Jesus, Democrats and the price of victory

1. Iraq, the Democrats and possible outcomes

Twenty thousand additional U.S. troops on the ground in Iraq may very well not make much of a difference. But it’s something. It shows our allies and enemies that the United States is committed to the war’s successful outcome.

If the President takes up the Democrats on their suggestion and pulls out, Iraq goes to hell overnight. The Saudis, as was reported in The Wall Street Journal this week, will start funding the Sunni insurgency in Iraq; Jordan will move its troops far enough into Iraq to keep its border secure; Turkey will be forced to find a way to deal with the Kurds, people they don’t like.

And Iran, which is likely pushing ahead with its nuclear arms program, will be sitting in the cat’s seat.

There’s a good chance that Iraq will be the theatre of a proxy war between the Arab world and the Persians. And if that happens, civilian casualties in Iraq will skyrocket exponentially.

But they won’t be the only ones that are harmed.

Oil, the fundamental commodity of all western economies, will see an increase in price. Right now, it’s trading in the $55 range, good news for the developed world. But if there’s any fear in the oil markets, the price of a barrel of crude will increase. Maybe double in this scenario.

The economic fallout would be horrible. Gas prices will increase; airlines will raise their prices to keep up with additional fuel charges; and just about everything that anyone buys at the store will see a jump in prices.

Companies will layoff additional employees simply because they don’t want to pay the additional overhead expenses.

And the stock markets will likely take a turn for the worse.

Finally, the continued confrontations between the Palestinians, Israel, Syria and Lebanon will spiral out of control. Syria’s best friend is Iran; Iran will extract all kinds of promises from Syria in this scenario; that means the Palestinians and the terrorist group Hezbollah will be receiving even more assistance than they’re already receiving from Iran.

So before you add your voice to the antiwar chant, consider these possible outcomes if the United States pulls out.

2. The debate over Iraq

It’s time to have the proverbial “Come to Jesus Meeting” about Iraq. The citizens of the United States, those who vote and actually give a damn about the country, are owed far better than what they’re currently receiving from the politicians in Washington. The sound bites of “stay the course” or “pull out” just doesn’t cut the mustard.

Those lines are cheap. And it allows anyone, on either side of this debate, to take a pass at truly discussing, considering and thinking about what U.S. involvement in Iraq means, not only to us but also to the Iraqis.

It’s time for leading Congressional Democrats and Republicans, the President, the Secretary of Defense, the Secretary of State, the National Security advisor, the Chairman of the Joint Chiefs and his top generals, as well as the Secretary of the Treasury to hole themselves up for a few days, maybe a week, in a place like Camp David, and hash out the issues.

And do so without issuing any press releases while they’re meeting. We need to force these people to devise a plan that meets the needs of everyone involved in Iraq. Maybe even those countries who have troops on the ground in Iraq, like Great Britain and Poland, should also join the meeting.

An American pullout doesn’t mean peace in Iraq; if anything, it means the exact opposite. More insurgents killing more people; and this time they’ll be funded by the treasury departments of Iran and some countries in the Arab world.

3. The All-Volunteer Force

If anything, President George W. Bush has proven the United States can wage a war with an all-volunteer force and, frankly, there won’t be too much resistance at home. To be cynical, those troops who’ve been killed in Iraq were, after all, volunteers.

Walk down any street America and you’ll never know that our sons and daughters are dying in central Asia or on a distant, dusty, Middle Eastern battlefield. You see the occasional flag but, otherwise, you’d never know there’s a war on.

Compare that with what happened during World War II, when houses posted star flags on their windows. If you posted a flag with one star, there was one member of your family in uniform. If you posted a flag with two stars, there were two members of your family serving, etc., etc.

The stars were silver. If that house changed their flag from a silver star to one that was gold, a member of that person’s family had been killed.

Since 9/11, I’ve only seen two silver star flags.

And this is the problem with an all-volunteer force. Only those Americans with a family member in the armed force are paying the price and feeling the pain of our involvement in Iraq and Afghanistan or anywhere else our troops are based.

If you’re in the peace movement, you want the draft reinstated. This might help you organize major marches across the United States on behalf of an American pull out.

If you’re for the war, you need to see the draft reinstated. It’s taken us nearly six years to increase the size of the active duty Army by 30,000; we simply need more troops on the ground in Iraq – like maybe a million – if we’re going to defeat the insurgents once and for all. We could probably say the same thing about our effort in Afghanistan.

The problem with the current size of the force in Iraq is that once we defeat the insurgents in one place, we need to move to another. And that allows the insurgency to reestablish its ties to the village or province we just secured. (Almost like Vietnam. But not quite.)

The U.S. Census Bureau reports that there are 63 million American men between the ages of 18 – 49.

Here’s an idea: Draft all men between the ages of 18 – 50, regardless of their marital status and whether or not they’re in college. The only way their names and numbers wouldn’t be subjected to the draft is if they’re veterans. Unlike the last time we used the draft, this version of conscription subjects everyone, regardless of their economic and educational status, to service in the armed forces.

The only way they would be allowed out of the military would be if they couldn’t pass the physical or basic training. If I had to guess, I’d say that half of all of those drafted will fail the physical and then another 50 percent will fail basic training. Still, that will give us about 16 million men in uniform, a number unseen since World War II.

Not everyone who is north of 35 or 40 will qualify for combat duty, but they should be able to contribute in some way to the well being of our forces.

A military force that consists of draftees will spread out the cost and the pain of Iraq and Afghanistan. And it will force all Americans to come to terms with Iraq.

In addition, a larger cross section of the country will be represented in this force. Instead of the force being made up of people who either 1) patriotic or 2) don't know what else to do, the force will be made up all kinds of Americans. This was the type of military that brought about victory in World War II.

A longstanding argument against the draft is that the military brass doesn’t want it, saying the average conscript isn’t a motivated solider. This same military brass considers itself to have some of the best leadership skills in the world. It’s time to put them to use. The best leaders motivate the worst performers.

Oil, The Fed & everyone's economic future

Last month, your correspondent weighed in on oil prices, suggesting that they'll sooner determine your economic future than just about anything else. Oil prices have been falling lately and the Dow Jones Industrial Average is now above 12,000. This just in, from the London Financial Times' investment editor:

The Short View: On the Fed and oil
By John Authers, Investment Editor

Published: October 25 2006 18:13

"The Federal Reserve Open Market Committee left the Fed Funds rate unchanged at 5.25 per cent on Wednesday, and warned that 'some inflation risks remain'. The market’s response to Ben Bernanke, Fed chairman, mirrored the deathless one-liner of Mandy Rice-Davies, caught up in a notorious British scandal of the 1960s, when told Lord Astor had denied sleeping with her: 'He would, wouldn’t he?'

"The market brushed off the ritual hawkish sentence at the end of the Fed’s communique, and also gave a Rice-Davies response to Jeffrey Lacker, who for the third time dissented and voted to raise rates. The rest of the statement was doveish enough – 'inflation pressures seem likely to moderate over time' and 'the economy seems likely to expand at a moderate pace' – to convince traders that the Fed believes the economy is heading for a 'soft landing'.

"They had feared something more hawkish, so this was enough to trigger an afternoon rally. The dollar weakened, the yield on the 10-year treasury bond shed 4 basis points (making 6 basis points for the day), and US stocks showed solid gains for the day.

"But was the Fed decision really the most important market news on Wednesday? Earlier, the energy market was shocked by supply figures showing that US crude oil inventories actually fell last week. The market had expected a rise. The result was a sharp bounce in oil prices. Nymex crude futures gained 3.6 per cent to stand at $61.52 per barrel, above the $60 floor that the Opec group of oil exporters is trying to establish.

"This matters. The 'reduced impetus from energy prices' was a factor the Fed named for believing that inflation pressures would moderate over time. And there is good evidence that the current remarkable world stock rally has more to do with falling oil prices than with the Fed’s 'pause' on interest rate rises.

"Data from Tim Bond of Barclays Capital show that since the start of 2004, the negative correlation between forward price/earnings ratios on the S&P500 and spot oil prices has been 0.87. Thus, 87 per cent of falls in multiples could be explained by rising oil prices, and vice versa. And if oil keeps rising, expect equities to fall, whatever the Fed says."

So there you have it. The house expert at the Financial Times writes that there's an inverse relationship between oil prices and stock prices.

More fodder for the Democrats. Not only could they create a campaign centered around making U.S. foreign oil dependence a national security issue, but now they could also make oil prices an economic security issue for the common man.

Feeling Rich?

If you invest in the stock market, you might be feeling a tad richer today. That's because, as you likely know, the Dow Jones Industrial Average jumped nearly 57 points yesterday to a high it hasn't seen in more than six years.

It was brought about by falling oil prices. A barrel of crude oil is running just under $60 a barrel, which means it's not as costly as it was two months ago to run a business.

Oil prices are directing our economy. The Federal Reserve, which overseas the money supply and our banking system, experts say, will likely not increase interest rates any time soon because oil prices have fallen so low, reports today's Wall Street Journal.

Stockholders at ExxonMobil and other U.S. energy companies, however, aren't so happy. Falling oil prices make their stock prices drop.

So perhaps you're feeling richer. Let's face it, it's not as costly to fill that gas tank; and your company or business may find it easier to increase the bottom line because energy costs are easier on the budget.

The problem with this feeling of elation is that it's short lived.

Oil prices will increase; and American consumption isn't about to change. The United States will remain the world's leading oil market.

So if President Bush is serious about ending the country's "addiction" to oil, as he puts it, he better set about creating a plan to bring this about. The Democrats, for that matter, might stop harping on the Page scandal in the House of Representatives and show themselves to be a party of ideas by coming up with their own plan to reduce America's oil consumption.

Be on the lookout for what our two political parties do -- not for what they say.