I haven't had much to say about the war with Iran. On one hand it is easy to come down on the side of regime change or, at a minimum, defanging the regime. The Mullahs are a dangerous collection of twisted religious revanchists who would kill me in a heartbeat for simply being American, Christian or both. Yup, I am the Great Satan. Nuclear weapons in the hands of these gangsters is taboo.
On the other hand, my preference would have been for a President to take his case before Congress before going to war. I am unconvinced of the clear and present danger of an immediate threat as much as I am convinced that the president would have gotten the go-ahead from Congress along with buy-in from the public. What we got instead was more executive unilateralism.
Almost three weeks into Operation Epic Fury - the war on Iran - the President's promise of prosperity and economic growth in his second term is facing a handful of critical risks that heretofore did not exist. Going into the new year the current economic condition was basically OK. Notwithstanding a nonsensical tariff regimen my sense was that the president was counting on a second-term economic agenda of deregulation and tax relief to propel the economy forward.
In the absence of a Congressional resolution supporting the war, shifting rationales for the war itself and no clearly articulated strategy to end the hostilities at this particular point in time and space there are any number of elements that might conspire to trip-up both the domestic and world economies.
The most immediate of which is the disruption to the energy supply chain. Even an Iranian 'threat' to shipping via the Strait of Hormuz has caused oil prices to spike impacting everything from gasoline, to LNG and diesel. The domino-effect of this is a spike in inflation pressures as a consequence higher prices for groceries (transportation and farming costs), airfares and utility pricing.
Wars costs a big pile of money; with the first week alone reported to cost us taxpayers $11.3 billion. Even if the burn rate settles-in at $1 billion a day the implications for expanding the the federal deficit are huge. The President and Pentagon are going to come back with hat-in-hand to ask for more money; and the resulting borrowing will crowd-out private investment and lead to calls for raising taxes.
Iranian threats have disrupted maritime security resulting in the rerouting of shipping, higher insurance premiums and increased freight costs impacting virtually every last consumer good traveling the global supply chain.
Economists have been setting-off alarm bells that a prolonged conflict could damage business confidence leading to a pause in hiring and capital investment. A combination of persistently higher energy costs and depressed growth could lead to a 1970s style 'stagflation'. Naturally, the investment market's response to uncertainty is greater volatility.
I do not believe that an air campaign alone can effect regime change much less political change. Consequently, I'm anxious to know how this gets wrapped-up before it morphs into an unintentional 'forever war'.
Meanwhile, the resulting energy crisis and fiscal drain have very real implications to our economy, and the world economy writ-large. The risk for shifting from an expected period of domestic growth to one of stagnation and rising living costs is quite real.
I want policy that improves your and my prosperity and general lot in life. Along with making the world a safer place. But what it is ain't exactly clear. We have not been to a Trump rodeo like this before.
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