Timothy Geithner, the Treasury Secretary, made an aggressive and spirited defense of the US government's use of hundreds of billions of dollars to revive the flagging American economy to other members of the G8. From the standpoint of the other financial ministers at the gathering in Italy, his comments may have been ill-timed. Much of the conclave was devoted to discussing how to cut back on stimulation as the global economy emerges from a violent contraction in GDP, especially among the developed nations.
Geithner's analysis of the stability of major economies, especially that of the US, is different from those of his peers. He apparently thinks that more money will have to be spent for a longer period of time in order to put America's financial status back on very firm footing.
According to The New York Times, "Talk is already turning to what economists are calling the 'exit strategy' on how to cut looming deficits and rein in spending without leading back to recession." While Geithner is not likely to convince the other attendees of the value of his perspective, their disagreement is not likely to sway US government policy. Geithner may have the practical ability to keep the Administration on the course of investing in jobs and programs to prime the economic pumps. The US still has the capacity to sell hundreds of billions of dollars in debt in the global capital markets. Other G8 nations do not have access to the same level of funding.
History may look back at this G8 meeting as a critical watershed in the effort to end a recession which is as deep as any in the last fifty years. Geithner has, along with the Administration and Congress, elected to increase the deficit to a huge number relative to GDP. If the stimulus package does not work, a generation of Americans may face a huge tax burden.
Douglas A. McIntyre is an editor at 24/7 Wall St.