Iraq endangers US economy takeoff

The New York Times reported the American economy grew at a vigorous annual rate of 4.2 percent in the first quarter, with military spending making a significant contribution to economic growth for the first time since the early days of the war in Iraq. If that is so, how come there are those who are worried the Iraq war may endanger the takeoff of the American economy?

Well, the worsening situation on the ground, with the Americans unable to pacify the Iraqi countryside can only mean that the cost of this war is going to go right through the roof. Pentagon and senior military officials recently testified that the price tag for military operations in Iraq is about $4.7 billion a month, a sum that would bust the budget just before the Americans vote this year.

Even as the Bush administration continues to downplay the cost of war and delay paying the tab by running a serious fiscal deficit, a Republican senator from Nebraska remarked that "every ground squirrel in the country" knows the administration will need an additional $50 billion to $75 billion, on top of last year’s $87 billion appropriation.

An article in BusinessWeek observed that this fiscal irresponsibility does the troops on the ground no good. "The long-term economic price of fiscal irresponsibility measured in terms of jobs and gross domestic product growth is high." It baffles me why the Democrats, notably the presumed nominee, Sen John Kerry, have so far been unable to drive home this message to the American people.

This should worry us for no other reason than we need the American economic recovery probably more than the Americans do. Given our own desperate problems with our economy, we need to be able to sell as much as we can to our principal market for semiconductors, garments and other export products, not to mention outsourced back office jobs. It is not surprising that we cheer any hint of recovery in the American market and worry when we see signs that such recovery seems to lack sustainability.

Many people only see the political implications of the resurgence of Iraqi resistance to the American occupying forces in their country. We have to see the economic implications on the world economy of continued bloodshed and violence in Iraq. The bad news from Iraq spells trouble to the American economy and to ours.

Signs of continuing American inability to manage the resistance that has united historical enemies in Iraq can only mean that the economic recovery we are starting to see in the US economy may be tentative. If Vietnam and our own resistance to the American invading forces in the early 1900s are any indication, the Yanks are probably in for a long and expensive guerilla type war in Iraq. It is unfortunate that the Americans never learn from history.

Bad as it seems, the Americans have seen nothing yet in Iraq. Researchers for the Gallup organization, working with funding from CNN and USA Today, report that 46 percent of Iraqis say the US has "done more harm than good" in the past year. The survey was done before the photos of American atrocities to Iraqi prisoners were shown by CBS in its program, 60 Minutes.

According to the Christian Science Monitor, the telling findings of the survey were that an overwhelming majority of Iraqis, 71 percent (and that figure rises to 81 percent if the Kurdish areas in the north are excluded), now see the US-led coalition as an occupying force and not as liberators. USA Today reports that a solid majority, almost 60 percent, wants the US and its allies to leave immediately, even if it means the security situation will deteriorate.

From an economic perspective, it does not help build our confidence to know that deficit spending related to the war effort is a strong factor driving up the economic indicators. Without the war spending, BusinessWeek observed, the gross domestic product would have expanded only at a mediocre pace: 3.5 percent. And if all hell breaks loose in Iraq and domestic confidence in American leadership falls significantly, the repercussions on the economy should be considerable.

Escalation of the resistance we now see in Iraq could also have some psychological impact on the international oil market, bringing crude price levels even higher than they are now. That would be a dampener for the world economy as it had historically been. It is clearly too early to be happy about news of so-called recovery of the American economy. It’s Iraq, stupid!

Roco’s Back

I think Raul Roco gave the best interview of the political season in ANC’s Impact 2004, last Friday evening. He was relaxed and his mind seemed more focused on the matters that count. He explained his medical condition pretty well, making our Publisher and Impact 2004 host Max Soliven acknowledge the damaging inaccuracy of our banner headline that day, the one that suggested he had bone cancer.

A slimmer Roco looked healthier and even very presidential in his dark suit, which tells me that he should junk his multicolored floral shirts for formal interviews like Impact. It was also the first time I saw him clearly focus on two things that matter most in this election: the need to be able to trust our leaders again and the need to give top priority to education as the most meaningful anti poverty measure. I hope this belated refocusing isn’t too late.

I had been telling the handlers of Roco in the weeks before he took his medical leave that it is frustrating to see the failure of their campaign to present Roco as the education president. I also found it a waste that they failed to present him as the son of an ordinary farmer and a public school teacher rather than the de campanilla lawyer who makes oodles of money in a world totally alien to the masa. Compared to Erap, Roco is the authentic masa, one who made good through education and should be a source of inspiration.

The pre-break Roco also came across to the public as intellectually arrogant. The Roco I saw being interviewed by Max Soliven and Karen Davila last Friday was relaxed, friendly and even a bit spiritual. This is a side of him we didn’t see too clearly two weeks ago. That break from the campaign trail must have really done him a lot of good.

The most important point raised in that show is the element of trust. People don’t pay the right taxes because they don’t trust the government leadership to spend their hard earned money well. Who can we trust to handle our nation’s finances? Who can we trust to have the intellectual ability to address our nation’s problems? Who can we trust well enough to allow him to lead us in this time of crisis?

This is probably the dirtiest election campaign in history and the one that presented us with the least desirable choices supposedly leading the race. This leads me to what I had been saying in this column for weeks –– don‚t vote for the lesser evil or for the devil you know. Vote for the best, no matter what the surveys now say.

Pinoy English

At a posh Manhattan dinner party, a visiting Pinoy was telling the guests about his home country and himself. As he concluded, he said, "And I have a charming and understanding wife but, alas, no children."

As his listeners appeared to be waiting for him to continue, he said, haltingly, "You see, my wife is unbearable."

Puzzled glances prompted him to try to clarify the matter: "What I mean is, my wife is inconceivable."

As his companions seemed amused, he floundered deeper into the intricacies of the English language, explaining triumphantly, "That is, my wife, she is impregnable!"

Boo Chanco’s e-mail address is [email protected]