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Monday, February 16, 2009

It's a Global Economic Meltdown -- Why Are We Shouldering Most of the Burden of Bailing Out the World? By John Schmitt,

The President could rewrite the current "Buy American" restriction to allow U.S. recovery funds to be spent on U.S. goods -- as well as those from any country that passes an economic stimulus program that is at least as large (as a percent of their national GDP) as the package ultimately passed here. Call it a "Buy Keynesian" plan.

The "Buy Keynesian" clause would let the President thread the political needle. 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 effectiveness 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.


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