Guns, No Butter

Democrats have rightly gone ballistic over the cynical White House efforts to use Iraq to change the subject of the fall elections. But the incessant beating of the war drums does more than distract voters from the sick economy: It makes the economy even sicker and weakens the Administration's ability to treat it.

The recession is turning into prolonged stagnation. Employment is down. Incomes are down. Poverty and long-term unemployment are up sharply. Eight trillion dollars were lost as the stock market tanked. Seniors are forced back to work to pay for soaring drug prices. Consumers are starting to tighten their belts. Companies have cut investment and jobs but still have overcapacity. States and localities are slashing spending in the face of decreasing revenue. Record trade deficits require America to soak up unsustainable amounts of foreign investment, even as the corporate scandals expose systemic fraud that gives any sensate investor pause. And America's woes are spreading to the rest of the world.

The fear--widely discussed at the grim meetings of world bankers in Washington recently--is that one more shock to the economy could shatter the fragile confidence of consumers and investors. Falling demand would drive down prices, producing a deflationary spiral even with interest rates at record lows. Deflation afflicted Japan a decade ago, and it still has not recovered. And if America goes down, the rest of the world will surely follow.

In this situation, the war dance over Iraq is particularly corrosive, feeding the insecurity that undermines investment. The cost of the war, which White House economist Lawrence Lindsey puts at up to $200 billion, won't lift the economy from its doldrums, but it will handcuff any federal effort to help states and localities avoid devastating cuts in schools, police and other essential services. Meanwhile, oil prices are already rising as the buildup to war begins. This in itself may be sufficient to put the global economy into a tailspin.

White House political guru Karl Rove is no doubt chortling over the success of his focus-on-the-war campaign in distracting voters from the corporate crime wave and the faltering economy. But Democrats, understandably distressed at the White House war-room politics, have contributed to their own plight. Led by the likes of Senator Joe Lieberman, staunch defender of unfettered executive stock options, they are too compromised to seize the banner of reform in the corporate scandals. And, unwilling to take on Bush's program of cutting taxes for the wealthy, they are too cowardly to offer a clear choice to the American people. Former Vice President Al Gore had it right on October 2 when he said, "President Bush believes that it is urgent that the Congress act on the issue of Saddam Hussein prior to the election on November 5. I think it's even more urgent that both the President and the Congress take action prior to the election to strengthen our economy." With or without the war scare, if Democrats were to gain electorally from Bush's economic failures, it would only be because voters harbor a default memory that assumes Democrats represent an alternative, even if they don't articulate one.

George Bush has always cared more about politics than policy--he's willing to use anything, even war, to partisan purpose. But this time, he has been too clever by half. He's changed the subject but failed his core responsibility: to deal with the real and present danger of an economic meltdown.

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