Advisor Condoleezza Rice pledged that the U.S. will be “completely devoted” to the democratic reconstruction of Iraq. That sounds nice to foreign-policy wonks--although such “nation-building” has yet to be budgeted.

But the Rice story succeeded in at least one mission. It was more visible than another story in that paper, a piece that normally might generate chills among economy-minded Americans: Foreign investment into the U.S. fell from $301 billion in 2000 to $125 billion in 2001. Even more ominously, a worldwide corporate survey showed that China, not the U.S., is the most attractive country for future investment.

But is it really a surprise that capital markets are shying away from a nation that’s preoccupied with starting a foreign war?

To be sure, if American military action produces a safer world, the “investment” in fighting will be worthwhile. But, as Byrd said, there’s been no sudden development in Iraq. Indeed, the developments seem to be everywhere but Iraq. As House Intelligence Committee Chairman Porter J. Goss (R-Fla.) said over the weekend, 70,000 anti-American terrorists are loose in the world, their numbers increasing by 2,000 every month. How will a U.S. occupation of Baghdad affect those baddies and their bad plans?

Bush believes, rightly, that defense trumps dollars. But if he miscalculates national security, he will also fail at economic security.

And then the nation will be less safe, not to mention less prosperous. And eventually, Americans will notice.