Of course, nowhere has the situation been more dire, tenuous, or fraught than in Europe, where the insolvency of banks and governments inside the eurozone is more than enough to make you skip ordering that soufflé. Finance ministers from across the continent have basically been in a six-month long meeting working to address it, and it feels like they may just be up to the task after all. Then again, who knows.
Nonetheless, in most articles I read that reference the economy in the context of the presidential election, President Obama is handicapped for the state of the European economy, because its turmoil affects us.
A weak American economy is never going to aid an incumbent, no matter what causes it. But shouldn’t the fiscal crisis in Europe actually be something that makes Obama look more favorable?
Doesn’t it validate his choices to bet on fostering growth over embracing austerity?
In 2009 with the Stimulus, and again in 2010 with the December tax deal, Obama made deliberate Keynesian pushes to first, defibrillate the economy, and then give it some fresh oxygen. The result is that the recovery began, albeit slowly: markets stabilized, stocks rose, and 4.3 millions jobs have been created thus far.
No doubt, the recovery needs to be stronger (tepid seems to be the favorite word of the press) and we can argue over the reasons why that might be: should the initial measures have been bigger, did the health care debate distract too much, have the Republicans impeded meaningful economic improvements to enhance their political fortunes, etc.
But that’s not the point here. This is a lesser-of-two-ills proposition. By comparison, we are much better off. Economically, would you rather be the US or Europe today? It’s an easy choice. We have weathered this relatively well (says the guy who was laid off at the outset).
And yet, instead, the current global dynamic will almost assuredly hurt Obama: voters will feel a weaker economy due in part to Europe and its massive trade with America remaining weighed down, and they will blame POTUS.
Further, not only should Europe be helping Obama, it should be hurting Mitt Romney.
Like many Republicans, he decries Europe, not for its approach to the global recession, but for the elements of socialism it blends with capitalism. (By the way, its socialism is much more like this, and not the kind we should fear, like this.)
When it comes to economic policy though, Romney does not synch. He favors more of the very austerity approach that led Europe down the kitchen disposal unit in the last few years. So, I would prefer he not bring it here.
He recently said, “If I were not to … get elected, we would instead in my view become more like Europe with higher deficits, with a debt that could put us in a Greece or Spain or Italy-like circumstance, with chronic high unemployment, with low wage growth and with a military that gets slowly but surely hollowed out so it could pay for the various programs that government would try to keep in place.”
The irony is that the policies he espouses were enacted in the Old World, and the picture he describes is largely what they are left grappling with. As Andrew Leonard at Salon put it, Mitt is the real European.
Let’s face it. Austerity is not sexy. And neither is Angela Merkel.
As Alexis Tsipras, the young leader of the Greek opposition, said in May, “The message we’re giving to the G-8 is that we have to press Mrs. Merkel to follow the example of America, where the debt crisis wasn’t tackled with austerity measures but with an expansionist approach.”
I’m not an economist, but I can tell that austerity does not spur growth, at least not in the short term. In observing the last few years, it appears to bravely but misguidedly preserve a small set of funds or programs at the expense of cutting many others that might otherwise, in concert, lead the way to expansion.
It’s encouraging, after the countries’ different experiments, that the G-8 leaders have now opted to “Urge Growth, Not Austerity.”
But if we had followed Romney’s prescriptions (or do in the future), we would probably end up cutting our way back to recession. It’s unlikely he will be demerited for this.
Conversely, Obama should get credit that we aren’t in the kind of baleful situation Europe is digging itself out of, but he won’t.