While President George W. Bush devoted much of his State of the Union Address to the need to topple Iraqi president Saddam Hussein, in the first half of his speech the president focused on domestic issues, especially the need to stimulate America’s economy. But, as George Krawciw reports, it is the uncertainty of war with Iraq, which is now undermining U.S. economic growth.
In his address the president reiterated his conviction that the economy can best be stimulated by tax cuts.
PRESIDENT GEORGE W. BUSH
“Jobs are created when the economy grows. The economy grows when Americans have more money to spend and invest. And the best, fairest way to make sure the Americans have the money is not to tax it away in the first place.”
While both sides support tax cuts, many Democrats say the Bush plan benefits wealthy Americans. The Democratic response to the State of the Union Address was delivered by the Governor of Washington State, Gary Locke.
“It will create huge permanent deficits that will raise interest rates, stifle growth, hinder home ownership, and cut of the avenues of opportunity that have let so many work themselves up from poverty.”
But, even as both U.S parties propose their own solutions, analysts say it is the very prospect of war with Iraq, which is now hurting the economy. Businesses are spending less, Investors not investing, consumers buying less. Economist Douglas Lee.
“The economy has already felt an impact, just because people are anticipating a war.”
If and when war breaks out and a U.S.-led victory is near, the uncertainty may ease and the economy may improve. But economic experts, like Robert Hormats, say that is a risky assumption:
“The only thing that you can be sure of in a war is that there will be surprises. There will be unintended consequences. If they adversely affect oil, they will adversely affect the American economy.”
Twenty percent of the oil imported by the U.S. comes from the Middle East, and any disruption would come at great cost to consumers and businesses. The fear is that Iraq could not only burn its own oil fields, but also damage fields in Kuwait or Saudi Arabia.
“The quicker the U.S. succeeds in overwhelming the Iraqis without damage to the oil facilities in the region, the quicker we will see a big improvement in the stock market.”
Also fueling consumer and business anxiety, the billions of dollars that would be needed in addressing Iraq’s post-war economic needs, the billions that would only add to an already large U.S. budget deficit.