Better than nothing. Not enough. All we're likely to get.
With the $790 billion U.S. economic stimulus package likely to be approved Friday, that's the verdict on similar efforts around the globe. So far, only China and the U.S. have introduced major new spending programs to compensate for collapsing private demand.
"Globally, almost nobody is doing anything, and nobody will, except for China," says Simon Johnson, former chief economist of the International Monetary Fund. "Basically, the U.S. is going it alone."
Others dispute that bleak assessment, noting that major European governments have launched modest initiatives. Even Germany, the most reluctant free spender in Europe, has approved two stimulus efforts for a total of about $106 billion.
Also, European social programs, including unemployment payments, are more generous than in the U.S., said Harvard University's Kenneth Rogoff. That spending automatically increases during recessions, cushioning economic downturns. "They have built-in fiscal stimulus which is very big, so they don't need to rely on ad hoc stimulus," he said.
The International Monetary Fund has called for coordinated economy-goosing equal to 2% of the $62 trillion world economy, about $1.2 trillion. In November, leaders of the Group of 20 nations, including the U.S., agreed to "stimulate domestic demand to rapid effect."
Europe has been limited in its ability to respond by high debt and looming bank bailout costs. Banks in Western Europe hold about 91% of the $1.75 trillion in loans outstanding to Eastern Europe, which has been hard hit by the crisis. If those borrowers default, Europe will face an enormous tab.
But if countries that accumulated sizable financial reserves in recent years, such as Germany and Middle Eastern oil producers, don't do more, they will face a backlash, says Adam Posen of the Peterson Institute for International Economics.
As a percentage of the economy, the Chinese and U.S. spending plans dwarf European efforts. China's $586 billion, two-year program amounts to about 6.7% of the economy each year. The U.S. expects to spend about 2.8% of its annual output. Germany's plans amount to about 1.6% extra per year.
Government spending isn't intended to be a cure-all. Most experts say the key to climbing out of the global downturn will be fixing the financial system, not economic pump-priming.
Some new spending could even make things worse. China hopes to spark the economy with a massive surge of new lending by state-owned banks. But many of the new loans are likely to fund unneeded new factories in industries where production capacity already exceeds global demand.