As President Barack Obama begins an annual meeting with the leaders of some of the world's richest nations today in Northern Ireland, the economic-policy gulf that has divided them since the global crash in 2008 has narrowed significantly - but not exactly in ways that the White House would have liked.
As President Barack Obama begins an annual meeting with the leaders of some of the world’s richest nations today in Northern Ireland, the economic-policy gulf that has divided them since the global crash in 2008 has narrowed significantly — but not exactly in ways that the White House would have liked.
The Europeans lately have slightly eased their austerity policies, after four years of deep spending cuts and tax increases that many economists blame for extending Europe’s recession long after America’s ended.
In contrast, the Obama administration, after years of pressing Europe to adopt American-style stimulus measures, is now presiding — if reluctantly — over European-style austerity that is measurably slowing the U.S. recovery.
Much of that austerity is in the form of across-the-board spending cuts known as sequestration that were forced by Republicans in Congress. But Obama supported an end this year to both a temporary payroll-tax cut, which the Congressional Budget Office and private analysts credited with spurring consumer spending and creating jobs, and the Bush-era income-tax cuts for the wealthy. What stimulus remains in the U.S. economy can be credited to the expansionary monetary policies of the independent Federal Reserve System.
That new reality in the United States reduces the president’s already-limited leverage in his fiscal debate with Europeans, analysts on both sides of the Atlantic say, even as Europe’s woes act as a drag on its trading partners, including the United States.
“President Obama will continue trying to lead by persuasion rather than by example,” said Eswar Shanker Prasad, an economics professor at Cornell University and a former official of the International Monetary Fund. “The U.S. is likely to push other countries towards adopting measures to support growth, including a slowdown in the drive for fiscal austerity, but against the backdrop of its own premature fiscal tightening.”
American and European officials said in interviews that arguments over austerity versus stimulus, which were so prominent at international gatherings in recent years, are likely to be muted at the two-day summit conference of the Group of 8 industrialized countries. Besides Obama, participants are the leaders of Canada, Britain, France, Germany, Italy, Japan and Russia — countries that account for about half of the world’s economic activity.
The reduced emphasis on stimulus versus austerity occurs even as unemployment remains at double digits in much of Europe, stoking unrest, especially among the young. However, the agenda is set by the gathering’s host: British Prime Minister David Cameron, a conservative who favors austerity.