Oh, yeah -- that's going to hurt McCain

[jducoeur]

I had suspected it, but this poll from CNN confirms it -- most people think that the Iraq War is part of why the economy is tanking.

Regardless of whether it's true (I happen to think it is, but I'm sure it will be argued), it's a very potent weapon for the eventual Democratic nominee. An argument that boils down to "Your War is why Americans are losing their jobs" is wildly over-simplistic, but likely to hit home quite effectively. McCain has put his entire reputation on the war, and while he may be able to sway people on the moral argument, I suspect that winning the pragmatic one is going to be a lot harder. The more people think about this link, and see McCain's justifications for the War, the crankier they're likely to get. Even Clinton can argue that she's been trying to disengage for a good while now, and that that might have spared the country the worst of the economic impact.

(Of course, this assumes that the economy is still in recession in November. I suspect that it will at least be perceived that way, even if a turnaround has started by then -- it takes time to shift the public perception, and I don't expect this particular setback to be either mild or quick...)

Comments

[onebuckfilms.livejournal.com]

Actually, the economic downturn is more due to junk mortgages and loans sold to people who cannot afford to pay them.

They went down, so the loan sharks no longer had the income they were banking on, and financial institutions build on artificial money via Interest imploded.

Government spending is inflated, and if that gets back to my taxes, it means money is going to the tax man rather than the economy, and the economy would be in even worse shape.

It might help or hinder McCain, but spending related to the war, as massive as it is, is probably miniscule next to overall spending of the nation.

Of course, Chrystler and other companies shutting down and manufacturing operations moving overseas doesn't help either.

Nobody paid, nobody to spend, no fuel for the economy.

[goldsquare.livejournal.com]

There is a nice article on this in the New York Times.

In the end, the issue here will not be what the prime cause is (which is certainly NOT the war per se), but how the dollar and the debt of the US have limited the scope of action of the US and its responses to the ballooning of both bad debt, and its lack of isolation in the economy.

One might also wonder about the ordinary business cycle. It booms and busts, and will never do another - but the Bush Boom was particularly weak, while the bust is fixing to be righteously bad. One can certainly argue that these facts are part of both the Iraq War and the tax strategies of the Bush Administration, both of which McCain supported.

I think one could argue, at some stretch, that the strain on the US middle class has lead to a transfer of reliance upon home ownership as an investment, and how the US economy's fundamental weaknesses in the consumer sector were transferred to housing and equity, and that the reliance upon this faux prosperity of concretely spending otherwise unrealized gains was part of the Bush Economy that McCain supports - but somehow that's both weaker, and more subjective.

And no longer much of a political rallying cry.

But, in the main, jducoeur is substantially correct in how the US voter is both confused, and easily lead to conflate these things - which will be ashes in the mouth of McCain.

[alexx-kay.livejournal.com]

spending related to the war, as massive as it is, is probably miniscule next to overall spending of the nation.

Is it? (Alexx goes off and googles...)

War spending so far, approx .5 trillion, so call it .1 trillion per year.
US GNP in 2006: approx 13.13 trillion.

So the war is costing a little under 1% of the GNP. I wouldn't personally call that miniscule in this context, but one might.

[be-well-lowell.livejournal.com]

That's a good point. To connect that cost to the problems in the economy, it might be more useful to compare it to the mortgage debt in the country (thus tying it to goldsquare's post today).

The total amount is roughly similar to the GDP, so by a back-of-the envelope estimate, I'd say that the amount of money taken out in home mortgages in a single year is similar to the cost of the war (order-of-magnitude kind of similarity). Given that all of that war cost has been financed by public debt, how can all that extra borrowing have not contributed to, say, the mortgage crisis?

[onebuckfilms.livejournal.com]

What tax increases have there been as a result of war spending?

[alexx-kay.livejournal.com]

No direct tax increases. Significant amounts of deficit increases, and the likelihood of strong inflation. No matter how much Bush pretends that money spent on Iraq "doesn't count", it will all get paid for by taxpayers in the end, one way or another.

[be-well-lowell.livejournal.com]

If there had been tax increases, it wouldn't be "public debt." That's kind of the meaning of the term. [Really. You can look it up if necessary. While you're at it, you might want to check into the concept of "interest," which is a closely associated concept.]

[onebuckfilms.livejournal.com]

But if it hasn't been taken out of the economy via taxes, there is no basis for it affecting the economy.

Of course, when taxes DO go up, then THAT WILL have an effect.

But there is no cause yet.

[jducoeur]

But if it hasn't been taken out of the economy via taxes, there is no basis for it affecting the economy.

That's simply not true -- it's a very naive view of how the economy works. It's instead being taken out of the economy as *debt*, as reduced available credit for the government to use (a serious problem when we're we're facing imminent stagflation), as damage to bond ratings, as imminent inflation because the government is forced to print money, as damage to the dollar (which affects nearly every sector of the economy), and so on.

These problems aren't as *visible* to the average guy in the street, but they certainly cause considerable economic damage, just less directly. Indeed, they are far more damaging to the economy than simple income tax rises are: they're much more systemic, and harder to adjust for...

[onebuckfilms.livejournal.com]

Now google and compare defense (war) spending against general Government spending.

See how overtaxed we are?

[alexx-kay.livejournal.com]

I make defense spending to be over 24% of the budget, up from about 21% last year. Given the low level of threat we currently face, I do find that excessive.

[its-just-me.livejournal.com]

With all due respect, and keep in mind that I whole heartedly agree, if you take a poll from Fox news and such you will probably have results skewed the other way.

[jducoeur]

Fair point -- it'll be interesting to see how this actually plays out. But my intuition is that this is, at best, going to be a weakness for McCain...

[its-just-me.livejournal.com]

We can only hope.

No doubt about it

[metageek.livejournal.com]

most people think that the Iraq War is part of why the economy is tanking.

I don't think there can be any doubt it's part of the problem. The only room for argument is over how much of the problem it is. The war roughly doubled the price of gas, after all. Also, by driving up the public debt, it reduced foreign confidence in the dollar, which has driven down the value of the dollar and driven up the price of imported goods.

Oh, and the war, and Bush's menacing stance toward Iran, inspired Iran to start selling oil in euros, which further weakens the dollar.

Re: No doubt about it

[laurion]

Mmm. I'm not sure how much of the gas prices are irrevocably linked to the war. Gas prices are high globally, despite there being plenty of producers and consumers not disastrously embedded in the current conflict. Russia is continuing to produce at a profligate rate, as are parts of South America. OPEC has plenty of options, but has specifically chosen to keep their production rates low in the face of increasing demand. Much of the increased demand is from parts of Eastern Europe, and much of it is from China, which is unabashedly growing and insatiably consuming resources from around the globe.

The war certainly hasn't helped, by tightening political and economic concerns in the Middle East, by channeling our own sources and reserves more towards the military sector, by increasing our international debt (again, China as the fastest growing giant comes into play here), and by frittering away a lot of political capital. The economic downturn, not entirely tied to the war, is also having a negative effect on the pump prices. Unfortunately for us, oil prices are also the foundation of transportation costs, which in turn affect almost every sector imaginable.

Re: No doubt about it

[metageek.livejournal.com]

Mmm. I'm not sure how much of the gas prices are irrevocably linked to the war.

<research, research>...you may be right. Invading Iraq took two million barrels per day off the market, but that's only about 10% of OPEC's total. It's still true that the war is part of the reason prices have gone up; but it may not be the biggest reason.

Re: No doubt about it

[jducoeur]

True, but remember that the effects are non-linear. If demand is relatively inelastic (as energy demand seems to be), then as soon as demand outstrips supply prices go *way* up. 10% can be a lot in such a system, if it causes the demand/supply curves to cross. (Think of it like system load -- 10% can be the difference between running smoothly and thrashing to death. Iraq's oil could be the thing that caused it to hit the elbow.)

To be fair, it isn't the biggest reason -- China's voracious consumption is probably biggest, and the return of OPEC's nerve as a cartel is probably next. But the war probably has done much to stiffen OPEC's spine, so even there it's had a negative impact...

[laurion]

From what I can tell, the Dem voices are already starting to use this. Both Obama and Clinton have more than hinted that they'll be looking to shutdown some or all of the war spending and use that 'savings' to fund their other initiatives. I think that argument will win votes, but it won't hold out in the long run. Extricating from a conflict, and maintaining some level of diplomatic efforts and humanitarian aid, is likely to cost more than anyone wants to admit.