June 12, 2012

European Economics and American Politics

By Don Kirk in Economics, Politics

Joe Trippi in today’s Wall Street Journal has an Op-Ed pointing out that Mr. Obama’s re-election efforts are in a bit of June swoon, and Mr. Trippi’s clear preference for Mr. Obama’s re-election makes his observations credible. There are too many factors influencing a presidential election to list them all, but this summer and fall, economic events in Europe might prove to be decisive for Mr. Obama.

Greece is gone. Full depression already. No amount of more bad news about the Greek economy is going to be a surprise this summer. Spain and England are already in recession, and the only thing keeping all of Europe out of recession is Germany’s paltry half-point percent of growth. If Europe actually slips into recession this summer, then American exports will likely drop, and if U.S. exports drop as European customers avoid buying U.S.-made goods and services, then American corporations will cut back on hiring and expansion in the late summer, immediately before the presidential election. No American president is re-elected during a period of rising unemployment.

Mr. Obama made a speech last week calling upon Europe to adopt growth policies and avoid austerity. He knows his re-elction is quite possibly at stake if the European economic stagnation begins to pull down the American economy. However, he never once mentioned increasing ‘economic liberties’ in Europe as a possible long-term cure for Europe’s economic woes, so the short-term Euro recession and his defeat might be more likely than not.