opinion

US indecision will propel a Caribbean economic downturn
by Clarence E. Pilgrim

Even with the US Federal Reserve's decision to slash interest rates to 3 percent from 4.25 percent in response to the sharp fall in the US economy, there is still no end in sight to the downward slide of the economy. The economic stimulus plan which made its way through Congress and re-crafted in the Senate, was recently blocked in the Senate, by a partisan vote.

This shows that one of the unfortunate short-comings of the democratic process of elected representation, is that reasonable initiatives can indeed become an unfortunate casualty in any election campaign season.

The defeated plan, worth $157 billion, would have expanded unemployment benefits, offered heating aid for the poor and also tax breaks for renewable energy firms and coal companies. The plan would have also provided extra money to retired people and veterans. It is a revised plan which went further than the one proposed by President George Bush to the sum of $146 billion, which it is reported would basically keep the stimulus measures focused on tax breaks. These breaks consist of some 117 million US homes getting a rebate of up to $600 for individuals and up to $1,200 for married couples, with an extra $300 per child. Businesses would benefit from up to $50 billion in tax cuts.

Whatever measure is taken, it is quite clear that the US economy does significantly impact on the world economy in varying degrees. However, with the emergence of stronger trading blocs and less dependent national economies, it is uncertain to what extent the flow of the economic waves emanating from the United States will have on certain specific regions.

The International Monetary Fund has lowered its forecast for global economic growth this year. It indicated that there will be a significant global slowdown, with major developed economies experiencing much weaker growth.

But there is also the warning that there may be some degree of financial market turmoil in 2008, which could create a condition worst than the main forecast.

If this happens then there will certainly be a spillover effect in the countries of the Caribbean Community.

Should US congressional leaders fail to have a workable solution soon, then the planned infusion into the US economy being contemplated will be too late to make much of a difference in the "slow down" nor would it lessen the intensity of the inevitable recession.

In any event the Caribbean Community should brace itself for the significant fallout which may occur. The reality is that the Caribbean collective must use every opportunity to develop a plan of action which will be aimed at easing the squeeze of the expected economic decline for 2008.

The upcoming 19th Inter-Sessional Meeting of the Conference of Heads of Government of CARICOM should place on the list of items for the council's attention, the challenges which a possible US economic downturn will have for the region.

There must be a concrete and decisive plan of action in the Caribbean, to go hand in hand with any actions the United States might decide to take as it fights against the expected recession.