Merkel Rejects Obama: We Need Growth That Doesn’t Rely on Debt But Is Based on...

[Ockham]

Posted by Jim Hoft on Friday, June 25, 2010, 12:09 PM

German Chancellor Angela Merkel rejected Barack Obama’s request today after arriving in Toronto for the G20 meetings. Merkel told reporters that, “We need growth that doesn’t rely on debt.” This was in response to Barack Obama who sent a letter to G20 leaders last week urging them to continue to run massive budget deficits in order to “keep economic growth strong.”
GDP growth was revised downward today.

“The world needs a new architecture for the financial markets and me and the EU will advertise for that very intensively,” she added.

More… Via Instapundit:

TELEGRAPH: Barack Obama is refusing to listen to reason on economic policy. “As it happens, the public debt trajectory is rather worse in the US than it is in Europe, yet Obama has adopted an overtly ’spend until we are broke’ approach in a calculated bid for growth and votes.”

Why is it that Obama and his White House staff are the only one's in left field on this issue? Either they don't care or they're oblivious. Either way, the U.S. is in dire straights and everyone knows it but our President.

Gateway Pundit

 

[obvious Child]

Why is it that Obama and his White House staff are the only one's in left field on this issue? Either they don't care or they're oblivious. Either way, the U.S. is in dire straights and everyone knows it but our President.

Gateway Pundit

You might want to try that again.

Europeans are fine with rates of growth that would get American Presidents and Congresses evicted from Washington. Therefore, their view that debt measures which partially stem from their histories (particularly Germany) is quite different from ours. France and Germany are fine with piss poor growth rates. We are not. But France and Germany also have exceedingly expensive welfare programs to blunt that kind of growth when coupled with their demographic issues. We don't.

Furthermore, our unemployment rate, the real unemployment rate is astronomical. Cutting spending when real unemployment is circa 20% is about as smart as raising taxes.

Bush ran our debt into the sky with tax cuts meant to stimulate the economy that were debt financed. Obama is merely doing the same principle. 0.5% growth is hardly a way to get elected.

Sure the US is in dire straits. But that would be just as true if we cut spending.

 

[Kandahar]

Why is it that Obama and his White House staff are the only one's in left field on this issue? Either they don't care or they're oblivious. Either way, the U.S. is in dire straights and everyone knows it but our President.

Gateway Pundit

No, Merkel is the one who is oblivious. Germany is condemning itself to YEARS of unnecessarily anemic growth with its austerity measures, which only serve to shut off demand. She's emulating Herbert Hoover. Now is the BEST time to take on more debt. We shouldn't do it as much as we do during boom times, but we need to do it a lot more during recessions.

 

[obvious Child]

No, Merkel is the one who is oblivious. Germany is condemning itself to YEARS of unnecessarily anemic growth with its austerity measures, which only serve to shut off demand. She's emulating Herbert Hoover. Now is the BEST time to take on more debt. We shouldn't do it as much as we do during boom times, but we need to do it a lot more during recessions.

I don't know about best time to get more debt, but I do agree with your assertion Germany is condemning itself to years, if not decades of slow growth. And we both know that when we get back into a boom, people like Ockham are going to ridiculue Europe for its slow growth without understanding that this action was partially at fault. They praise the action but then laugh at the outcome despite the outcome being perfectly predictable. As for debt during boom years, we shouldn't do it period outside of refinancing at the federal level.

The US system takes more risk, has higher growth but has far more damaging systematic shocks.
Europe takes (overall) less risk, has lower growth and far less damaging shocks.

It's a trade off. People who lean strongly to the right tend to want higher growth overall in the economy, but at least on this forum, they don't understand that corrolates with higher systematic risks.

 

[washunut]

You might want to try that again.

Europeans are fine with rates of growth that would get American Presidents and Congresses evicted from Washington. Therefore, their view that debt measures which partially stem from their histories (particularly Germany) is quite different from ours. France and Germany are fine with piss poor growth rates. We are not. But France and Germany also have exceedingly expensive welfare programs to blunt that kind of growth when coupled with their demographic issues. We don't.

Furthermore, our unemployment rate, the real unemployment rate is astronomical. Cutting spending when real unemployment is circa 20% is about as smart as raising taxes.

Bush ran our debt into the sky with tax cuts meant to stimulate the economy that were debt financed. Obama is merely doing the same principle. 0.5% growth is hardly a way to get elected.

Sure the US is in dire straits. But that would be just as true if we cut spending.

The developed world is in a box. For many years we have outspent what we earned. People have always said that deficits and debt don't matter until they do. Well guess what, they do now.

So as a country we have lived on a credit card which allowed us to live better than what we really earned. So the trickbox for politicians is what to do now.

The European experience tells them that they would rather lower growth rates than have inflation which. America has the experience of the deflationary depression, so they are trying to guard against that.

America is in a unsustainable path. Increasing the social safety net might feel good, but we can't afford what we have now. We need a President that is a true visionary. One who might really pave the way for new industries which will make our economy great again, not just living on a legacy economy whose growth the last decade was a mirage built on a housing/ credit bubble.

We also need a President who better understands that he has to choose between two wars, armies in Asia and Eirope and taking care of Americans here.