Jun 14, 2006- The War in Iraq

HON. MARCY KAPTUR
 OF OHIO
IN THE HOUSE OF REPRESENTATIVES
WEDNESDAY, JUNE 14, 2006

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Ms. KAPTUR. Mr. Speaker, I would like to include in the RECORDextraneous materials this evening, particularly an article from the ChristianScience Monitor entitled ``Prices Rise, and Interest Rates Sure to Follow.''

This evening we have heard from many of our colleagues about the ensuingdebate tomorrow on a very weak resolution concerning the ongoing war in Iraq. Tonight Iwould like to direct my comments to the terrible taxes that this war places onthe American people. And not just taxes in the conventional meaning of the wordbecause, indeed, this war is causing us to borrow money, which we must payback, and we are borrowing it back from foreign countries. This war is costingus more every day. Over $300 billion and rising. We have to pay those dollarsback because we are borrowing them.

This war is placing a terrible burden on this economy as we now see pricesrise and interest rates ticking up, which I will talk about in just a second.And, of course, the greatest tax is on the loss of life and the injury to bodyand limb of those that we have asked to fight the battles of this Nation, aswell as innocent civilians who are being killed and injured across Iraq and theregion.

This war in Iraq is alsoexacting a terrible tax on the people of the Middle Eastand adjoining regions because it is yielding more terrorism, not less. This waris yielding more repressive regimes in places like Pakistan;in places like Egypt; in thePalestinian Authority; indeed, adjoining nations like Lebanon. Thetax on democratizing regimes is getting heavier and heavier every day. There ismore instability in the region as we watch the demonstrations in the West Bankand in Gaza, aswe see Hamas and Fatah locked in internal struggles. There is more instability,not more stability. And most crushing for our country globally is the United Statesis losing respect across the world. We have fewer friends and more enemies andthose who doubt the UnitedStates across the globe.

Here at home we see rising interest rates, and that is the article I willenter into the RECORD tonight. Higher prices for such things as airlinetickets, housing, health care, and, of course, gasoline are now starting to eatinto consumers' pocketbooks. Indeed, this war is a terrible tax on the Americanpeople, and they are feeling it in their pocketbooks.

Wednesday, the Labor Department reported the May consumer price index rose.4 percent after a .6 percent rise in April. This is well above the comfortlevel of the Federal Reserve, the Nation's chief inflation fighter. The Fed isgoing to have to raise interest rates more out of a desire to keep the marketfrom thinking the new sheriff in town at the Federal Reserve is not seriousabout fighting inflation. Prices are rising against a backdrop of weakeninghousing and other parts of the economy. This war in Iraq is a heavy tax.

Economists are most concerned that rising prices seem to have moved beyondthe energy sector and removing food and energy, typically the most volatileprices from the inflation rate, indicates core prices rose in May .3 percent;and over the past 3 months, the core rate of inflation is up to an annual rateof 3.8 percent, the fastest pace in more than a decade. We are seeing anear-term acceleration in the core rate. An increase of half a percentage pointat the next Fed meeting is a strong possibility before the Fed decides to backaway.

So we look at what this war is yielding on many levels. More terrorism, notless terrorism. Is it yielding more democratic regimes throughout the Middle East? No. The oil regimes continue to be asrepressive as they ever were. There is not a single democratic nation anywherein the region, and there will not be one for a long time to come. The United Statesought to decouple itself from the repressive oil regimes it continues tosupport and become energy independent here at home.

Is there a solution to the Palestinian-Israeli standoff? Are there ongoingnegotiations? No. There is just shooting across borders. There are moredemonstrations in the street. There is no back channel that is being activelypromulgated by this administration to get the warring parties to sit down andfinally reach a peace process following on the agreement that was attempted tobe negotiated during the Clintonyears.

Have we seen freedom on the rise? No. We see repression on the rise,as beheadings and the election of people who are absolutely opposed to theUnited Stateswithout any sense of growing freedom.

There was a gentleman down here on the floor earlier who said that they dowant our freedom here in the UnitedStates, that is why they hate us so much.Actually, a number of those revolutionaries want freedom from what they see usrepresenting in that region, and that is support of dictatorships, support ofoil regimes, and we are yielding the counterreaction to many years of supportingbrutal dictatorships in that part of the world.

[From the ChristianScience Monitor, June 15, 2006]

Prices Rise, and Interest Rates Sure to Follow

(By Ron Scherer)

It could be a summer of rising interest rates.

That's the sobering prospect for the U.S. economy following news thatthe inflation rate is running at a quickening pace. Higher prices for suchthings as airline tickets, housing, healthcare--and of course, gasoline--arenow starting to eat into consumer pocketbooks.

Wednesday, the Labor Department reported the May Consumer Price Index (CPI)rose 0.4 percent, after a 0.6 percent rise in April. This is well above thecomfort level of the Federal Reserve, the nation's chief inflation-fighter.

The latest numbers just about guarantee the Fed will hike interest rates atthe end of the month. Its new chairman, Ben Bernanke, an avowedinflation-fighter, may follow that with yet another increase in August.

The inflation pop, however, comes at a time when the economy may be startingto cool. This could keep the Fed from hitting the brakes too hard.

``The Fed is going to have to raise rates more out of a desire to keep themarket from thinking the new sheriff in town is not serious about fightinginflation,'' says Anthony Chan, chief economist at JP Morgan Private ClientServices in Columbus, Ohio. ``Prices are rising against a backdrop of weakeninghousing and other parts of the economy.''

Economists are most concerned that rising prices seem to have moved beyondthe energy sector. Removing food and energy--typically the most volatileprices--from the inflation rate indicates that ``core'' prices in May rose 0.3percent. Over the past three months, the core rate of inflation is up to anannual rate of 3.8 percent, the fastest pace in more than a decade.

``We're seeing a near-term acceleration in the core rate,'' says GregoryMiller, chief economist at Suntrust Banks in Atlanta. ``An increase of half a percentagepoint at the next Fed meeting is a strong possibility before the Fed decides toback away.''

However, Mr. Chan reports that such a large rate hike is not likely. In thepast, Mr. Bernanke has said previously, the Fed has tended to ``overshoot'' byraising rates too high or dropping them too low. The central bank would thenhave to change directions, confusing the markets.

``I don't think Bernanke is going to put in a strong case for a half apercentage point increase,'' Chan says. Though the inflation rate isaccelerating, the economy has changed considerably since the last major periodof inflation in the 1970s, Chan says. Back then, whenever the consumer priceindex rose, wages automatically ticked up via ``cost of living adjustments.''Most of those arrangements are now gone, he says, particularly at manufacturingfacilities, like General Motors Corp., where total remuneration is being cut,not raised. ``A slowing economy will eventually lead to diminished pricingpressures,'' Chan says.

Until that happens, consumers are starting to feel the effects of risingprices on their pocketbooks. For example, airfares rose 2.6 percent in May,according to the CPI report. Brian Hoyt, a spokesman for Orbitz.com, saysairline ticket prices this summer are up 10 percent over last year's.

Amy Kelley of Calverton,N.Y., can attest to this. She'sbeen searching for less expensive tickets for a vacation to Seattle. ``I can't find the bargains I usedto,'' she says.

While the higher airline prices are related to the rising cost of jet fuel,the CPI also points to rising medical expenses, which were up 0.3 percent inMay. In Philadelphia,Warren West, president of Greentree Brokerage Services, says the cost ofproviding medical benefits to his employees rose 16 percent this year. ``Thereis no way to pass this on to the end user. We don't have that kind of pricingpower,'' he says.

In fact, inflation in services is a growing issue, says economist RobertBrusca of Fact and Opinion Economics in NewYork. ``The last two months there has beenservice-sector wage pressure,'' Mr. Brusca says, pointing out that two-thirdsof the jobs in the economy are service-related. ``Inflation pressure on goodsis not that bad, but in services they seem to be building.''

Part of the reason for the service-sector price increases is supply anddemand, says Sandy Horwitz, an accountant in Coral Gables, Fla.His firm, Goldstein Schechter Price Lucas Horwitz & Co., has raised itsbilling rates 5 to 7 percent this year, he estimates. ``There is a shortage ofaccountants and pretty strong demand out there, so we need to meet people'ssalary requirements,'' he says.

Miami lawyerMatthew Krieger says demand for his legal specialty, immigration law, is sostrong he has been able to increase his billing rates from 10 to 20 percentthis year. ``There is a shortage of good attorneys in our area,'' he says.``It's a very complex area of the law.''

In terms of prices, ``rents'' is one of the fastest ascending groups. Thegovernment calculates rents by determining what individuals would pay forhousing if they were renting to themselves. Last month, rents rose 0.6 percent,the fastest pace in years. Since housing represents 25 percent of the CPI, itis a significant contributor to the overall inflation jump.

In Miami,landlord David Lombardy says tenants are not seeing rents climb--up about 30percent in the past year, he estimates. A one-bedroom apartment at the Miradoron South Beach is now renting for $1,400 a month,up from $1,000 a month last year, he says.

Still, Mr. Lombardy expects rents to drop eventually due to the risingnumber of luxury condominiums coming on the market. ``All those people whobought on speculation will try to flip them, and when they can't do that theywill try to rent them. So this will bring rents down in 12 to 18 months,'' hesays.