 |
China’s
top economic body is accelerating infrastructure
projects such as work being done on the Beijing-Shanghai
Express Railway. | |
|
Washington — Governments around the globe are taking
steps to encourage consumer spending and economic expansion.
Through increasing public spending, offering tax breaks
and bolstering consumer confidence, they hope to bring a
quick end to economic recessions many countries are experiencing
and thereby restore world economic growth.
First on the agenda: combating the largest quarterly drop
in U.S. consumer spending since 1980. (See “World
Economy Turns on U.S. Consumer Behavior, and It Is Changing.”)
“The fastest way to move the economy forward is to
get consumer spending to jump,” said David Cross,
president of the business consulting firm Market Outlook.
“It immediately translates into more business investment,
more hiring, and a restoration of confidence in the system.”
To boost consumer spending, the U.S. Congress in February
approved a $168 billion package, including income-tax rebates,
and the Bush administration in November announced that up
to $800 billion will be spent by the Federal Reserve, the
U.S. central bank, to encourage loans for education, cars
and real estate. (This is money not included in a $700 billion
rescue plan for the financial sector — the Emergency
Economic Stabilization Act of 2008, signed into law October
3.)
But the United States and other governments are looking
beyond short-term stimulus toward programs that will lay
the groundwork for sustained growth. U.S. congressional
leaders and President-elect Obama’s economic team
are developing a package that may be worth more than $500
billion and would likely include infrastructure projects
and other investments aimed at job creation and long-term
economic expansion.
 |
People
walk through New York's Times Square after the
Federal Reserve announced plans to provide $800
billion to thaw consumer lending. | |
|
“Spending on infrastructure and health care makes
perfect sense,” said Charles Morris, author of The
Trillion Dollar Meltdown: Easy Money, High Rollers, and
the Great Credit Crash. “The consumer is so tapped
out.”
At the recent financial summit in Washington, leaders of
the G20 nations agreed to stimulate their economies and
work together to avoid a prolonged global recession. The
notion is that, in tandem, countries can create a sort of
global New Deal, recalling the spending program of U.S.
President Franklin D. Roosevelt in 1933, which created jobs
and helped bring an end to the Great Depression.
Even the International Monetary Fund, which typically promotes
fiscal restraint and debt reduction, has called on governments
to boost spending by 2 percent of gross domestic product.
“Practically every country in Europe has instituted
a stimulus package, either directly through coordinated
tax cuts and interest rate cuts or through intervention
in the financial markets,” Cross told America.gov.
The European Union is considering a proposal worth more
than $250 billion to encourage growth. Britain and Spain
have proposed $30 billion and $14 billion stimulus packages,
respectively. In November, China announced a $586 billion
plan to boost domestic consumer spending over two years.
In a recent public address, French President Nicolas Sarkozy
said it is time for massive investment in infrastructure,
education and innovation. “The government will put
175 billion euro [$226 billion] of direct investment into
economic activity over three years," Sarkozy said,
according to a French government Web site. “Alongside
investment in universities, research and the environment,
we are going to invest heavily in the digital economy, which
will be the driver of future growth, along with clean technologies.”
A United Nations report released December 1 recommends
massive, coordinated stimulus packages to prevent a worldwide
economic meltdown. A recent World Bank report on weathering
the financial crisis concurs.
“The costs of investing both in social programs and
economic activities can seem daunting for many governments
now short on cash,” said Danny Leipziger, a specialist
on economic management for the World Bank, in a statement
on the bank’s Web site. “But the future cost
of not taking action can be much higher than the savings
from inaction.”