Nations Spend in Tandem To Stall Global Recession

A snapshot of how governments plan to increase spending is emerging. Those plans include not only the building of more bridges and roads but the introduction of measures to put more cash into the hands of strapped consumers.

The Federal Reserve and Treasury Department have moved to boost consumer spending and lower home mortgage rates, committing as much as $800 billion to make it easier for Americans to borrow money for cars, tuition and homes. The British said they would slash the national sales tax to 15 percent from 17.5 percent. The Germans are set to offer temporary tax breaks to consumers buying cars or renovating homes. The Japanese are giving out cash rebates to taxpayers.

Some of the projects being proposed are preexisting infrastructure plans that are now being accelerated.

Nicholas R. Lardy, a senior fellow at the Peterson Institute for International Economics, estimates that only about half of the "new projects" in Beijing's $586 billion package amount to previously unplanned spending. "But that is still a great deal of money," Lardy said. That figure also does not include a number of measures China is taking to stimulate consumer demand, such as a recently announced $16 monthly increase in social security benefits for more than 40 million Chinese.

A number of countries are gearing up for projects that offer long-term benefits, both economic and environmental. In a move that may offer a guide to helping the ailing Big Three automakers in Detroit, the French are in the early stages of plans to assist their hard-hit auto industry by awarding government grants to boost research into hybrid and battery-power technology.

In comments last week, Obama suggested that an expansion of wind and solar power generation would be part of his stimulus plans. Such targeted spending may be able to spur private-sector job growth. Last month, Flabeg, a German maker of solar mirrors, announced plans to create 300 manufacturing jobs in the Pennsylvania rust belt. The move follows the arrival of a Spanish company, Gamesa Technology, that took over an abandoned steel plant in the state last year to make wind turbines, creating 850 new jobs.

Obama also cited a plan being circulated by environmental groups that would offer government loans to help schools update their heating and cooling systems, creating quick construction jobs and stimulating demand for building materials. Those schools would theoretically save enough money in the long run to pay back federal loans.

"I think the fervor in which [the Obama team] is seeking suggestions right now tells me that this kind of spending is something they are very serious about," said Carl Pope, executive director of the Sierra Club.

Critics say some governments, however, may not be spending enough to stimulate growth.

In its call for public spending, the E.U. said member countries should spend at least 1.5 percent of their gross domestic products on fiscal stimulus. That's short of the 2 percent in fresh spending recommended by the IMF. By comparison, if the U.S. Congress were to approve a fiscal stimulus package in the ballpark of, say, $500 billion, it would represent roughly 3.5 percent of GDP in the United States.

Some countries in Europe, such as Germany, appear more concerned about overspending. That is at odds with the leadership in France, where Sarkozy has seen the crisis as an opportunity to boost the role of government.

"My sense is that yes, the fiscal spending will help, and we are seeing governments moving this way," Blanchard said. "As to whether this is on the dimensions of a [global] New Deal, probably not yet, but it may well get there."