MANAGING a crisis as complex as this one has so far called for nuance and pragmatism rather than stridency and principle. Should governments prop up credit markets by offering guarantees or creating bad banks? Probably both. What package of fiscal stimulus would be most effective? It varies from one country to the next. Should banks be nationalised? Yes, in some circumstances. Only the foolish and the partisan have rejected (or embraced) any solutions categorically.
But the re-emergence of a spectre from the darkest period of modern history argues for a different, indeed strident, response. Economic nationalism—the urge to keep jobs and capital at home—is both turning the economic crisis into a political one and threatening the world with depression. If it is not buried again forthwith, the consequences will be dire.
I’m all for buying American-made products, but there is a clause in the economic stimulus bill currently being debated requiring that funds from the stimulus package be used to buy American made materials; while I would prefer that American-made products be used as much as possible, if funding infrastructure projects right now is contingent on that, then many projects that could people to work right now will be backburnered.
There are a lot of flaws in the new economic stimulus bill … in many ways, I think there are more flaws in this package than in the original TARP bill passed last Octomber; there are many projects that while important, really do nothing to put people to work now … and many of the tax cuts being discussed won’t have any effect until 2010.
This package should be about putting people to work immediately; not about funding pet projects that don’t do much for the economy as a whole.
Shovel ready projects is what this bill should be about. Then both sides can really work on developing a plan that will work longer-term … and economic protectionism should not be built in.
President Barack Obama, his advisers and the Democratic leaders of Congress argue the roughly $830 billion measure will help pull the U.S. economy out of its current skid. Much of the package involves infrastructure spending, long-term energy projects and aid to cash-strapped state and local governments.
The nonpartisan Congressional Budget Office reported last week that the measure is likely to create between 1.3 million and 3.9 million jobs by the end of 2010, lowering a projected unemployment rate of 8.7 percent by up to 2.1 percentage points.
But the CBO warned the long-term effect of that much government spending over the next decade could “crowd out” private investment, lowering long-term economic growth forecasts by 0.1 percent to 0.3 percent by 2019. Watch South Carolina Gov. Mark Sanford warn of “disastrous consequences »
In a concession to Republicans, about a third of the bill involves tax cuts. But the measure is expected to have only minimal GOP support when it goes to a scheduled vote early this week.
The version of the bill that passed the House of Representatives had no Republican votes.
“We need to spend money on infrastructure and on other programs that will immediately put people to work. But this is not it,” said Sen. John McCain, R-Arizona, last year’s GOP presidential nominee.
Senators reached a tentative agreement Friday on a compromise bill largely negotiated by a handful of moderate Republicans whose votes are needed to prevent a filibuster. But McCain told CBS‘ “Face the Nation” that the package should have been about half the size of the one now before senators, and should be balanced between tax cuts and spending.
“We’re going to amass the largest debt in the history of this country, by any measurement, and we’re going to ask our kids and grandkids to pay for it,” he said.
I hate to say it, but I’m with John McCain on this … this bill needs to be stripped down to projects that can be started immediately; once that is done, then Congress can get out from under the pressure of “immediate action required” to put together a long-term economic package that makes sense.