Is Obama's Iran policy bringing on a recession?
It's not clear at this point whether President Obama's strategy will deprive Iran of a nuclear weapon, but it might deliver the U.S. into the grips of another recession.
Put simply, if oil remains as expensive as it currently is, or gets even higher, the U.S. economy will almost certainly fall back into a recession - potentially a nasty one given the already high unemployment.
Now, there are a lot of structural factors beyond the Iran standoff that are driving expensive oil, particularly the growth in demand from Asia. Even if the U.S. were to ease Iranian supply back into the market, oil is likely to be expensive on an ongoing basis (unless we tip back into a recession again). But we're not going to do that. In fact, U.S. strategy right now is to keep as much Iranian oil off the market as possible, making the price higher.
Now, supporters of this strategy claim that Saudi Arabia stood ready to make up for the loss of Iranian crude - but that's not happening. Not because Saudi Arabia doesn't want to pump more, it's because they can't pump more.
Presumably the administration believes that an Iran with nuclear weapons would do worse damage to U.S. interests than a possible second recession (or a prolongation of the Great Recession bequeathed by the Bush administration). Unfortunately, we may be about to test this hypothesis.
