NYT: Despite Crushing Costs, Iraqi Cabinet Lets Big Subsidies Stand

New York Times ^ | August 11, 2005 | JAMES GLANZ

[OESY]

A proposal by Iraq's finance minister to reduce the enormous fuel and food subsidies that consume roughly a third of the government's budget and largely crush economic growth has been rejected by the cabinet after a recent similar move in Yemen set off fatal riots there.

The subsidies, which artificially produce some of the lowest gasoline and heating fuel prices in the world and finance free basic foodstuffs, have been singled out by financial institutions both inside and outside Iraq as a crippling burden when the country is trying to create a free-market economy as it grapples with insurgent violence and sabotage of its oil and electricity infrastructure.

"They've reached the point where they've become insane," the finance minister, Ali Abdulameer Allawi, said of the subsidies just before he presented the plan to the cabinet in late July. "They distort the economy in a grotesque way, and create the worst incentives you can think of."

But after his proposal's rejection, Mr. Allawi said the cabinet had judged the measure "inopportune politically." A second member of the cabinet, Ibrahim Bahr al-Uloum, the oil minister, said that he had been among the leaders of a group that blocked the proposal, and that he had raised the specter of the riots in Yemen, in which dozens of people died, after the government ended fuel subsidies there.

Mr. Uloum said that while he supported the idea in principle, it could safely be put in place only after a public education campaign, preferably after the next national elections. Both ministers said the cabinet did approve a measure that would, for the first time, allow private industry to enter what is now an entirely state-run oil-export business. "This is the point," Mr. Uloum said. "We got something new."...

[OESY]

Fresh bread for sale at a Baghdad bakery. The cost of food and fuel in Iraq is artificially low, a result of enormous government subsidies.
[Obviously, cheap bread is a huge worry for the Old Gray Lady at the NY Times. Could she be tired of writing about the starving in Africa?
The Big Question: Would the Times be compelled to rethink its editorial policy to support socialist regimes, even if headed by tyrants? Nah.]

COMMENT: What, no oil subsidy for the U.S.? Iraqis are running their own country? Do you know what this does to the argument of Democratic moonbats who said the whole war in Iraq was about oil? How can these liberals led by Moonbats-in-Chief Howard Dean and John Kerry ever be believed, nay trusted, again on matters of national security? We know what Dean and Kerry and Biden said.

[68skylark]

Since when is the Times worried about government subsidies that harm economic growth? I thought they loved subsidies that harm economic growth.

They're constantly arguing for subsidies like this in the U.S., whether it's government supplied health care or rent control in NYC.

[OESY]

The key is understanding the Times wants subsidies only for the sunsetting dinosaur industries, not those that might have a future and especially not in a country yearning for economic and political freedom. /sarc.

[HiTech RedNeck]

Well, turning these back is like letting go of a tiger's tail.

[HiTech RedNeck]

They should back it off something like 2% a year. It'll take 50 years but the alternative is upsetting a house of cards.