If President Obama’s domestic electoral “shellacking” wasn’t enough to convince him that his financial policies need to change radically, his reception at the G-20 meeting in Seoul should have sealed the deal.
The Europeans – particularly Britain, Germany, and France – were adamant that fiscal discipline needed to take priority over financial policies designed to goose the US economy. In fact, Germany’s position as a minimum practitioner of stimulus measures over the past two years has resulted in a stronger recovery than most other nations – a point which Chancellor Merkel was eager to make.
China (who has been carrying the global recovery over the past year – successfully “decoupling” in the language of 2008) goes a step further, pointing out (along with Obama’s new friend, India) that the issuer of the global reserve currency has a responsibility to the world financial system, not just to its own domestic considerations. Efforts to get the Chinese to upwardly value the yuan are certainly not helped by the Fed’s efforts to devalue the dollar.
A bit more broadly, Obama’s international weakness is striking. Yes, he gave a great speech in India and had a feelgood moment in Indonesia, but in the past week he was rebuffed in efforts to establish targets for national trade balances, and failed in efforts to renegotiate a highly visible free trade agreement with South Korea which Bush had signed in 2007. (Note: as the former head of purchasing for two Fortune 500 companies, I recognize that there is a time to walk away from a contract. But competence requires that you don’t set it up to look like such a failure – and this was overall a good deal despite the UAW’s objections.) And an editorial by Simon Tisdall in today’s left-leaning British Guardian reflects that unresolved issues with Europe “encourage the feeling that Obama cares little for Europe’s interests and even less for its opinions. In short, he is not listening.”
The big point is that the voters have told Obama and the international community has told Obama that he has to get his financial house in order. With the Fiscal Responsibility Commission he has an opportunity. Lets hope that he has the strength (not yet shown in either direction on almost any issue) to stand up Nancy Pelosi, the AFL-CIO, Krugman and the others on the Left who have offered a knee-jerk “no way” reaction to the initial salvo from Bowles and Simpson.
For the full posting, see www.RightinSanFrancisco.com.