As destructive as we believe the economic stimulus bill that President Barack Obama signed Tuesday is, the Obama Administration could undo a significant portion of the legislation’s damage today, and this weekend. President Obama will travel to Ottawa today to meet with Canadian Prime Minister Stephen Harper. Also today, Secretary of State Hillary Clinton will travel to South Korea before moving onto China Friday. Obama and Clinton can help avert disaster for America and the world by reassuring our global trading partners that the “Buy America” provisions snuck into the economic stimulus bill by the protectionist left are completely meaningless.
There has been a renewed debate in this country over the effectiveness of the New Deal, but there is one thing that the vast majority of economists all agree on: the protectionist Smoot-Haley Tariff Act of 1930 played a significant role in worsening the Great Depression. Smoot-Hawley cut the amount of American imports in half and dramatically shrunk exports. Unemployment grew from 3.2% in 1929 to 8.7% in 1930 and peaked at 24.9% in 1933. While the “Buy America” provisions in the economic stimulus bill are not as pernicious as Smoot-Hawley, they come at a perilous time for world trade and the world economy.
According to a recent World Trade Organization report, the economic downturn has prompted only a few instances of protectionism world wide … so far. Embracing the protectionist “Buy America” provisions in the economic stimulus bill would send a clear message to our world trading partners that the United States is turning its back on free trade and would spark a devastating trade war at a time the U.S. economy can least afford one.
Candidate Obama sent some very distressing signals about his commitment to free trade. He told primary voters in Ohio, “Ten years after NAFTA passed, Senator Clinton said it was good for America. Well, I don’t think NAFTA has been good for America — and I never have.” Fortunately for the American economy, President Obama has refined that position. In a recent interview, Obama reassured the Canadian Broadcasting Corporation that, “It’s not in anybody’s interest to see that trade diminish.” His deputy national security adviser Denis McDonough was even clearer: “This is no time to — for anybody to give the impression that somehow we are interested in less rather than more trade.”
But many Canadians are not convinced by Obama’s new promises. Addressing the “Buy America” provisions directly, a column in the Globe and Mail noted: “While the bill was amended to comply with international law, we believe these reassurances are largely false.” Canada is one of our largest trading partners with the equivalent of $1.5 billion a day in goods crossing between us. Obama must reassure Canada, and the world, that the “Buy America” provisions in the stimulus bill were a meaningless hat tip to his labor base. Otherwise, not only will American taxpayers not get the best value for their taxpayer stimulus dollars, but the very foundation of our economic recovery will be undermined.
- The Federal Reserve issued a bleak forecast yesterday, projecting high unemployment through 2011.
- The Obama Administration unveiled a $275 billion plan to help select homeowners avoid foreclosure yesterday.
- The Obama Administration doubled taxpayer commitment to Fannie Mae and Freddie Mac, promising to reimburse the companies for up to $400 billion in losses on their investments in mortgage loans.
- The top U.S. commander in Afghanistan said yesterday, that 2009 will be “a tough year” and said the U.S. will have to keep about 60,000 troops in Afghanistan for at least the next three to four years.
- Because Americans do not talk about race as often as he thinks they should, Attorney General Eric Holder called the United States “a nation of cowards” yesterday.