President Obama likes to give lectures. At the Group of 20 summit in Mexico last week, he instructed German Chancellor Angela Merkel on why Berlin must underwrite more bailouts for bankrupt European nations. The German position is that sinking economies such as Greece, Spain and Italy (for starters) need to control deficit spending and show that future infusions of cash won’t be wasted the way previous handouts were. This reasonable requirement has sparked a backlash against Teutonic austerity among big spenders.
In an unsatirizable display of chutzpah, Mr. Obama reproved Europeans for not wrestling their debt problems under control. Given that Mr. Obama is responsible for spiking U.S. national debt to a record $15.8 trillion, which surpasses our gross domestic product for a whole year, his advice makes about as much sense as a hard-core drug addict telling others they shouldn’t drink too much caffeine. The arrogance hasn’t gone unnoticed in Germany, where last year’s economic growth of 2.7 percent was more than double America’s and unemployment is about half the U.S. jobless rate.
“People are always very quick at giving others advice,” an irritated German Finance Minister Wolfgang Schaeuble said on Sunday. “Mr. Obama should first of all take care of reducing the American deficit, which is higher than in the eurozone.” According to the Associated Press, “The [European] bloc’s debt relative to its economic output stands at about 80 percent, while it is about 100 percent in the U.S.” On fiscal policy, Mr. Obama talks out of both sides of his mouth. He bellyaches about the danger of the European economy dragging down America, but at the same time, he warns Europeans against the sensible idea that cutting government spending will solve their budget problems. At least he’s consistent. Although the Keynesian approach hasn’t generated growth on either side of the Atlantic, Mr. Obama’s response to failed “stimulus” spending is even more spending.
Even if throwing money around on more European bailouts worked, Germany - the fourth-largest economy in the world and the biggest in Europe - isn’t rich enough to prop up the whole European Union (EU) forever. This reality is being widely ignored. Some of the smoke-and-mirrors temptations for making debt disappear by failing European countries is to simply not pay back their loans, repay vast sums in weak funny money (for example, a reintroduced Greek drachma) upon leaving the euro currency, or have the EU adopt a system of common debt, whereby national liabilities could be offloaded by spreading arrears across the whole continent. All of these schemes leave Germany - the EU’s largest creditor nation - holding the bag.
Economist R. Glenn Hubbard, dean of Columbia Business School, wrote in the German publication Handelsblatt, “The advice of the U.S. government regarding solutions to the crisis is misleading. For Europe and especially for Germany.” This got under the skin of Mr. Obama, who whined, “Traditionally, the notion has been that America’s political differences end at the water’s edge.” If that’s how the president feels, he should stop telling leaders overseas what to do.
Brett M. Decker is editorial page editor of The Washington Times. He is coauthor of the new book “Bowing to Beijing” (Regnery, 2011).
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