When an economic adviser writes an article to a foreign country … an ally of critical importance … to interrupt foreign policy and active negotiations between our President and another government … that is treachery of the highest order. To understand the deception of such an article – one must understand the relationships of all the key players.
Here’s the backstory … Europe has been engaging in austerity measures for the past three years instead of pro-growth policies and this Republican style austerity via spending cuts to balance the budget has only further pushed Europe into a double dip-recession and left them very fragile economically.
Germany has a successful economy – Europe’s largest – and is very reluctant to increase spending given their own history with hyper-inflation during the years of the Weimar Republic. Angela Merkel was able to persuade conservative French President Nicholas Sarkozy to engage in this pro-austerity direction. With the top two economies in agreement – the rest of Europe mostly fell in line. But recently – France had an election and rejected these policies by electing Socialist President Hollande who has called for more pro-growth policies that has run counter to the Merkel/German philosophy.
Even recently – at the G8 conference – those countries put out a joint statement that said, “Our imperative is to promote growth and jobs” which was a sharp reversal from previous German fiscal policy (source). But since President Hollande’s election – there has been a growing friction between France and Germany as to the right way forward … and the Germans appear to be willing to alter course and give some sway to these pro-growth policies.
This is of huge importance because a strong Europe will mean big gains for U.S. exports and thus jobs. Europe makes up 1/3 of the world economy and their policies and collective failed EuroProject has had a contractionary effect on world growth. Enter Glenn Hubbard – Mitt Romney’s economic adviser and the man who was behind George W. Bush’s tax cut policy. Here he is talking down on President Obama’s policies as the Germans weigh whether or not to engage in these pro-growth policies that would have real benefit both to Germany but also America. If the American economy is doing well – Mitt Romney loses.
The Republican party has tried very hard to sabotage the American economy over the past 3 years (SOURCE) and they are doing what they can to sway public opinion by undermining President Obama’s economic policy and boosting the conservative austerity mantra in Germany. Chancellor Merkel will not concede anything with France on pro-growth policies if the German people do not support it. And that’s how the game is played.
Mitt Romney’s economic adviser – Glenn Hubbard – writes in the German finance newspaper Handelsblatt HERE:
In the U.S., a gradual reduction of unmet promises from the government social and health programs would build confidence, create scope for future tax cuts and thus stimulating the current growth.
In this moment – he is saying what Mitt Romney has been calling for – cuts to Medicare and Medicaid along with cuts to the social safety net that has slowly eroded over time. This “gradual reduction” is akin to boiling a frog … if you put a frog in a lukewarm pot of water and slowly let the temperature rise to a boil – they will not feel the temperature change and you will soon be eating frog legs. That’s the Republican fiscal policy and that’s how they pay for huge tax cuts for the rich.
Hubbard then goes on to say denounce a Keynesian economic approach … instead advising the Germans to continue on the same fiscal path of austerity that Europe has engaged in for the past 3 years since the advent of the Bush economic crisis. He then goes on to say that President Obama’s council to the Germans is flawed and then suggests that a President Mitt Romney would be a much better partner in economic policy with Germany and the Eurozone. He says:
The supporters of the growth policy in the U.S. and Europe usually focus on short-term results. They prefer the Keynesian solution, greater public debt anrät to the dahindümpelnde economy is boosted. The growth is still hampered by structural deficits that make future tax increases and likely affect capital accumulation and productivity. The investigations of the two U.S. economists Carmen Reinhart of the Peterson Institute for International Economics and Kenneth Rogoff of Harvard University show that growth is proceeding according to many financial crises are very slow. Thus governments are forced to react to short-term deficits with tax increases.
The Council of President Obama to the Germans and Europe has therefore the same flaw as its own economic policy: namely, that it is paying long-term, if we focus on short-term stimulus. The other way is a shoe out of it: The long-term confidence in sound public finances support growth while allowing scope for short-term transitional assistance. Mitt Romney, Obama’s Republican challenger understands this very well, and suggests such a gradual fiscal consolidation for the U.S., enhance structural reforms to boost growth.
In case you don’t know who Glenn Hubbard is – you really need to read HERE. This is the guy that the director from Inside Job made look like an asshole.
Glenn Hubbard is interviewed during the movie and is questioned about his consulting and directorship arrangements with the financial services industry. Hubbard writes that he LOVES credit derivatives and was paid to say that credit derivatives would create a safer banking system. It’s called a conflict of interest. Watch the video.
The NY Times points out HERE:
The article — written by R. Glenn Hubbard, the dean of the Columbia Business School and a former adviser in the Bush administration, and published in the business journal Handelsblatt — drew a rebuke from the Obama campaign.
“In a foreign news outlet, Governor Romney’s top economic adviser both discouraged essential steps that need to be taken to promote economic recovery and attempted to undermine America’s foreign policy abroad,” said Ben LaBolt, press secretary for the president’s re-election campaign.
Every presidential election seems to test the frequently quoted cold war-era axiom of former Senator Arthur Vandenberg, a Republican who cooperated with President Harry S. Truman, that “politics stops at the water’s edge” — though even then the rule was often observed in the breach. Separately, the Hubbard critique illustrates how the austerity-versus-stimulus debate concerning Europe is also a proxy for the ideological fight over fiscal policy that Democrats and Republicans are waging in this country.
