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Monday, December 9, 2002
War Games 101
William Annenberg,

    WASHINGTON -   Many combinations of unanticipated events will come back to haunt governments in the Middle East region and beyond. The economist George Perry, spoke of the unintended economic impacts of disruptions of world oil supplies, for example.
     His study mostly focused on the underlying economic world crises from the oil reduction in supply the supplay of food and heating fuels, world wide.
    His worst case scenario is an outcome which assumes a decline in world oil production of seven million barrels per day. Some of this deficit might be provided by US strategic oil reserves of about 2 1/2 million barrels per day.
     In the event of an OPEC boycott, oil production might be reduced to less than 20 percent.
    Such impacts would readily drive up oil prices to around $75 per barrel or more. Perry estimates that gasoline prices would skyrocket overnight to more than $3 per gallon.
     The Bush administration assumes the negative effects on rising price of gas can be offset by obtaining the supply of oil from other regions. Under White House strategy, this would lead to a decline of slightly under $1 per barrel over the next decade. With a forecast of $25 a barrel, this could lead to a decrease in the cost of US oil imports of $30 billion over the next decade.
    However, if the US is on a Wartime footing, things could be much darker. In World War II, for example, and Vietnam military buildups and defense jobs rose and fell just as fast at the end of the war.
     If the IRAQ war went badly in the initial phases, the economic effects could quickly turn the entire US economy into mush.
     Putting the different adverse effects together adds up to $1.6 trillion, most of which come outside of the direct military costs.
     If the US has a string of bad luck or misjudgments during or after the war, the outcome, while less likely, could reach the $1.6 trillion of the upper estimate
     The first concern is that the George W. Bush administration has not made public his estimate of the costs of this war. The public and the Congress are unable to make informed judgments about the realistic costs and benefits of the upcoming conflict when none are given.
     Postwar occupation, reconstruction, and nation-building costs in Iraq have not been made public. If American taxpayers decline to pay the bills, this would leave a mountain of rubble and mobs of angry people in Iraq and the region.
      According to Treasury reports this week, the federal budget has deteriorated by $360 billion from last Spring to this Fall and with a war, Mr. Bush's budget deficits are likely to become enormous. The Bush administration has not prepared the public for the cost or the financing of what could prove to be the most expensive wartime adventure in world history.
    Another caution -- Bush advisors may have undrestimated the homicidal reaction of the Islamic world and the Iraqi people to American intervention.

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