Domestic Economics: Opposition to Bush's War Proposal

"Diesel Prices Force Small Truckers Off the Road: As Fuel-Price Rise Puts Squeeze on Little Players, Bit Outfits May Jump In," [3.11.03, B6].
"The sharp increase in diesel fuel prices is threatening to put many small trucking companies out of business. With diesel hitting $1.70 a gallon on average in recent weeks -- more than 55 cents a gallon higher than a year ago -- many small truckers are seeing their profits evaporate... Trucking remains a highly fragmented, fiercely competitive industry. More than 80% of the 600,000 trucking companies nationally operate six or fewer trucks, says Bob Costello, chief economist of American Trucking Associations.. Costello says that if fuel prices stay high for long -- or go higher -- he expects a substantial increase in the number of trucking-company failures this year [see graph]."

"Small Talk: No. 1 Problem: Small-business owners' biggest concern last month," [3.11.03, B6].
"Times change and for small businesses, worries do too. What was once the biggest concern for entrepreneurs in no next to the bottom on the pile: inflation. What has made it to the top of the National Federation of Independent Business's monthly poll, and has remained there during the past three months is insurance -- both its cost and availability [see illustration]."

"War Jitters Send Markets Down; Treasury Yields Hit 44-Year Low," [3.11.03, A1].
"With investors wringing their hands over a possible war's impact on an already fragile economy, stocks tumbled to a five-month low and the yield on 10-year Treasury notes fell to levels unseen in 44 years. The immediate concern is that the United Nations debate over the conflict with Iraq is creating a diplomatic morass that could weaken the U.S. internationally. The broader worry is that the lingering anxiety about possible military action is paralyzing decision-making at U.S. corporations, postponing important spending moves and holding back economic growth [see graph]."

"Budget Office Sees Deficits for 10 Years," [3.10.03, A14].
"President Bush's proposed new round of tax cuts and the rest of his budget would produce a string of federal deficits over the coming decade totaling $1.82 trillion, the nonpartisan Congressional Budget Office projected... The congressional analysts projected that under Mr. Bush's proposed tax and spending plans, there would be deficits of $287 billion this year and $338 billion in 2004. The figures exclude the costs of possible war with Iraq and its aftermath, which analysts and government officials have said could exceed $100 billion."

"The Outlook: Fed Girds for Interest-Rate Cuts as War Scenarios Unfold," [3.10.03, A2].
"Should the bombs start falling on Iraq, the Federal Reserve will be watching with its finger on the interest-rate trigger. It is normally the economic data that drive the Fed's policy decisions. But today the Fed is hostage to political rather than economic developments... At the time he [Greenspan] spoke, the economy seemed to be recovering steadily from its late-2002 'soft spot.' But since then, it has sputtered again, as Friday's report that nonfarm payrolls sank 308,000 in February shows."

"The reasons why aren't clear. Fed officials think the rise in energy prices to date shouldn't seriously hamper growth. But Mr. Greenspan often has noted how economic models can't explain how an increase in energy prices has accompanied every recession in the past 30 years [see chart]."

"Labor Data Show Economic Growth Could Be Stalling: Jobless Rate Rises to 5.8%, As Payroll Cuts Extend To Every Major Industry," [3.10.03, A2].
"U.S. economic growth could be stalling on the eve of a possible war with Iraq, as a host of financial concerns -- many of them unrelated to war -- continue to weigh on business conditions... perhaps the most troubling, the percentage of unemployed people who have been looking for work for 27 weeks or more rose to 22.1%, the highest level since 1992."

"Gasoline Prices Hit Record Highs In 16 States and Shortages Loom," [3.7.03, A1].
"As crude oil prises rise, U.S. gasoline supplies are dwindling, even leading to shortages in some cities, and prices at the pump have shot to all-time highs in 16 states. Worries over a war in Iraq, a cold winter, the lingering effects of a recent labor strike in oil-producing Venezuela, and complications in the increasingly lucrative oil-refining business are having potent effects on gasoline supply. One result: for some big oil companies the profits could be huge" [see chart]."

"Pump prices in California have soared to over $2 a gallon on average and have climbed more than in any other region in the country. One reason may be that California refining companies are reaping profit margins that are 20% above historical norms, according to the California Energy Commission. Moveover, refiners in the state, which uses cleaner gasoline blends that in most parts of the country, are being required for the first time to switch to a summer-blend gasoline that contains ethanol, which is leading to scattered shortages."

"Threat of War, High Fuel Prices Hobble Economy: Fed Survey of Regions Finds Activity Was Subdued In January and February," [3.6.03, A2].
"The threat of war with Iraq and high energy prices cast a pall over the economy in January and February, a survey prepared for Federal Reserve policy makers found."

"Political Capital: White House Unveils Medicare Proposal That Lacks Punch," [3.4.03, A4].
"Meeting with a small group of journalists last week, President Bush refused to discuss any compromises in his tax-cut plan. 'Here's the problem in this town,' he told the gathering. 'The temptation is to get the president to negotiate with himself. And the minute I negotiate with myself, I lose.'"

"True enough. But unfortunately, the Medicare proposal Mr. Bush unveils today is the result of a monthlong negotiation with himself. The White House had planned to unveil a bold and detailed Medicare overhaul plan shortly after the State of the Union address. Instead, the plan went underground after congressional critics got wind of it; it resurfaces today in watered-down form. The White House now says it will sit down with lawmakers to further negotiate the details."

"Therein lies the Bush administration's real deficit problem. It isn't the cost of war, which will come and go. It's the mismatch between the president's stiff-spined determination to cut taxes and his spineless efforts to reduce the size and scope of government. Mr. Bush is the Man of Steel when it comes to his tax cuts, but he's Sponge-Bob on spending. He sends his minions to take the heat on his budget and Medicare proposals, then caves when they come back under fire."

"Mr. Bush's economic plan makes sense if -- and only if -- he sticks to his guns on limiting spending and revamping Medicare and Social Security. If he fails to rein in the burgeoning cost of government, then his tax cuts will leave a fiscal mess that future presidents will have to clean up."

"Despire High Oil Prices, Deflation Fear Persists: Increase in Costs of Energy May Discourage Spending By Consumers, Businesses," [3.3.03, A2].
"The surge in global oil prices is starting to generate a touch of inflation in economies where the biggest worry had been falling prices. But economists say prices forced up by higher oil costs won't help economies and companies suffering under deflationary pressures. Indeed, some notably bearish economists say global deflation is more of a worry now than it was before oil prices started rising. 'The case for deflation actually looks more compelling than ever,' says Morgan Stanley's chief economist, Stephen Roach. Last week, the bank's economists downgraded their expectations for global growth this year to 2.5% from 2.9%, which they say put the world 'right back on the brink' of recession."

"'It would now take a fairly vigorous recovery in the global economy -- several years of world GDP increasing in excess of 4% -- to tilt the business cycle away from deflation,' says Morgan Stanley's Mr. Roach. 'Yet precisely the opposite now seems to be in the cards.'"

"Washinton Wire," [2.28.03, A4].
"The administration's big aid deal with Turkey riles lawmakers: Sen. Dorgan tells governors to demand a 'Turkey Standard' -- if Bush has money for Turkey [approximately $26 billion], he has money for strapped states."

"Airlines Seek Government Help Amid Worries Over War Effects," [2.28.03, A3].
"The nation's beleaguered airlines, concerned about a U.S. attack on Iraq, are in Washington this week seeking government help to soften the impact of what could be a financial body blow. The board of the Air Transport Assocation, the industry's major trade group, met yesterday to explore a range of assistnce proposals, such as tax relief, government assumptions of security expenses and the release of oil held in government reserves to bring down jet-fuel prices."

"The group, made up of airline chief executives, also plans meetings with individual lawmakers and administration officialsto make its casse that the industry is in worse straits today than it was in 1991, when airlines were laid low by the Persian Gulf War [see chart]."

"Bush to Seek up to $95 Billion To Cover Costs of War on Iraq," [2.26.03, A1].
"The Bush administration is preparing supplemental spending requests totaling as much as $95 billion for a war with Iraq, its aftermath and new expenses to fight terrorism, officials said today. The total could be as low as $60 billion because Pentagon budget planners don't know how long a military conflict will last, whether U.S. allies will contribute more than token sums to the effort and what damage Saddam Hussein might do to his own country to retaliate against conquering forces."

"The $95 billion figure -- including money the State Department would use to compensate Turkey and other allies hurt by a war -- suggests that the conflict's ultimate cost could approach the $100 billion-plus estimate offered last year by President Bush's former top economic adviser, Lawrence Lindsey. The size of Mr. Lindsey's estimate shocked Congress and raised a political ruckus at the time."

"The supplemental requests' magnitude also indicates that the Bush administration is willing to pump far more money and manpower into maintaining order and rebuilding Iraq than it has in Afghanistan. The Afghan government has complained that the U.S. hasn't placed a high enough priority on such matters there. The administration has asked Congress to appropriate about $7 billion for military operations and humanitarian assistance next year in Afghanistan, where 8,000 troops remain active."

"The requests come at a time of soaring deficits -- more than $300 billion proposed for this year -- that have led to calls for austerity, including cutbacks in Mr. Bush's latest budget proposals for housing, job training, health care and other social programs."

"Republicans Play 'Hey, Big Spender' Now: Texas Activism and Control of Congress Made This Year's Budget So Fat," [2.21.03, A4].
"No more Bill Clinton or Democratic Senate to blame. The $397.4 billion omnibus spending bill is wholly owned by the new Republican Washington -- lock, stock and pork barrel. Total discretionary spending on domestic and defense programs for fiscal year 2003, which ends Sept. 30, will be nearly $100 billion above levels just two years ago."

"Going Up. Discretionary federal spending for defense, foreign and domestic programs has been on a steady rise since 1998, in contrast with tight limits set by Republicans in the first years following their takeover of Congress in 1995 [see chart]."

"Trade Gap Widens to Record Level," [2.21.03, A2].
A record trade deficit, declining leading economic indicators and rising claims for unemployment insurance all show an economy falling short of a sustained expansion. The deficit in international trade in goods and services widened to a record $44.24 billion in December..."

"For all of 2002, the trade deficit reached a record of $435.22 billion, 21.5% greater than in 2001, and a record 4.2% of gross domestic product [see chart]."

"Bush Campaigns for Tax-Cut Plan To Spur Economy," [2.21.03, A2].
"Amid fresh evidence of economic weakness, President Bush turned up pressure on Congress to approve a huge tax-relief package he says is needed to spur growth."

"Jitters Over War With Iraq May Not Be the Only Factor Weighing on the Economy," [2.20.03, A2].
"The case that the U.S. economy will soon be growing fast enough to bring down unemployment rests on one optimistic assumption: The one thing holding back the economy is jitters about war with Iraq."

"Blame 'the heightening of geopolitical tensions,' Federal Reserve Chairman Alan Greenspan told Congress the other day, for 'creating formidable barriers to new investment and thus to a resumption of vigorous expansion of overall economic activity.' Since it's all Saddam Hussein's fault, he said, forget the stimulus tax cuts."