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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: pogbull who wrote (7809)	10/4/2002 11:26:21 PM
From: stockman_scott	Respond to of 89467

CEOs see negative impact from a war in Iraq 10/04/2002 - Updated 11:17 AM ET WHITE SULPHUR SPRINGS, W.Va. (Reuters) — A war against Iraq could spell trouble for a fragile U.S. economy trying to regain momentum from its first recession in a decade, top U.S. corporate executives said this week. The overall impact would be negative with energy prices spiking up and consumers curtailing travel, but that could help communications companies because calling traffic spikes in times of crisis, executives said during the annual gathering of the U.S. Business Council. The Bush administration has been pushing for renewed, unconditional inspections for weapons of mass destruction in Iraq and is contemplating military action if Iraqi President Saddam Hussein refuses. "This is just another negative ... with respect to the capital markets and the equity markets," said Bill Harrison, CEO at J.P. Morgan Chase and vice chairman of the Business Council. A short war against Iraq might mitigate the downside impact on the U.S. economy, but should the conflict become complicated the economy would almost certainly suffer more, Harrison said, adding that the prospect of war was a "net negative." CEOs from a wide swath of companies, from technology to pharmaceutical firms, have been discussing national security and the economy at the luxurious Greenbrier resort in the mountains of West Virginia. As part of their talks, they received briefings from CIA chief George Tenet and Attorney General John Ashcroft. The CEOs released a survey in which almost all of them expect economic growth to slow in the second half of 2002 from the 3.2% tallied in the first half of the year. The U.S. economy started recovering late last year but the recovery has been bumpy, with annualized growth of 5% in the first quarter that fell to 1.3% in the second quarter. "I don't think a $100 billion tax on U.S. citizens is a good thing," Scott McNealy, chief executive of Sun Microsystems, said referring to the potential cost of a war in Iraq. One top chief executive, Fannie Mae CEO Franklin Raines, said he believed that a war with Iraq was inevitable. "War would have a depressive impact on the economy ... I think it would delay the start of business investment," he told Reuters. "It would be offset somewhat by lower Treasury rates as there's a flight to quality by investors, but it would probably be a net negative." Delta Air Lines chief Leo Mullin said there undoubtedly would be a dropoff in travel, noting that during the 1991 Gulf War, there was a 10% decline in traffic across the Atlantic and 5% drop within the United States. "If the war is of short duration, it may have very limited consequences. But if it's longer, we'll just have to handle it as the time comes," Mullin told Reuters. " And a big factor that would affect the airlines and numerous other sectors of the U.S. economy is oil prices. "Obviously energy costs will be a factor, there will be a spike," said Charles Holliday, CEO at DuPont. "We're already seeing oil up $5 a barrel." But not all companies expect their businesses to decline if war breaks out in the Middle East. Bill Esrey, CEO at Sprint, the No. 2 U.S. long-distance telephone carrier and No. 4 U.S. mobile telephone carrier, said whenever there is a major event, Americans pick up the phone or dash off e-mails to friends and family. "Any time you have an event, whether it's a war or a national news event, an earthquake, hurricane or whatever, it stimulates traffic," he told Reuters. "It's a boost in activity, it's not a huge change, but an incremental change." On Sept. 11, 2001 after the attacks on the World Trade Center and Pentagon, telephone networks were jammed with double the normal amount of traffic as people tried to locate loved ones and friends. -------------------------------------------------------------------------------- Copyright 2002 Reuters Limited. usatoday.com