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Defying the Odds

Defying the Odds
New book about the 2016 election.

Monday, June 16, 2014

Iraq and the Midterm Election

In the short term, events in Iraq will have only a limited effect on domestic American politics.  President Obama's critics say that the situation reflects his administration's incompetence, but others blame President George W. Bush.

The real political impact could come via the economy.  Mideast turmoil could possibly mean an oil shock, which would probably trigger a recession, which would certainly hurt Democrats.

Alan Mattich writes at The Wall Street Journal:
“The correlation between oil shocks and economic recessions appears to be too strong to be just a coincidence,” wrote James Hamilton, an economics professor at the University of Southern California, San Diego, in a 2011 analysis of historic relationships between oil and economic growth.
Substantial rises in oil prices have been associated with most of the recessions the U.S. has faced since the end of the Second World War. And in a few of the cases where only a modest rise in oil prices preceded the economic downturn, concurrent price controls on fuel make it hard to gauge where prices might have been under free market conditions.
What’s more, as the oil shock associated with the Gulf War of 1990 shows, Iraq matters.
Iraq is a key oil producer, the world’s eighth largest in 2013. And a jump in total production (including natural gas) to 3.1 million barrels per day (bpd) in 2013 from 2.4 million barrels in 2009 has been a major contributor in the overall growth in global output to 90.3 million bpd last year from 85 million over the same period.
Voters might not blame the current president for the Iraq situation , but they always blame recessions on the in-party