May 08, 2012
If the Washington Post doesn’t like it. That would explain the lead sentence of its lead front page story on the elections in France and Greece on Sunday:
“The shrill anti-incumbent message that has emerged from a pair of European elections carries a threat to the U.S. economic recovery and a political warning for President Obama, whose reelection prospects could hinge on whether the economy can improve.”
Other newspapers might leave such editorializing for the opinion pages, but not Fox on 15th Street.
The substance in this statement is also not especially accurate. U.S. exports to Europe are only about 2 percent of U.S. GDP. This means that even a sharp drop in exports (e.g. 10 percent) would only imply a reduction in growth of around 0.2 percentage points. That is unlikely to make much of a difference in U.S. growth.
If Europe’s turmoil leads to more uncertainty in financial markets (short of a full-fledged meltdown), it could actually benefit the United States. Interest rates in the United States plummeted following the spike in interest rates on Spanish and Italian debt last summer. The same would likely happen again. This would make it cheaper for people to refinance mortgages and engage in other types of borrowing.
The piece also includes the bizarre assertion:
“A new round of political paralysis that delays Europe’s recovery or calls into question the austerity agreement reached this year to help bail out Greece would probably lead to an immediate slowdown of U.S. economic growth and job creation while confusing bond and equity markets.”
Actually, Europe is not on a path to recovery. It is on a path to recession because of the austerity being imposed by the European Central Bank and the IMF. If this austerity is reversed and Europe starts growing again that would help the U.S. economy.
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