Rescuing US economy

AS the previous vote in the House of Representatives last Monday rejected the $700 billion bailout plan for US economy, sparking market and political turmoil in the country and casting a long shadow over foreign economies as well, the Bush administration and bailout supporters mounted efforts to win over dissenting Democrat and Republican Congressmen in favour of a revised version of the bill. Their success (263-171) on Friday owed largely to Democratic presidential hopeful Barack Obama's backing and the support the bailout package received from the Senate (74-25). Senator Obama, according to a latest poll, gets 48 percent to Senator McCain's 41 percent as being more suited to take the economy out of the present mess. And the new measure provides a chance to US economic managers to set the ball rolling in an attempt to rescue the country's faltering economy that has lost 760,000 jobs this year. Of this, September witnessed the largest cut in five years, 159,000 jobs taking the unemployment rate to 6.1 percent. The percentage of jobless among the black community shot up to 11.4 percent. As most projections see more cuts in jobs, hitting 7 to 7.5 percent in 2009, Dow Jones industrials slid by 157.47 points on continued worries about the economy. Reports cite French officials scrambling to reassure consumers and investors after the statistics warned that the country's economy has gone into recession. Although there is widespread scepticism about the package's ability to turn the corner and the criticism that it is aimed at helping rich financial speculators who were responsible for the crisis, there is an equally widespread feeling that this largest government economic intervention since the Great Depression of the 1930s is a "necessary evil". President Bush acknowledged, "our economy continues to face serious challenges", just as he signed the bill into law. The Treasury is speeding up efforts to develop a plan for spending the huge money. It has the power 'to buy bad debt from banks, credit unions, thrifts and insurance companies. The hope is that by shoring up their books, trust will be restored to the financial system, banks will begin lending again, and it will start the economy on the road to recovery.' However, with the war on terror continuing to make holes in the economy one wonders whether the inbuilt mechanism in the American system would come into full play with the injection of $700 billion. Should it fail to work, not only the US and Europe but also the rest of the world would have to suffer worsening economy, with greater fallout on poorer countries. 

ePaper - Nawaiwaqt