Erle Frayne D. Argonza
Good evening from the paradise boondocks south of Manila!
The weather in this tropical area where I reside right today has been so fine for almost two (2) weeks now, and this is unusual for the month of September when four (4) storms pass over the country on the average. At any rate, this makes me a bit happy, enough to ruminate again about the global economy specifically the White House policy pronouncements.
I was among those analysts and development experts in my country who made a go for stimulus packages as core ‘pump priming’ strategy for staving off the ill effects of the global recession. To recall, I even went to the extent of saying my kudos for America’s own stimulus package that was pronounced late by then president Bush and then extended by the new president Obama.
Being all to familiar with pump priming, as I had been witness to how this tool was wielded every time we experienced the pains of spiraling crash right in my own country, I have been all too eager to see the tool be employed judiciously in the Northern countries (EU, USA-Canada, Japan) that have either remained flat growth-wise for successive years or crashed calamitously such as what the USA went through in 2002 and 2007.
The Obama administration had its chance of employing this tool, with no less than $800 Billion as war chest for its execution, and somehow the pump priming proved to have stopped the catastrophic collapse that went on after the implosion of the realty bubble in ‘07. As per my own textbook orientation in macro-economics, it takes two (2) years for a stimulus program to optimize the economy back from appalling sub-optimal performance accountable to a recessionary crash.
The two (2) years since the package was begun by Bush yet will end this month, as far as I can recall the beginnings of it. After the two (2) year gestation period is over, it is standard task for policy-makers and stakeholders to evaluate the overall performance of the measure. The evaluation will unveil what kinks remain that were largely un-addressed by the measure.
It is surprising on my part to learn of the latest pronouncements from the White House that the US president is again ready to launch a new stimulus package on top of the existing one, coming at a time when the first package has never been evaluated to the fullest. The next package includes tax cuts that are but a rehash of the Bush-era stimulus for big business.
I just hope that the pump priming won’t be misconstrued as rendering the stimulus tool into a permanent policy tool. Just by pronouncing that a new stimulus package is on the drawing board can already send jitters to business stakeholders as the pronouncement is a tacit acceptance of the failure to revive the economy as a whole, and that a new round of recession could be in the offing.
Maybe the White House has in mind not only the US economy but also that of its Atlantic partner Europe. Hasn’t the USA been handling fresh cash to Europe to mitigate the bursting of bubbles and gnawing crisis there? Did the White House or Federal Reserve even bother to submit a report to the US Congress about the subsidies to Europe, subsidies that should be hands-me-down to America’s laborers who continue to suffer from the ballooning unemployment in the homeland?
The White House pronouncement is also sending bad signals to Asia’s emerging markets that have already been growing appreciably over the past eight (8) months of the year. Asia’s own stock markets, financial and money markets are trembling over the Obama stimulus news, and there are now silent moves inside board rooms to map out contingency measures in case that the USA will go thru another round of recession in the aftermath of the failure of the first stimulus package to induce totally recovery.
If there is anything I can advise to the White House and Federal Reserve technocrats at this point, it is to desist from making such an untimely measure. Ensure that the most optimal results from the first stimulus package were achieved first of all, report the results to the US congress and the world community, and show clear patterns of transparency in the dealings regarding the pump priming.
If a stimulus package is utilized largely to fatten the purses of corporate executives and owners, who will then use the same to buy new yatch and spend most luxuriously for their board meetings, then the clear message is this: forget about stimulus package!!!
[Philippines, 14 September 2010]
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