Republican Candidates To Europe: Drop Dead
Last night, most of the leading Republican candidates for President acted as if Europe was on another planet.
One of the more interesting exchanges during last night’s Republican debate came right at the beginning, when the candidates were asked about the Eurozone crisis, and specifically yesterday’s developments in Italy:
Lost among Herman Cain’s protests and Rick Perry’s stumbles Wednesday night were some provocative responses from the eight GOP presidential candidates on how they would deal with the economy on a global scale — with Italy and China as flashpoints.
The unfolding debt crisis in Italy was, in fact, the first question that came from the CNBC panel moderating the Michigan debate, and while the candidates’ answers were quickly overshadowed by questions about the sexual misconduct allegations against Cain and Perry’s deer-in-headlights moment, they were uniform in their approach to the European situation.
Not our problem, they said. Let Europe take care of Italy.
Here’s the video of most of the candidate’s responses to the initial question, starting with Cain’s response:
And it continued when Jim Cramer picked up the questioning:
Jim Tankersley at National Journal thinks that the entire field tanked on this question:
Europe’s problems should absolutely terrify anyone who cares about the American economy; its sovereign debts could infect banks around the world, potentially triggering a new wave of financial crisis, and a European recession would drag on already slow U.S. growth.
But the candidates who assembled at the CNBC debate in Detroit treated those threats as a far-away nuisance, like famine in Africa or an earthquake in Mongolia: very serious, very sad, not our problem
(…)
It’s stunning that a Republican field that includes a former ambassador, a former House speaker and two successful former businessmen – and which, to a candidate, gushed over the virtues of markets throughout the debate – so casually brushed aside the struggles of the world’s largest collective economy (the Eurozone is bigger, economically, than the United States) and America’s largest trading partner.
You don’t have to believe America should bail out Italy, Greece or the entire Eurozone – a straw-man concept that no one in Washington is even floating, but several candidates took pains to denounce on Wednesday night – to recognize that the United States has a role to play in averting another global financial crisis. At the very least, you should expect lawmakers, and presidential candidates, to be making plans for how to respond if the European crisis escalates.
There were no such plans to be found on the debate stage on Wednesday. Republican primary voters should start demanding some, right away.
On some level it’s not surprising that the candidates would jump on the easy soundbite of rejecting the idea of the United States bailout out Italy, or any other part of Europe. Given the sentiment against bailouts in general, it’s bound to be popular with the public. Since we’re talking about “bailing out” foreign banks, it’s bound to be even more popular. Of course, nobody is even seriously suggesting that idea so it’s kind of like saying you oppose the idea of invading Canada to gain access to their bacon supply, it makes for a good soundbite but it doesn’t really mean much of anything because it doesn’t seriously address the issue at hand.
As Daniel Drezner noted earlier this week, the consequences of an Italian default, or really of any further instablity in Europe, could be quite severe indeed and there seems to be no way that the United States could avoid being impacted by them in some respects. One need only look at the numbers on Wall Street over the past several months to see that, every time there’s bad, or good, news overnight from Europe, the market reacts accordingly. A collapse in Italy would clearly have an impact on American stock and bond markets, and potentially the American banking system. While nobody is calling for the United States to step in and bail Europe out, the idea that we can simply ignore what’s going on there and concentrate on our own economy, which to a man is exactly what each of those candidates said last night, is silly. Yes, Europe needs to fix Europe, but we can’t ignore what’s going on in Europe as if it isn’t going to impact us if it doesn’t go right.
It’s actually somewhat ironic. Ordinarily, the rest of the field criticizes Ron Paul as an isolationist whenever the subject gets around to foreign policy. Last night, though, they all adopted a form of economic isolationism that basically says we don’t need to worry about what happens in Europe, we just need to worry about ourselves. A sentiment like that betrays either pandering populism or an appalling failure to understand how the world financial system works. America may be separated by an ocean from Europe, but our economies are interconnected in a myriad numbers of ways, and have been since at least the end of World War II. There’s simply no way to pull up the economic gangplank and pretend that what happens in Europe won’t effect us. It will, and if we ignore it, don’t involve ourselves in the discussions going on over there, and don’t prepare for what could happen if efforts to save the Euro fail, then the pain could be very severe indeed.
Of all the candidates, the one who seemed to at least have an idea was Ron Paul, the guy who’s usually the isolationist. The idea of letting these countries deal with the consequences of their profligacy rather than trying to continually prop them up does have some merit. Of course, it’s an idea that would have even more painful consequences than the austerity that Greece and other nations are being prodded to adopt, though, so it seems like it would be politically impossible to adopt. But at least it’s an idea. Pretending that we can just ignore Europe like the other candidates did is the height of silliness.
We can only hope the moral hazards will not be ignored so the elect few can be made whole.
I’m no fan of McArdle’s…but I thought she put it well this morning:
That the people on the stage last night exemplified
comes as no suprise.
When Israel attacks Iran and the ME oil dries up all of this will seem unimportant or irrelevant.
The Republican candidates are expressing the opinions of a large percentage of Americans, perhaps a majority.
Why should the Republican candidates treat Europe any different than the poor or uninsured?
FWIW – It isn’t just the Republican candidates that are telling Europe to take a flying fork at a rolling donut.
Why do you want Americans to have repsonsibility for something over which they have no authority?
I’m not sure I’d characterize it as silliness, as it’s more dangerous than that. If the candidates don’t put actual thought into developing a policy response to this, then they aren’t going to be prepared to actually make a decision when the time comes. They’ll end up ignoring the situation until that no longer works, and then end up making these decisions in an emergency. That pretty much guarantees a something like TARP 2, The Return of the TARP, TARPs Revenge (you get the idea).
Why is acknowledging the potential gravity of the situation such a high bar for these candidates?
@charles austin:
We should be concerned because failure of the EMU will negatively affect our economy at a time we can ill-afford additional shocks, and it looks like the Eurobosses are going to continue blindly embracing the austerity programs which have brought their economies to the brink of depression.
@Ben Wolf: Bulllshit. You continue to confuse cause and effect with the austerity programs and why Europe is really on the brink of catastrphe — as we will soon be if we don’t get the unconscionable growth in federal spending under control.
The welfare state model has been broken for a long time and the interest payments can no longer just be rolled over. That’s all that is happening now. This is not a new thing and started long before the actually rather weak austerity programs began.
For conservatives, if a foreign problem can’t be solved with B-52’s, tax cuts, or eliminating 3 government agencies, one of which I can’t recall, then it isn’t really worth discussing.
@charles austin: Britain’s economy was in recovery until austerity measures began in late 2010. Germany’s economy surged after enacting stimulus in 2009 until austerity was implemented, falling from growth of 2.5% in 2010 to 0.2% in 2011. Greece’s debts and deficits have increased since enacting austerity plans in 2010.
In every case austerity has failed and you, sir, don’t have the economic chops to debate the point with me. I may vehemently disagree with Steve Verdon or Drew, but they at least have a solid grasp of the complexities.
Here’s an excellent example of the value of austerity during hard economic times. The first link shows Britain’s GDP before and after austerity was enacted:
http://bilbo.economicoutlook.net/blog/wp-content/uploads/2011/11/UK_real_GDP_growth_prelim_Sep_2011.jpg
The second is of economic activity:
http://bilbo.economicoutlook.net/blog/wp-content/uploads/2011/11/UK_real_GDP_growth_sectors_prelim_Sep_2011.jpg
The principle for anyone willing to learn is simple: austerity pulls net financial assets (money) out of an economy. This is not arguable unless one is a madman. Britain’s government is now competing with its private sector for scarce pounds and forcing a contraction in economic transactions. Fewer pounds means fewer transactions, end of story.
Its not about money, it’s about wealth which is being destroyed. But, oh never mind, I don’t have the chops to argue with you.
@charles austin: That’s because you’re wrong, Charles, plain and simple. Austerity programs during economic downturns do _not_ work. The money slashed from government spending and tax reductions do magically transform into multiplied boosts to the economy. In fact, those cuts _hurt_ the economy because the things the _federal_ government stops doing still need to get done, and doing it in every state or municipality (let alone by individual citizens) is vastly less efficient (yes, even less efficient than when our gov’t does it) and expensive. _That’s_ when wealth is destroyed – when citizens have to pay extra just to maintain basic services themselves instead of investing what money the have.
I think you are confusing Charles Austin with the long term problem (austerity) rather than focusing on the short term problem (insolvency).
Failures in the eurozone have the ability to trigger US bank failures. That is the critical short term problem.
Some economists are suggesting the Fed buy eurobonds off our banks to keep that from happening. That would again benefit the 1%, but again asks us what is really necessary for wider economic survival.
Why do these candidates ignore important issues, do they truly lack intelligence or do they just spew crap to satisfy their base. They don`t even try to dazzle us with big words to make us think they know something. Do they think voters want a hillbilly in a suit if that`s the case let`s randomly pick someone like they do for jury duty.
So, there are really no ideas offered in this article or the ones cites as to what the GOP candidates should propose. Great. The rest seems to be doing a soft shoe around the notion that America should bail Italy out. Well, there’s a conservative ideal if ever I saw one!
What would you have the US do? What would you have the GOP candidates do? Keep bailing out with money we don’t have?
Italy needs to get its crap together, just like the US. It needs to stop spending what it doesn’t have, and acting like mommy and daddy, just like the US government.
Funny how some folks throw hissy fits about stopping brutal dictators and Islamic jihadis around the world, notions that can protect our own national security interests, yet, are all for helping Italy continue its big spending ways.
@William Teach: Wanting an actual plan beyond pretending the Eurozone crisis won’t affect us is in no way support for bailing Italy out.
Also, this talk of how our fiscal problems are similar to Europe’s problems is ignoring the role of the Euro and inability of Greece, Italy, etc to control their own currency. The comparisons are so far off base it’s funny.
@William Teach: Italy and Greece are currency users. The United States is an autonomous currency issuer with a floating exchange. You would do well to learn the difference, because our finances are nothing at all like the EMU’s.
@john personna: The problem is the eurobonds are only the tip of the iceberg. There are outstanding derivatives contracts in the trillions or even tens of trillions, and those are the real threat. The Fed will I suspect both buy the eurobonds and swap treasuries for the derivatives. It won’t be so much a firewall as shoring up the banking system’s foundations so that it can weather the storm.
@john personna: P.S.
It isn’t difficult to confuse someone who refuses to think. As I’ve stated before, I’m losing my patience with the “nuh-uh” crowd who’s response to new information is to embrace their ignorance rather than reflect and learn. I have to remind myself that there are in fact people out there reading these comments who want to understand rather than obfuscate. I accept your rebuke.