The eruption into our lives of Saddam Hussein, glowing with energy and pawing the ground, demonstrates how one man's audacity can cause many variables to dance unpredictably. What he has done in the desert and, perhaps more important, what as a result will not be done in Washington, jeopardize that which is the controlling concern in this crisis: the economy.
In his address to the nation, the president stressed the "wholly defensive" nature of the deployment to protect "the integrity" of Saudi Arabia. Events, he said, demand that we "define who we are and what we believe." He said "standing up for our principles is an American tradition" and "America has never wavered when her purpose is driven by principle."
That is principle, spelled p-e-t-r-o-l-e-u-m.
Far over the horizon is the principle of defending democracy, which here means Israel. Hovering in the ether and selectively invoked is the principle of acting against aggression. But the principle that drives our purpose here is: We will defend, with force if necessary, our economy.
This is not a contemptible principle. Prosperity -- social surplus above subsistence -- is a necessary (not a sufficient) condition of civilization's progress.
But it is a stark, chilly principle, from the frank expression of which political leaders understandably flinch, preferring more elevated themes.
It is a principle that should be stated clearly in order to make the following clear: We are assembling fleets and airlifting troops -- rightly -- to protect our economy. But the economy is more jeopardized by political dithering and cowardice at home than by anything done in Arabia.
If Arabia's great product were agricultural -- if it were a prodigious source of, say, wheat -- Iraq's aggression would be vigorously denounced, but fleets would not assemble. The fact that the U.S. intervention has been almost universally approved, even by people almost always critical of interventions, does indeed define us. The purpose Americans rally 'round is that of keeping the industrial world's economy humming.
The Saudi decision to increase production may minimize the length and economic impact of this crisis. But already Hussein, execrated as an aggressor and dictator, is being exploited as an alibi and an excuse. He is to be the alibi for any recession. And he is the excuse for evading, again, disagreeable political decisions in domestic policy that would serve the goal for which we have sent the fleet: prosperity.
In spite of economic sluggishness, inflation is still between 4 percent and 5 percent (slightly above what it was when the Nixon administration imposed wage-and-price controls). So the lowering of interest rates has seemed contingent on deficit reduction. But even before Saddam Hussein changed the subject, the subject of deficit reduction was being discussed in inadequate terms.
Counting the year's cost of the savings and loan debacle, and subtracting from revenue calculations the Social Security surplus, the fiscal 1991 deficit will be approximately $250 billion -- without assuming a recession.
But now the plan (a mere aspiration, really) to nibble even just $50 billion from that deficit may be shelved, with sighs of relief all around the political system. The shelving will be because the economy already is sagging and because Saddam Hussein has made two important components of deficit reduction, defense cuts and energy taxes, suddenly seem more problematic.
Americans spend a smaller portion of their income on oil than they did in 1973, when the first oil shock shattered the illusion that economic growth had become automatic. Because of price-induced efficiencies, Americans use less energy per unit of GNP than they did then.
And because Iraq is so isolated and so many oil-exporting nations have strong political and economic interests in exporting, today's oil-price spike may last only long enough to have one long-lasting effect: it will be used to justify inaction on the U.S. budget deficit. It will be lamented as a "tax" siphoning off consumer demand and preempting any taxation for deficit reduction.
Without any help from Saddam Hussein, the auto and housing markets were already depressed, the economy was littered with firms loaded with debt, corporate profits have been declining since the fourth quarter of 1988 and almost half the states report revenue collections only equal to or below the inflation rate. We do not know within half-a-trillion dollars the 30-year cost of the S&L salvage. We do know that even a mild recession will make it significantly worse. And both inflation and recession trigger entitlement spending by government.
Think about it: a recession that starts, not ends, with a deficit approaching $300 billion, and the banking system fragile, and the political system exploiting a foreign policy crisis as the latest in an endless line of excuses for not dealing with a larger, long-term domestic crisis.
Like a stone thrown into a lagoon, Saddam Hussein has produced many ripples. The ripples may roil America's political waters longer than he dominates headlines.