In the United States, meanwhile, policymakers have not taken steps to boost a slowing economy that is feeling the effects of the European crisis. Nor have they agreed on what to do about a package of automatic tax hikes and deep spending cuts that could undermine the economy if they take effect as scheduled at year’s end. President Obama’s press conference Friday, aimed at encouraging European officials and American legislators to move faster in tackling economic threats, devolved into an exchange of barbs between the presidential campaigns.
It has been a recurrent theme for the past three years: Policymakers facing political constraints have taken only relatively modest actions to address financial and economic challenges as they surface – steps that later turn out to be inadequate.
“It is a cycle that has become too familiar since the start of the crisis, like a movie we have watched too many times,” Christine Lagarde, managing director of the International Monetary Fund, said Friday night. “With the passing of each cycle, we reach a higher and higher level of uncertainty, and the stakes rise.”
The depth of political division in the United States was on display this weekend. On Saturday, R. Glenn Hubbard, an economic adviser to GOP presidential candidate Mitt Romney, took to the pages of the German publication Handelsblatt to criticize Obama’s guidance to the Europeans. He argued that cutting spending and restoring the faith of investors in government bond markets are superior to more bailouts.
“In a hitherto unprecedented manner, the Obama administration is trying to force Germany to assume liability for financially weaker governments and banks, so that the Greek crisis doesn’t spread to other countries,” Hubbard wrote, according to a translation of the article. “These suggestions are not only unwise. They also reveal ignorance of the causes of the crisis and of a growth trajectory in the future.”
On Sunday, David Axelrod, a top Obama campaign adviser, attacked Romney for his opposition last week to more federal spending spending to keep teachers employed amid heavy layoffs by states and localities.
On CNN’s “Face the Nation,” Axelrod said that “250,000 teachers have lost their jobs in the last couple of years. That is dramatically bad news for the country. It’s certainly not good news for our future. What planet is he living on where he thinks that we can take these kind of hits in our education system and progress as a country?”