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Threat of war could stifle bay area economy

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By ROBERT TRIGAUX, Times Business Columnist

© St. Petersburg Times
published February 10, 2003

With Tampa Bay's headlines flipping week to week from Super Bowl elation to Columbia tragedy to imminent war with Iraq, it's no surprise the area's business community seems to be holding its collective breath.

Is it time to celebrate, mourn or brace ourselves?

It's that darn drumbeat of uncertainty. All the pentup economy really wants to do is exhale.

Not just yet. As the Bush administration on Friday raised the national terror alert from yellow to orange, some bay area business leaders said they are coping the best they can with the Iraq threat.

This is not unfamiliar territory. Struggling through the lasting impact of the Sept. 11 attacks has prepped local executives for a war economy.

If there's war, make it swift and tidy, they say. A protracted and messy conflict in Iraq could depress travel to and from the United States, revive the domestic threat of terrorism, further damage an already weak stock market and scare U.S. consumers enough to cut spending more.

"It's really a psychological game at this point," Busch Gardens general manager Robin Carson says. But until war does occur, it's hard to predict how things such as tourism and travel will be affected.

"There were times in our history that a war was best for the economy," Carson says. "I do not think that is the case now."

After Sept. 11, Busch Gardens, a major economic barometer for this metro area, had to deal with a steep decline in domestic and international tourism. While attendance gradually returned, some post-Sept. 11 patterns have remained. Fewer domestic tourists visit the Tampa Bay area by air. National security precautions put in place after the terrorist attacks have largely remained in effect and, Carson says, are probably here to stay.

Across Tampa Bay in St. Petersburg, a community bank president marvels at how well his city has weathered a nasty national recession. But he is also quick to note the precautions he is taking with certain parts of the local economy.

"Where we would be concerned in a war with Iraq is the tourism sector," Signature Bank president David Feaster says. After Sept. 11, a couple of area restaurants with loans from Signature were hurt when tourism drooped. Feaster now says the bank will be paying particular attention to such tourist-sensitive customers and discouraging any bold business plans.

"It is a time to accumulate capital and not a time to use cash to expand," he says.

Still, that is one of the community bank's few exceptions in an otherwise bullish outlook. Feaster's only lasting concern is that a war with Iraq could drag on and renew the threat of terrorism.

"That would freeze this country," he says. "Nobody would want to travel."

Tampa consultant Gordon Tunstall, who specializes in helping organize and finance small business startups, barely blinks an eye at a looming war with Iraq. Compared with the effects of Sept. 11 and given the quick success of the Gulf War 12 years ago, the latest Iraqi threat to the U.S. economy is almost a "nonevent," he says.

"When we dealt with Wall Street after 9/11, the investment banks did not even know where their offices would be. Any economic uncertainty that we experience now is nothing after 9/11," he says.

True enough, but the Iraq questions -- Do we make a pre-emptive strike? Do we face retaliation by terrorists or weapons of mass destruction? Do we limit U.S. involvement in the Middle East, or is this the start of a bigger and unwanted role? -- already have dampened the nation's economy. Consider:

-- The U.S. dollar has lost 20 percent of its value against the euro in the past year. The decline is driven by concerns that an Iraqi war will slow U.S. economic growth, that this country will have to pay for the vast bulk of the Middle East conflict and that overseas investors have grown skeptical about owning dollars.

-- U.S. consumers are less confident lately, partly because of the Iraq threat. That will affect spending habits. In a recent USA Today/CNN/Gallup Poll of more than 1,000 adults, nearly one quarter said they were cutting back on spending because of the threat of war.

-- The stock market is treading water. After topping 10,600 in the past year, the Dow Jones Industrial Average briefly fell below 8,000 last summer. It rebounded only to fall below 8,000 again in September, then rose before dipping below 8,000 a third time last month. The Dow closed Friday at 7,864.23, the lowest close since Oct. 11.

At the University of South Florida's Center for Economic Development Research in Tampa, director Ken Weiand says uncertainty over Iraq is driving up oil and gas prices and dragging down the U.S economy.

A successful war with Iraq could result in lower oil and gas prices. And it could boost consumer confidence enough to help U.S. stock markets, according to Weiand.

"As long as we are in the current stalemate, we won't see any improvement along those lines," he says.

A war comes with many tradeoffs. Any conflict with Iraq would discourage international travel to and from the United States. But if Florida is hurt by fewer foreign tourists, it might benefit as an alternative destination for those Americans who otherwise would plan overseas holidays, Weiand suggests.

And if there is no war, or a compromise emerges brought about by the United Nations? Would that benefit the U.S. economy?

"There are so many variables," Weiand says. For example, he says a swift and clear victory in Iraq could discourage terrorists, who respect demonstrations of strength.

At Busch Gardens, Carson says that between Sept. 11 and the uncertainty over Iraq, "It's been a pretty awful, trying time for everybody."

The Tampa theme park has "what if" marketing plans for as many scenarios as Carson and her managers can conjure. What if foreign tourism plummets? What if all air travel drops precipitously?

What scares Carson more than an Iraq war is another sharp hit to the U.S. economy and stock market. Yet even during the Great Depression, people sought entertainment.

"Human beings have certain fundamental needs," Carson says. "To eat, sleep, go to the bathroom. But the need to get out and have a break and some fun with the family is also a need."

Especially when there's so much uncertainty.

-- Robert Trigaux can be reached at or (727)893-8405.

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