If there were any doubt in your mind that some People of Influence in Washington think that a U.S. military attack on Iran is a reasonable proposition, consider this: the Heritage Foundation has just published a paper attempting to reassure policymakers that the economic fallout from a U.S. attack on Iran - specifically a major disruption in the supply of oil from the Middle East - could be easily managed.
The paper reports on a "computer simulation and gaming exercise that examined the likely economic and policy consequences of a major oil disruption in the Persian Gulf," conducted between December 2006 and March 2007. The game was based on a scenario in which Iran began blockading the Strait of Hormuz in January 2007, following a U.S. bombing of Iranian nuclear sites, air bases, and air defense targets.
The Heritage Foundation economics team found that under "worst-case circumstances":
The price of West Texas Intermediate crude would peak in the third quarter of 2007 at $150 per barrel, an increase of $85 per barrel; real (inflation-adjusted) gross domestic product (GDP) would fall by over $161 billion in the fourth quarter of 2007; private non-farm employment would decline by over 1 million jobs by the middle of 2008; and real disposable personal income would be more than $260 billion lower by the fourth quarter of 2007.
But, Heritage argues, these outcomes could be mitigated by correct U.S. policies. I promise you, you will never guess what these wise policies include:
The Administration request permission to permit petroleum recovery in the Arctic National Wildlife Refuge (ANWR) and the off-shore reserves immediately west of Florida. The participants assumed that Congress would pass this legislation in late January 2007. The game participants further assumed that this policy change would apply downward pressure on petroleum and gasoline prices in the futures markets.
Congress and the Administration temporarily reduce regulatory burdens that would otherwise cause energy prices to increase. The participants assumed that, in March 2007, Congress would delay implementation of fuel economy standards and relax compliance with the Jones Act and clean air regulations regarding power plant improvements.
Wait, you guessed it? No way! I had no idea you were that clever.
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