When the G20 summit discussion turns to the world economy later this week, one point of contention between the United States and Europe will be how much spending governments should pour into the ailing financial system to spur a worldwide uptick.
While conservatives at home portray Europe as a continent of free-spending socialists, the reverse is true when the question is government funding for stimulus plans. Our country is pledging more than five percent of its Gross Domestic Product to stimulus spending, while countries in Europe are putting up minimal amounts.
The Europeans are likely to resist efforts by President Barack Obama, who will press for more and quicker spending when leaders gather in London.
Left alone, the Europeans are plotting, a dare-we-say, conservative approach of hunkering down and letting the markets right themselves at their own pace.
The Europeans have at least two motives here. If both the United States and China pour in resources, everyone will see a benefit, regardless of what France, Germany and their neighbors do.
And secondly, leaders in Europe are wary (and in some cases incapable) of busting open their coffers with big government spending. Note too that the really big meltdowns––carmakers, AIG and banks in general––are homegrown, red-white-and-blue messes that require dollars not euros to bail them out.
We would do well to consider the European position and maybe temper our own desire to spend our way out of this economic decline.
Heavy spending for a brief period of time should get things moving, but just pouring money into problem industries or ill-conceived plans will only create growth through waste. Even when we’re wasting money, someone is spending and someone else is making money.
Le’problem is that over the long haul waste is simply that––wasted money as far as taxpayers are concerned. There is certainly a benefit to preventing foreclosures and keeping people out of the unemployment line, but if that’s done through programs or projects not actually needed, in the end, it becomes wasted money.
It was encouraging to see the president demand car-makers produce some substantial changes in order to keep receiving federal money to avoid bankruptcy. Lest anyone argue “just let them fail,” consider that a failed GM would immediately add 400,000 people to the jobless ranks, would cut off numerous pensions and healthcare plans and would indirectly close thousands of supplier companies across the country––a price too high to be ignored.
But something else needed is a demand by taxpayers that our government administration produce substantial changes in order to keep spending our money.
Much as the former president was hounded to produce timetables on the Iraq War, President Obama should be pressed on exactly how much will be spent, on how long this bailout driven salvation plan will persist, and at what point we can stand down with our greenbacks. If things are not showing signs of improvement by this time next year, will we still be pouring money into the mess? And at what point will we write-off some large corporations into bankruptcy, regardless of how many jobs lost or how important their financial holdings may be?
True, it took years to create the conditions for this current recession, and we shouldn’t expect to get out of it any time soon. But are we spending all our stimulus money too fast, in one year, when we really should be looking at a longer, slower recovery process?
Bailing out and propping up industries in the short term is fine, but only if it amounts to stage one of a prolonged recovery program. Just throwing open the treasury doors is not a recovery plan. |
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