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CNN SHOWDOWN: IRAQ
'Sound-Off'
Aired March 13, 2003 - 12:25 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: War and money. We've heard military action could cost anywhere from $60 billion to perhaps $100 billion. Experts say the price tag will go even higher after the war as the U.S. helps to rebuild Iraq. Who will foot the bill? American taxpayers already squeeze by skyrocketing fuel prices, rising unemployment and a shaky stock market. They're nervous. They are wondering how much it will cost them.
"Sounding Off" today from Boston, Robert Reich, the former Labor secretary. He served during the first term of the Clinton administration, and in New York, Walter Russell Mead. He's written an important cover for the march issue of "Inc" magazine called "The Storm Before the Calm."
Walter, you think a war could pump up, could help the U.S. economy.
WALTER RUSSELL MEAD, COUNCIL ON FOREIGN RELATIONS: I think everyone is holding off on investment decisions. Everybody is worried about the future. Typically in markets, the worst comes before you actually get the blow. Hopefully, when the war begins, if it's a short war and things go well, we'll actually see the economy begin to turn around.
BLITZER: What about that, Professor Rice?
ROBERT REICH, FMR. CLINTON LABOR SECY.: I think Walter is correct. If there's a short war, if there is no instability following in the Middle East, if is the Shiites, and the Sunnis, the Kurds, the Turks all are very peaceful. If we can establish stability, and also establish stability and also establish democracy very easily, if we don't stir up terrorism, if our allies are willing to share the burden of the financial cost of occupation and relief and all of the humanitarian aid that has to follow. Well, those are a lot of ifs. If all of that comes to pass, then it's probably going to be good for the U.S. economy.
But if you believe that, you probably believe in the tooth fairy.
BLITZER: That's a fair point. Those are a huge number of ifs, Walter. Everything has to go perfectly right. A short war, relatively few casualties, and you don't stir up a lot of terrorist attacks against the United States.
RUSSELL: I don't think it has to go perfectly right. I think there is some room for things to go wrong. The -- say the cost difference between $60 billion and $100 billion is not a huge difference, and I think it seems more likely than not, frankly, that we're not going to see huge upheavals across the Middle East.
The chances are that whenever hostilities seize, even if reconstruction in Iraq is less than perfect, you'll see the war premium go out of oil markets. You'll see the price of crude fall, and that works like a tax cut for the economy. It brings prices down and stimulates activity everywhere.
BLITZER: And, professor Reich, as you well remember, after all the doom and gloom scenarios a dozen years ago before the first Persian Gulf War, as soon as the U.S. showed within a day or two it was winning this war decisively, quickly those gasoline prices dropped, the price of a barrel of oil dropped and the economy picked up.
REICH: That's right, Wolf. The only difference here, and I think it's a significant difference. The objectives of that war were very clear. We were basically getting Saddam Hussein and the Iraqis out of Kuwait. Here, the objectives are much more complicated. We want to not only stabilize Iraq, but we also want to stabilize the Middle East. The range of things that could go wrong is very greater than was the range of things that could go wrong 12 years ago.
And the problem is we won't know for sure. We'll certainly know whether we oust Saddam Hussein fairly quickly, but we won't know the outcome of all of these other inponderables in terms of instability in the Middle East, oil prices. Oil prices are likely to stay high.
And if Saddam Hussein torches these oil wells, then all bets are off.
BLITZER: Let me read an e-mail to you, Walter, and get your reaction to this viewer, Frank, in New Jersey, who writes this -- "Our economy is already on enough of a roller coaster ride. A war would drain it even more. Wouldn't a recession result from the demands toppling Saddam Hussein and rebuilding Iraq would place on the economy?"
RUSSELL: Well, actually, the financial burden of the reconstruction and the war are not that significant the great scheme of things. When you have a $10 trillion economy, you can afford these bills. Now maybe you can't afford everything else you want, but that's another issue. It's very unlikely that the fiscal pressure of the war is going to be a serious drag on the economy.
BLITZER: All right, let me read an e-mail to you, professor Reich, from Joseph in Delaware, who wants to know this, "The nation and the economy are paralyzed by the possibility of war. The market and the economy hate uncertainty. If the U.S. is going to take action against Iraq, we should do it immediately so that the country can get back to business and make the economy strong again.?
REICH: Well, Joseph is probably correct, if we can get back to business immediately. But the big question here is not just the invasion and the cost of the invasion and whether Saddam Hussein is going to go quietly or go a little unquietly, the real question has to do with what happens then? The consequences with regard to anything that could happen in the Middle East. And here is where markets uncertainty is likely to continue. Here is where I think oil prices and the kind of shock of all of this may not wear off very, very readily. Are our allies going to help us rebuild Iraq after the way the allies feel about how they've been treated? I'm not at all sure.
BLITZER: As we are speaking, Walter, we're looking at some of the gasoline prices out in California. $4-plus for premium unleaded gasoline. That's a number I haven't seen in a long time, if ever, here in the United States. These pocketbook issues are making Americans right now very, very nervous.
RUSSELL: And well they should. I mean, $4 a gallon, that's what Europeans pay. It's horrendous.
But I think, again, the uncertainties that Professor Reich is talking about after the war are very unlikely to be large enough to impact oil prices significantly. In Venezuela, it's another issue. If things should go badly there, that would have more of a direct impact.
But in general, I think what we're going to see is a calming of the oil market this spring.
BLITZER: Do you believe that as well, Professor Reich?
REICH: Well, I certainly hope that Walter is right. There are so many unponderables here, we can't be sure. We are also dealing with a huge federal deficit. The federal deficit is likely to get much, much larger.
Lawrence Lindsey who was CEA chair before he was dismissed, really projected $100 billion to $200 billion with regard to the cost of the war, but on top of that, the OMB predicted a $1.8 trillion budget deficit over the next 10 years. Now, again, how are we going to afford all of this and have another tax cut on top of everything else that's been proposed. This is fiscal madness.
BLITZER: Let me just wrap this up with you, Walter. Is it possible that Iraq, which does, after all, have a huge oil supply, a lot of oil reserves, Iraq is not a poor country. Indeed, it's a wealthy country potentially, that they could foot some of the bill for their own -- quote -- "liberation."
RUSSELL: I don't think we're going to charge them for the war. We've never really done that in the United States, and I don't think we're going to do it now. But it's certainly true that in terms of reconstruction, Iraq is going to be well able to help itself recover, rebuild and get over the damage Saddam Hussein has caused.
BLITZER: Walter Russell Mead, he has an important article in "Inc" magazine, Robert Reich, the former labor secretary, always has profound thoughts as well. Thanks to both of you for joining us.
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