Wake up, America: Even France gets it
Leaders of the world’s 20 industrial economies recently met in Toronto to discuss global economic problems, including the worrisome developments in European sovereign debt. The meetings resulted in a group statement announcing a concerted effort to reduce government spending.
“Advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016,” G-20 leaders announced last week.
But not all G-20 participants are fully bought into the plan. The president of the United States, for one, cast a skeptical eye on the work of Germany’s Angela Merkel, England’s David Cameron and France’s Nicolas Sarkozy.
“A number of our European partners are making difficult decisions,” the Washington Post quoted President Obama as saying, “but we must recognize that our fiscal health tomorrow will rest in no small measure on our ability to create jobs and growth today.”
Translation: The United States admires the fiscal austerity of our friends across the sea … but as for us, well, we’re not ready to cut government spending just yet.
Perhaps the timing of a column by Nobel economist Paul Krugman, which appeared in the wake of the G-20 meeting, wasn’t coincidental. Krugman, a well-known liberal and frequent critic of fellow economists who tout the virtues of free markets, warned darkly that “we are now, I fear, in the early stages of a third depression.”
The reason? Not enough spending. “Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending,” Krugman writes.
Krugman’s views, it should be noted, do not reflect a consensus among economists or among Nobel economists. Yet they bolster the view of the current administration that the cure to our economic problems isn’t thrift, but more borrowing, more spending, more debt.
This view defies belief. It’s so at odds with common sense, it could only make sense in the hermetic, insular world of theoretical academics. In the real world, once you find yourself in a hole, you stop digging. In the real world, a debt crisis like the one that unfolded in Greece serves as an object lesson demonstrating the hazards of too many obligations and not enough revenue. In the real world, families have credit limits on their Visa cards.
This is not just another news story that should pass by unnoticed as we check the latest scores in the World Cup soccer tournament. This is a big, big deal. As we watch in real time, the leaders of European systems saddled with debt and social welfare obligations are standing firm and crying “enough” — even as our president and his economic enablers call for more spending.
President Obama ran on the message that the United States needed to be more in tune with the rest of the world. Now would be a good time to heed some of the good advice from our friends across the sea.
Rob Witwer is a former member of the Colorado House of Representatives and co-author of the book, “The Blueprint: How the Democrats Won Colorado (and Why Republicans Everywhere Should Care).”