I will not hold my breath

The other day Adam blogged about the House of Representatives adding a protectionist clause to the Obama stimulus package.

This article from The Times fleshes out the issue, noting that the protectionist clause was added at the behest of the US Steel industry. As Rosemary Righter, the article author notes:-

the America of Barack Obama. There, “economic patriotism” is the new protectionism, prettily wrapped in stars and stripes but just as damaging to the world’s prospects of recovery as was the 1930s variety.

So Smoot & Hawley walk amongst us again, but as we shall see later they are accompanied by the shade of a predecessor to Barack Obama. Ms Righter is concerned at the protectionism rampant which is cloaked in Old Glory, that symbol which never fails to stir the heart of US nationalism.

What makes much of this so sickening is that Obama was the candidate of change. The One touted by so many globally as the ‘saviour’. If he goes through with much of what is in this legislation he may go down in history as ‘The One’ alright, The One who plunged the world economy into a trade war the likes of which we have never seen before, because of the global linkages that now exist. The approach he is espousing will be music in the ears of the likes of Sarkozy,  Merkel and Putin.

Righter went on:-

Is Mr Obama a protectionist? Instinctively, yes; he has never seen a free-trade deal he would actually vote for, and he talks about trade policy as a tool “to support good American jobs”.

There we have it. This was certainly his early approach and rhetoric.

But as the election campaign wore on, he toned down his invective against foreign competition, and, because his economic team is basically free trade, the jury is still out.

Well yes and no, he said one thing in public and another in private. In addition, his Trade Representative is not seen as the heavy hitter in his economic team.

Adam thinks that in his gut Obama is not a free trader, nor has he demonstrated in his stimulus package a clear understanding of what stimulus is. That in itself is very worrying as is the aquiesecence of his economic team to the nature of the package. This does not bode well for the future.

Then as Righter wrote:-

The verdict, however, will be in very soon. At the behest of the most protectionist Congress in memory, Mr Obama may be about to repeat, at the dawn of his presidency, the same historic error that the much derided Herbert Hoover made just before quitting the White House in 1933. In the depths of the Great Depression, he signed into law the innocent-sounding Buy America Act. It required the US Government to use American suppliers in all public contracts.

Here we have it, not just the ghosts of Smoot & Hawley, but the shade of Herbert Hoover.

Less notorious than the Smoot-Hawley Tariff Act, “Buy America” did huge damage. It proved a disaster for US manufacturing exports and the global economy. Other governments followed suit, and it took decades to begin to reverse the closure of markets.

In 2009 we see The One going down the same path. So much for the free trade economic team.

Now, prodded by America’s mighty steel lobby, a key congressional committee has voted, 55-0, to attach a still more rigorous “Buy America” clause to President Obama’s stimulus package. It bars federal funding of any public projects “unless all of the iron and steel used is produced in the United States”. The clause could be extended to asphalt, cement, heavy machinery, you name it. US dollars, the committee intones, must be used to create “American jobs in America, not Chinese jobs in China”.

These people are unreal, not content with existing protectionism, the idiots are going to make everything worse. You know what makes it all so horrible, is that hundreds of millions of people, including many New Zealanders will think that Obama is helping them, but if he signs off on this he will be hurting everybody on the planet. But to date, The One does not seem to realise this.

This of course is the president that pledged to do the right thing, the practical thing. Yeah Right!

Leave aside value for money. Pass over the detail that the US does not produce enough steel to meet domestic demand. Admit that, when economic activity evaporates as precipitately as it has this winter, “saving” jobs looks more important than ensuring long-term competitiveness. Admit, further, that all governments are in the hidden subsidy game right now, whether they boast about it, as in France, or deny it as stoutly as Lord Mandelson – whose “this is not a bailout” brings to mind Magritte’s famous “ceci n’est pas une pipe” painting.

Why worry about value when you can spend inter-generational money.

Agree, finally, that when you are the newly elected US President and the money you are preparing to print runs into the trillions, the queue at the trough is bound to form pretty fast. But the scale of the temptation is precisely what makes Congress’s populist “Buy America” rider an irresponsible, innumerate, pernicious bit of political and economic folly.

Own up to the reality Obama. Get out there and live up to your campaign slogans. Do not beggar us all .

Go for the world, not for Buy America.

I will not hold my breath.