The U.S. House and Senate have adopted a $787 billion economic stimulus package and the U.S. Treasury Department has announced a $2.5 trillion rescue plan for the U.S. financial system. The main point of the financial system stabilization plan is to set up a public-private investment fund to finance the purchasing of toxic bank assets. But the rescue plan has been criticized for lacking details. And the hard question of how much to pay for bad assets remains.
Nevertheless, the two large-scale measures are a feat for the Obama administration. It is remarkable that less than one month after its inauguration, the U.S. administration has readied important tools to pull the U.S. out of the economic crisis. The speed with which the Obama administration is tackling the economic crisis is something Prime Minister Taro Aso and other Japanese leaders should learn from.
Mr. Obama said that the stimulus package will save or create 3.6 million jobs. It is nearly 4 percent less than the House bill and nearly 6 percent smaller than the Senate bill but it is the largest fiscal spending aimed at economic recovery since World War II. The package includes spending programs worth about $500 billion and tax relief worth about $287 billion. The spending programs include more than $150 billion in public works projects for transportation, energy and technology.
The package, however, also has a “Buy American” provision, which would limit steel, iron and manufactured goods to be used in infrastructure projects to products made within the United States, though it has stated that this provision will be implemented in a way so as not to violate existing international trade agreements. Some other nations, including Russia, have already taken protectionist steps. To tide over the current economic crisis, every nation needs to stimulate its own economy. But in so doing, the U.S. and other nations should take utmost care not to be tempted by protectionism. The blunder committed during the Great Depression of the 1930s must not be repeated.
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