OP-ED: Free Trade Threat (The AUSTRALIAN)

The demon of protectionism is stirring in the US Congress.

President Barack Obama has moved quickly to assemble the kind of economic stimulus package that the International Monetary Fund says is essential to halt the downward economic spiral and prepare the ground for recovery. Workers, losing jobs in their thousands, were looking to Washington for "action, bold and swift", Mr Obama said as the US Congress prepared to vote on his package. The House of Representatives endorsed the $US825 billion plan ($1.25 trillion), while the Senate is still considering a parallel bill.

There is much to commend in the approach taken by the new administration. It picks up the IMF's recommendation that the most direct way to boost demand is for government to spend money itself on one-off initiatives. Almost $US300 billion is directed to state governments that do not have the ability to borrow independently, and are facing sharp cuts to services and infrastructure spending as their own tax revenue dries up. A further $US275 billion is devoted to tax cuts aimed at low-income families.

The package also bears the marks of the worst features of American democracy, with congressmen trading their votes for inclusion of their pet projects. Hence, funds are provided for internet access to rural areas, an anti-smoking campaign, a super computer to study ocean currents, and the laying new turf on the mall from Capitol Building to the Lincoln Memorial.

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