According to its critics, the "Buy American" condition of President Obama's economic recovery package will set off a vicious cycle of 1930s-style retaliatory protectionist measures that will only push us and the rest of the world deeper into recession. Concern about a return to a version of "beggar thy neighbor" retaliatory trade policies, however, completely misses the real problem facing the global economy today.
The "Buy Keynesian" clause would let the President thread the political spine. He gets to keep the "Buy American" provision that many taxpayers (and Senators) are demanding. And, when foreign leaders accuse him of protectionism, he can rightly respond that their goods have been excluded not because they are foreign, but because their countries aren't pulling their weight in the international recovery.
More importantly, a Keynesian clause would increase the efficiency of both the U.S. and foreign stimulus packages by encouraging a virtuous circle of fiscal stimulus. Access to the U.S. stimulus expenditures increases the incentives for the rest of the world to carry out stimulus of their own. The larger the scale of these international efforts, the more effective each national stimulus plan will be.
As the world's largest economy -- with a gluttonous appetite for imports -- the United States is uniquely placed to lead the world out of a recession. Replacing "Buy American" with "Buy Keynesian" could actually go a long way toward filling the biggest hole in the current global response to the deepening recession: the lack of coordinated international fiscal policy.
The "Buy Keynesian" clause would let the President thread the political spine. He gets to keep the "Buy American" provision that many taxpayers (and Senators) are demanding. And, when foreign leaders accuse him of protectionism, he can rightly respond that their goods have been excluded not because they are foreign, but because their countries aren't pulling their weight in the international recovery.
More importantly, a Keynesian clause would increase the efficiency of both the U.S. and foreign stimulus packages by encouraging a virtuous circle of fiscal stimulus. Access to the U.S. stimulus expenditures increases the incentives for the rest of the world to carry out stimulus of their own. The larger the scale of these international efforts, the more effective each national stimulus plan will be.
As the world's largest economy -- with a gluttonous appetite for imports -- the United States is uniquely placed to lead the world out of a recession. Replacing "Buy American" with "Buy Keynesian" could actually go a long way toward filling the biggest hole in the current global response to the deepening recession: the lack of coordinated international fiscal policy.
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