Next week, United States Treasury Secretary Timothy Geithner is expected to elaborate the second phase of the country’s economic bailout program, currently under debate in the Senate.

Hannah Armstrong, Casablanca

President Obama is seeking to distinguish his American Recovery and Reinvestment Act from the Bush administration’s Troubled Asset Relief Program (TARP) through measures meant to emphasize accountability and tighter government control over financial institutions picked to receive bailout funds.

The $350bn dollar TARP bailout program, designed to inject liquidity into banks in order to jumpstart lending, is facing mounting criticism in light of revelations that bailout funds were used to give bonuses to Wall Street executives and to remodel million-dollar offices. Congressmen and citizens alike expressed their outrage over taxpayer money being used to boost the salaries of the very same bankers and executives whose oversight and reckless risk-taking caused a severe contraction in the world’s largest economy. American lawmakers need to ensure that the follow-up economic stimulus package will jumpstart the troubled economy and open credit markets, fast.

Obama’s stimulus plan will seek to appease taxpayers and ease the economy’s pain with three tactical objectives: unlock credit markets, lower mortgage rates, and monitor banks’ use of bailout funds. Whereas TARP bailout funds came with no strings attached, Treasury Secretary Timothy Geithner vowed to make banks increase lending activities in exchange for receiving government funds. Obama included a measure to cap executive pay for companies receiving rescue funds at $500,000. An increase of federal spending on education and infrastructure will boost jobs-creation and economic growth, and a foreclosure relief program is expected to be included in the new Act.

The American Recovery and Reinvestment Act marks the debut of a new era of Keynesian government, in stark contrast to the Bush administration’s blanket rejection of public spending and social support. Alarmed at the rapidity of jobs being slashed and credit freezing up, Americans are ready for this radical change in economic direction. Some observers worry, however, that the American solution could be a global problem: economists predict that the stimulus package, expected to reach $1 trillion over a two-year period, could drive up inflation and interest rates around the world, and possibly crowd developing countries out of capital markets.