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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (67542)	1/21/2003 8:34:48 PM
From: JohnM	Read Replies (2) \| Respond to of 281500

Stiglitz on the effects of war on the US economy. Great find, Scott.

To: stockman_scott who wrote (67542)	1/22/2003 6:36:36 AM
From: frankw1900	Respond to of 281500

Stigltz is full of it. The Gulf War of 1991 demonstrated that wars can actually be bad for an economy. That conflict contributed mightily to the onset of the recession of 1991 (which, it should be remembered, was probably the key factor in denying former US president George Bush re-election in 1992). In 1991 interest rates were much higher. Bush senior didn't keep his promise and there were new taxes and that's what probably contributed to the severity of that recession and his loss of the election. Stiglitz hasn't made an argument proving Gulf War I caused the recession in '91. As Stiglitz himself admits the cost of a war with Iraq now will be about .1 to .2 percent of the US GDP. Even as percent of government expenditure this not not outrageously huge. The Iraq war probably won't do a whole lot of good for the US economy but it's not going to harm it greatly. There may be a spike in oil prices but that will be temporary. Stiglitz says the country can't afford a tax cut but he doesn't make an argument to show it's going to be harmful. M. Friedman who also got a Nobel lollipop thinks a tax cut is good for the economy and that's where his expertise is, and that's not where Stiglitz's is. His comment about the US trade deficit is foolish: We must take into account uncertainties connected to the US' massive trade deficit, which has reached all-time records. It's irrelevant. It means foreign goods eventually will be less attractive because more expensive and domestic goods more attractive because less expensive - things will balance out, probably with an increase in domestic employment.