The head of a prominent D.C. economics think tank on Thursday will name some of America‘s strongest allies in calling out foreign countries who are not doing enough to stimulate their own economies, in congressional testimony that is very likely a peek into some details of U.S. policy that often are left unsaid by top officials.
The testimony to a House Foreign Affairs subcommittee, provided to the Times Wednesday night, will lay out what is essentially the U.S. bargaining position as they head into a meeting this weekend serving as a run up to the G20 global summit.
“Countries that clearly can and should do more include Brazil, Canada, France, Germany, Korea and Mexico,” according to the opening statement of Fred Bergsten, director of the Peterson Institute for International Economics.
Bergsten’s testimony echoes a set of proposals announced by Treasury Secretary Timothy F. Geithner on Wednesday. Geithner announced in broad strokes on Wednesday that he will propose at the meeting an expansion of the International Monetary Fund’s reserve account from $50 billion to $500 billion.
Geithner will fly tomorrow to Great Britain for two days of meetings with fellow finance ministers from G20 nations.
Though Geithner and President Obama tamped down talk of a rift between the U.S. and Europe on whether additional stimulus or financial regulation should be the focus of the G20 talks, Bergsten’s testimony leaves no doubt that stimulus should be the overriding concern.
Bergsten calls overhaul of global regulatory structures “ a long-term rather than immediate project” and says the G20 should “perhaps provide a bit more guidance” to the process started in Washington last fall at the first global summit.
But the summit should “spend most of their time,” he says, on stimulus, avoiding protectionism, and helping developing economies such as China, India and Brazil, to recover quickly from the global slump.
While Geithner on Wednesday said countries should be tracked quarterly to see if they are committing two percent of GDP to stimulus through the end of 2010, Bergsten said it should be three percent.
He said this will “inject total new demand of perhaps $1 - 1.5 trillion into the world economy in both 2009 and 2010.”
But he also said that the U.S. and China should be given “credit” toward their stimulus requirement for recently enacted measures that are pumping $787 billion and $586 billion into their economies, respectively.
In an e-mail, Bergsten said that European countries “will resist but that US proposal is correct and will eventually be accepted.”
— Jon Ward, White House reporter, The Washington Times
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