Warning that the global recession is deepening, the Obama
administration on Wednesday called on major U.S. allies to do their
part and support strong stimulus programs to fight the downturn.
The administration said decisive action was needed by all countries to complement what is being done in the United States. Treasury Secretary Timothy Geithner outlined an ambitious agenda, including a tenfold increase in the size of an emergency fund the International Monetary Fund uses to help countries in trouble to as much as $500 billion.
"We can do a really good job here at home, with a whole host of policies, but if you continue to see deterioration in the world economy, that's going to set us back," President Barack Obama said in the Oval Office following a briefing by Geithner.
It's essential for other major countries to commit to substantial and sustained efforts to bolster their economies in the face of a deepening recession, Geithner later told reporters.
The U.S. challenge highlighted a rift with European nations who are balking at U.S. calls for more stimulus spending, arguing they do not want to pile up huge levels of debt. Some European critics have charged that the U.S. demand for increased stimulus spending was an effort to divert a European call for a major overhaul of regulations governing the financial system to curb the types of excesses in the U.S. that spawned the crisis.
Obama said the U.S. has two goals for the G-20 summit in April: to make sure there is "concerted action around the globe to jump-start the economy" and to achieve consensus on regulatory reform to take place in each country.
However, many European nations have been critical of U.S. calls for increased stimulus spending. At a meeting this week of finance ministers of the 27-nation European Union, officials said they were doing enough already to support the world economy.
Geithner sought to play down any disagreement between the U.S. and Europe.
"I think you will find very broad support to address these objectives," he said. Geithner will attend talks Friday and Saturday in London with finance officials from the Group of 20 nations.
Those meetings are designed to develop a common agenda for a summit April 2 in London to be attended by Obama and the other leaders of G-20 countries, a group that includes not only the world's wealthiest nations but also major developing countries such as China, India and Brazil.
Geithner said the U.S. will seek approval to expand a $50 billion fund the IMF maintains to support countries in trouble to as much as $500 billion. The IMF needs much greater resources to be able to provide emergency loans to countries during the current crisis, he said.
Currently, the U.S. contributes 20 percent of the $50 billion fund, known as the New Arrangements to Borrow. Geithner said the U.S. share of the expanded fund would have to be worked out. Congress would have to approve any expansion of U.S. support to the IMF.
Geithner also said the U.S. would urge a big expansion in the membership of the Financial Stability Forum to include all members of the G-20. The forum, which is expected to play a major role in developing tougher financial regulations, currently includes fewer than half of the G-20 countries.
Geithner said there have been many ideas passed among the nations, and good progress made, but that the time for talk is over.
"It's time now for us to move together and to begin to act," he said. "Everything we do in the United States will be more effective if we have the world moving with us."
Obama and Geithner did not directly criticize other nations that have been reluctant to adopt the kind of expensive stimulus packages for their own economies that have been approved here. But their message that allies are not doing enough compared with the U.S. was clear.
"The United States has actually taken a significant lead on a number of these steps that are required," Obama said. "As aggressive as the actions we are taking have been so far, it's very important to make sure that other countries are moving in the same direction, because the global economy is all tied together."
Geithner said the U.S. would be pushing for other G-20 nations to adopt an IMF recommendation of adopting stimulus measures equivalent to 2 percent of each country's gross domestic product, the broadest measure of an economy's health. In a report last week, the IMF said the U.S. was the only one of the world's seven rich industrial nations _ the Group of Seven _ on track to meet that goal.
Asked by reporters what countries should be doing more, White House spokesman Robert Gibbs said, "I'd subtract G-1 from G-20."
Geithner said the administration also would support efforts to boost trade, including a proposal by the World Bank to coordinate trade financing initiatives among wealthier countries aimed at helping developing nations.
Answering critics who contend the administration is not moving aggressively enough to develop tougher regulations of banks, hedge funds and other financial institutions, Geithner said such proposals will be presented during congressional testimony scheduled in two weeks.
The administration's $787 billion stimulus plan and the $700 billion financial rescue effort have come under attack from congressional critics who contend the stimulus relied too heavily on government spending and the bailout has not been tough enough on banks getting the assistance.
At a hearing Wednesday, Rep. Dennis Kucinich, D-Ohio, complained that three big banks getting billions from the government _ Citigroup Inc., Bank of America Corp. and JPMorgan Chase and Co. _ had made foreign investments which he said represented a diversion of U.S. taxpayer money.
Obama has met with several G-20 leaders already in the lead-up to the summit, including Japanese Prime Minister Taro Aso and British Prime Minister Gordon Brown, hammering home the notion that they only benefit from a strong U.S. economy. The president said those talks have made him "optimistic about the prospects" for a good agreement to come out of London.
"They're rooting for our success, we've got to make sure we're rooting for theirs as well," Obama said.