The recently signed $ 787 Billion economic stimulus package by Barack Obama has been claimed as the measure that would get the American economy back on track. Obama claims that the plan would create over 3.5 million jobs, tax cuts would help millions of common Americans who were struggling to make both ends meet and the bail out to major companies would help save thousands jobs. Obama has also vowed to cut down wasteful spending and tighten the belts of those companies that seek a government bail out. He has also promised to penalize companies that outsource. So is this great ‘New Deal’ the way ahead to stabilize the economy or will it end in yet another costly failure? Is Protectionism the right way to go?
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Critics of the Bill are already decrying it as a ‘pipedream’ which offers nothing new. Republicans say that “a bill that’s supposed to be about jobs, jobs, jobs has turned into a bill that’s about spending, spending and spending (Faler para 7)”. Republicans also accuse the Democrats of ‘rushing’ through the bill which at over 1000 pages is too long for any member of the senate to have actually read it. Hence the devil in the detail may actually prove to be the Bill’s undoing. Domestically, the tax cuts promised by Obama have met with criticism stating that it will only cause additional burden on the exchequer and not address the real problem – of job loss. Common Americans wonder what could be the rationale for bailing out the big wigs that come to Capitol Hill asking for dole flying in private company owned jets!! The housing sector collapse has not been addressed sufficiently by the Stimulus plan. Though housing is cheapest today since the 1970s, people are not buying, waiting for the prices to fall further. According to Samuelson instead of just focussing on foreclosures the stimulus plan should have looked at bribing the prospective buyers by giving them a 10% tax cut. This would motivate buyers to enter the market and create 2,50,000 jobs.
The overt protectionist clauses of the bill on outsourcing and import taxation will only hurt American companies that made profits due to outsourcing. Protectionist measures are sure to invite retaliatory measures by countries affected. Countries like China and India account for more than half of America’s outsourced business ventures. China owns Billions of Dollars of American government bonds that in effect subsidise American debt. The World Trade Organisation boss Pascal Lamy has already warned that global trade talks could remain stalled if the Obama administration back pedals on liberalisation. Lamy’s hypothetical case that if the US closes $ 80 Billion car imports from China, Japan, and Europe could cause the very same countries to close American imports to their countries ‘worth US $ 120 Billion” (Lamy para 7) is a reality.
Will Obamanomics of neo-protectionism sound the death knell for Free Trade championed by America for so long or will it help America rescue its economy? The Economist observes that the recently announced curbs on immigration and H1-B visas will only force the innovators to go elsewhere to Britain or Europe (para 6). The author of this essay opines that though well meaning, the President’s decidedly protectionist streak in the Stimulus Bill will do America more harm than good and it may well be prudent to water down the ‘Buy American’ rhetoric and remove the protectionist clauses and concentrate on ‘start ups’ instead of ‘bail outs’.
Faler, Brian. “US Congress Gives Final Approval to $ 787 Billion Stimulus.” 2009. Bloomberg.com. Web.
Lamy, Pascal. “Protectionism cannot be Smart, Lamy tells Australian Think-tank.” 2009. WTO website.
Samuelson, Robert J. “Wrong Turn on Housing.” 2009. The Washington Post online. Web.
The Economist. “Protectionism Rears its Ugly Head.” 2009. The Economist.com. Web.