The European Union (EU) is once again lecturing America on its economic policies, and thanks to President Obama’s policies and his allies in Congress, the EU is right and America is wrong.
Europe, like the United States, is plunging into recession. France saw a stunning 13.8 percent decline in industrial production since last year; Sweden’s drop was 22.9 percent roughly matching the drop in the U.K.
The U.S. responded to its recession by adding a $1 trillion plus fiscal stimulus on top of a nearly $1.5 trillion deficit for 2009. Even for those misguided adherents to the magic money of fiscal stimulus, this is madness. With these policies, the United States government will rack up more debt in 18 months than George Bush did in 8 years.
Europe is having none of it. To be sure, the various European governments have passed stimulus plans of their own, but these are puny in comparison to the president’s massive attempt to leverage the U.S. economy. Whereas the federal deficit will approach 13 percent as a share of GDP, in Europe fiscal stimulus will be 3 to 4 percent of European GDP.
Axel Weber, the President of Germany’s Bundesbank expressed it well when he said, “The expectation that we could neutralize this synchronized recession through short-term fiscal policy measures is false. We should not even try.” Herr Weber is right; President Obama is wrong.
Herr Weber went on to point out that “there will be costs” associated with irresponsible fiscal policy. Right again, and the American people will face those costs in lost opportunities, higher interest rates at home, and higher interest expense in the federal budget forevermore. It’s a sad day when America needs to look to Europe for economic policy guidance.
President Obama should expect a lot of Dutch Uncle talk behind closed doors at the upcoming G20 meeting. We can only hope he listens.