Surprise! It’s Romney’s economic model, not Obama’s, that mirrors the European approach!
Mitt Romney’s campaign for president has featured loads of rhetoric — on his own part and that of his surrogates — that seeks to portray Barack Obama as the dreaded “Other,” a “foreign” interloper who’s not really American.
“I don’t think he understands America,” Romney said of Obama last winter.
“I wish this president would learn how to be an American,” said Romney campaign chairman John Sununu this past summer.
Obama’s political philosophy “does not comport with the American experience,” Romney said a few weeks later.
Ian Reifowitz of the Huffington Post has aptly characterized Romney’s rhetoric thusly:
By calling Obama “foreign” he taps right into the same anxiety that drives birtherism, or the belief that Obama is “Muslim,” or that he wants to “take your guns,” or employ “death panels” to snuff out Granny.
Reifowitz could have added that Romney’s rhetoric is hypocritical on several counts, considering his record at Bain Capital of offshoring American jobs and his penchant for stashing lots of money in foreign tax havens.
But perhaps the greatest hypocrisy in Romney’s rhetoric about Obama’s “foreign” proclivities is his claim that the president favors a “European-style” approach to economic matters.
In truth, it’s Romney’s economic model, not Obama’s, that mirrors the European approach, as Nicholas Kristof explains HERE:
Mitt Romney’s best argument on the campaign trail has been simple: Under President Obama, the American economy has remained excruciatingly weak, far underperforming the White House’s own projections.
That’s a fair criticism.
But Obama’s best response could be this: If you want to see how Romney’s economic policies would work out, take a look at Europe. And weep.
In the last few years, Germany and Britain, in particular, have implemented precisely the policies that Romney favors, and they have been richly praised by Republicans here as a result. Yet these days those economies seem, to use a German technical term, kaput.
Is Europe a fair comparison? Well, Republicans seem to think so, because they came up with it. In the last few years, they’ve repeatedly cited Republican-style austerity in places like Germany and Britain as a model for America.
The International Monetary Fund this month downgraded its estimates for global economic growth, with only one major bright spot in the West. That would be the United States, expected to grow a bit more than 2 percent this year and next.
In contrast, Europe’s economy is expected to shrink this year and have negligible growth next year. The I.M.F. projects that Germany will grow less than 1 percent this year and next, while Britain’s economy is contracting this year…
All this is exactly what economic textbooks predicted. Since Keynes, it’s been understood that, in a downturn, governments should go into deficit to stimulate demand; that’s how we got out of the Great Depression. And recent European data and I.M.F. analyses underscore that austerity in the middle of a downturn not only doesn’t help but leads to even ratios of debt to economic output.
To all of this I would add we that have two significant American precedents for the failure of the austerity prescription that conservatives so eagerly tout.
The first of these dates back to 1937, when some of Franklin Roosevelt’s advisers recommended spending cuts to help balance the budget, which was in the red as a result of government programs aimed at easing the effects of the Great Depression.
Roosevelt somewhat reluctantly acceded to the advice, and accordingly, New Deal job rolls and projects were drastically reduced. The result: The economy took a nosedive. Industrial production declined almost one-third. Unemployment jumped from 14.3 percent in 1937 to 19 percent iin 1938. Manufacturing output fell by 37 percent and went back to 1934 levels. Producers reduced expenditures on durable goods, and inventories declined.
It took World War II, with its massive deficit-spending, to undo the disastrous effects of Roosevelt’s fiscal policy in the first two years of his second term.
Our second precedent goes back to the Reagan administration.
Ronald Reagan came into office talking a good game about spending cuts, but certain realities prompted him to change his tune.
After his party’s losses in the midterm elections of 1982, caused mainly by high unemployment, Reagan backed off on spending cuts — albeit while continuing to peddle his trademark rhetoric about smaller government. Actually, he made government bigger. His promise of reducing the number of federal departments was abandoned. Instead, he created a new department and added 60,000 jobs to the federal payroll during his presidency.
And let’s not forget that Reagan also greatly increased spending on defense programs.
So, all in all, federal spending under Reagan increased considerably. When you look at the 40-year record of federal spending from 1970 through 2009, you see an annual average of 20.7 percent relative to Gross Domestic Product. But when you look at spending under Reagan, you see an annual average of 22.4 percent relative to GDP.
Under Reagan, the gap between tax revenues and federal spending nearly tripled — this despite the fact that his celebrated cuts in taxes were offset at least in part by his uncelebrated tax increases.
In 1982, Reagan agreed to undo one-third of the previous year’s massive cut. In so doing, he signed into law the largest tax increase in U.S. history up to that time.
In 1983, Reagan raised the gasoline tax by five cents a gallon and instituted a payroll-tax hike that helped fund Medicare and Social Security. In 1984, he eliminated tax loopholes worth $50 billion over three years.
And in 1986, he signed the Tax Reform Act, which imposed a record-breaking $420 billion in new fees on businesses.
Yet despite these tax hikes — or “revenue enhancements” as the Reaganites euphemistically called them – the national debt soared from $700 billion to $3 trillion, and America was transformed from the world’s largest international creditor to its largest debtor.
But the bottom line, as it applies to the argument I’m making here, is that Reagan’s deficit spending greatly reduced joblessness. The unemployment rate on his watch fell from a high of 10.6 percent to 5.4 percent, and more than 16 million jobs were created. And of course, the deficits he racked up wouldn’t have been so bad if he had foregone some of his celebrated tax cuts.
But the overall moral of the story is that spending cuts in a time of high unemployment won’t do anything to create more jobs. Rather, the result invariably will be exactly the opposite.