Price of Conflict

Even as the Bush-led coalition gains grudging ground in Iraq, is it losing it in the Republican-majority US Senate? If the Senate''s refusal to grant George W Bush the full $726 billion in tax cuts is any indication, he might well be. In a dramatic snub to the president — who insists that tax cuts are necessary to stimulate an economic revival — the Senate voted 51 to 48 to limit the relief to just $350 billion. The vote followed a request by Mr Bush for $74.7 billion to cover the first six months of combat and post-war operations in Iraq. Clearly, worry about how much the war will cost the US in the long run played on the senators'' minds. But since they obviously didn''t want to appear unpatriotic, the senators also said the money made available to the government by halving the proposed tax cut should be used to shore up the tottering social security programme. What happens next? The US House of Representatives has already cleared the entire $726 billion in tax cuts. A Senate-House committee will now try to work out their differences. The chances are, Mr Bush may finally get the figure he asked for. Still, this is a clear sign that there is growing unease within the US political establishment — indeed, Mr Bush''s own party — about the economic consequences of the Iraq conflict.
There is still no clear consensus on what the cost of attacking, occupying and rebuilding Iraq will eventually add up to. Economist William Nordhaus estimates that the final figure could go up to $1 trillion over the next decade. That seems staggering, but some commentators have pointed out that this would only take America''s defence spending to four per cent of gross national product — still well below the 10 per cent of GNP that was the norm in the 1950s. (It''s another matter that the US alone spends as much in absolute terms on defence as the world''s other 191 countries put together.) Others are not so sanguine. The International Monetary Fund''s managing director Horst Koehler has become the latest voice of gloom, warning that a global recession cannot be ruled out if a long war pushes up oil prices.
But whether it''s the IMF or the Federal Reserve, everybody is hedging their predictions with lots of riders. Sandstorms may have been raging in Iraq, but obscured clarity of vision appears to have become a worldwide phenomenon.