Common ground between the U.S. and Europe seems to be emerging, with both a recognition that more stimulus spending may be needed and some moves on the regulatory reform Europeans prioritize in the offing. The U.S. and Europe do have different priorities and perspectives, but summits exist precisely so that countries can work out differences and arrive at a common agenda.
Last night President Obama made the case for his budget, which includes important action on health care, energy and climate, and education. Taking action on these issues is vital to maintaining America’s position as a global power. Some have argued that in the midst of recession now is not the time to advance these issues. This has it backward.
The justified outrage over AIG’s post-bailout bonuses should not be conflated with the revelation that AIG dispensed billions to foreign banks. The US needs an international recovery to sustain our own recovery, and our status as the sole global superpower and the world’s reserve currency give us a unique stake in working to maintain the global economy. Despite public anger at AIG, as President Obama noted during his address to Congress, “in a time of crisis, we cannot afford to govern out of anger.”
The Obama administration is dealing with the crisis by seeking a global solution for a global problem. Yesterday, Treasury Secretary Tim Geithner unveiled a proposal to shore up the IMF and ensure that global institutions have the resources they need to help failing economies. There is still no international consensus on this plan and much difficult work must be done before the upcoming G-20 summit in April. Unfortunately, rather than addressing these serious issues and helping find a constructive solution, conservatives in Washington are playing politics by railing against earmarks, which make up only 2% of the federal budget.
The World Bank released a report on Friday that projected the global economy will contract for the first time since WWII. This has led Lawrence Summers, the head of the National Economic Council, to call for a global stimulus effort that seeks to boosts demand throughout the world. The world will be watching the G-20 summit in April for the hope of seeing strong global action along the lines advocated by Summers and Prime Minister Gordon Brown. However, despite the need for countries to take strong action, Congressional conservatives are stuck in a mindset reminiscent of the Hoover-era. Calls for “spending freezes” and to stimulate the economy exclusively through tax cuts, are reflective of a movement that has run out of ideas and has no practical solutions to solve the economic crisis their very own policies created.
Yesterday, the new Director of National Intelligence, Dennis Blair, warned that “the primary near-term security concern of the United States is the global economic crisis and its geopolitical implications.” While Al Qaeda remains the most direct threat to the physical security of the United States, the geopolitical ramifications of the global economic crisis are truly startling. The interconnected nature of the global economy has meant that the current crisis has affected all regions of the world.
In an increasingly interconnected and globalized world, the domestic stimulus bill has tremendous international implications. Attempts to stick to a discredited economic doctrine and sacrifice economic recovery for 2010 talking points, show a dramatic misunderstanding of the leadership capital the US can gain – or lose – here. As if the welfare of Americans wasn’t enough, businesses around the world are watching and hoping that Congress shows we understand how what is in our self-interest is also in theirs.
This weekend, world leaders will gather in Washington to discuss the financial crisis. After World War II and the great depression the world’s leaders recognized that the international financial system was too complex and interconnected for countries to go it alone and responded by establishing the Bretton Woods institutions. The international financial mechanisms they created helped war-torn economies recover – and set the stage for the US economy to grow and thrive atop the global economy for the half-century that followed.