Obama is going global with his war on success. Not content with blaming domestic bogeymen -- the GOP, Rush Limbaugh, millionaires and billionaires, George Bush, “bad apple insurers,” the Chamber of Commerce, oil producers etal-- for his administration’s inability to supply jobs, he has now ventured overseas. Achtung- it’s Germany’s fault! The buck, it turns out, stops everywhere but here.
In its semi-annual currency report, Obama’s Treasury department skewered Germany for pumping up exports, claiming that its large current account surplus weighed on the global recovery. It is such a nonsensical charge, given Germany’s relatively robust gains in consumer spending (compared to its neighbors) and the pivotal role played by that country in the EU’s survival, that it was immediately dismissed by German authorities, and rightly so.
It is especially ludicrous given that President Obama has long promised to double U.S. exports to ramp up our limp economy. He laid out that unlikely-to-be met ambition in 2010. Since then, exports have climbed only 40 percent in current dollars and a meager 25 percent adjusted for inflation.
Obama’s failure to reach his exports goal or to revive job growth through other means makes Germany’s progress all the more impressive – and possibly galling to the White House. German unemployment at 6.9 percent is near the lowest level of the last two decades, and German exports look likely to top those from the U.S. this year. Shame on them.
Perhaps the Obama team figures that the best defense is a strong offense. After reports that the NSA tapped Angela Merkel’s cell phone, our German friends delivered a sharp rebuke to the Obama administration. The German Chancellor told Mr. Obama the intrusion represented a “grave breach of trust.” This may be diplomatic theater, but the Obama team could be trying to divert attention from the spying snafu. Whatever the motivation, the message was absurd.
The attack on Germany’s economic policies comes at a time when missteps by the White House have soured our relations with many traditional allies. Obama’s embarrassing tap dance on Syria infuriated France and England, his overtures to Iran have created a serious breach with Saudi Arabia and Israel and numerous countries are smarting over reports of NSA intrusions.
A Gallup survey earlier this year (before the latest goofs) shows just 41 percent of the those polled in 130 countries approve of U.S. leadership, only a few points higher than at the end of George W. Bush’s presidency and down from 49 percent in Mr. Obama’s first year in office. Remember how President Obama was going to rebuild our international reputation?
This latest fracas concerns how Germany has balanced its efforts to stimulate growth at home with its export ambitions. U.S. authorities would like Germany (and China) to boost consumer spending, because it would help our own economy, and global demand as well. As a whole, the EU has moved from a balanced current account, with Germany’s surpluses offset by the large trade deficits among its weaker southern members, to a 2.3 percent surplus. Some of that shift is attributable to the recession in Spain, Italy and elsewhere, that has dampened demand for imported goods. Some has stemmed from Germany’s export growth.
Confusingly, the Treasury’s report is contradictory, noting that the EU’s exit from recession has been built on “domestic demand growth in Germany.” Indeed, in the most recent quarter, Germany’s growth came from a 1.1 percent gain in domestic consumption, while net exports slowed, making the timing of the Treasury’s complaint all the more peculiar. The IMF is forecasting that Germany’s current account surplus will decline from 7 percent of GDP in 2012 to under 6 percent next year.
The larger issue is that the Obama administration considers it Germany’s civic duty to bail out not only the EU, but the rest of the world as well. Our White House expects Angela Merkel’s economic policies to be geared towards the global good. That same reasoning does not seem to guide our own economic gurus. Ask Brazil, or India, how our quantitative easing program has benefited their economies. Though the loose money policies have helped boost U.S. demand, and therefore worldwide growth, those countries have been whipsawed this year by hints that the Federal Reserve would begin to taper its bond-buying program. The minute global investors anticipated that interest rates and returns would start to rise in the U.S., money flowed out of emerging markets, causing considerable damage to local stock markets and currencies.
Germany has arguably benefited from a euro weakened by the credit issues of its neighbors. But, more important, it has been successful in adapting labor regulations that have increased productivity and boosted their competitiveness – the kinds of policies that the IMF has been urging on France and other laggards. Since 2002, when left-leaning Chancellor Gerhard Schroder convened the Hartz Commission to reform the country’s labor and welfare policies, Germany’s government has worked with its business community to make its exporters successful.
President Obama has had no time for our corporate leaders. Stung by criticism that his administration was alarmingly devoid of real-world business experience, he formed a “jobs council” headed by GE’s Jeffrey Immelt; but the White House was clearly so detached it was quickly disbanded. Top American business leaders who have occasionally won an audience with Mr. Obama universally describe him as aloof and condescending – certainly not interested in their point of view. This makes for an awkward partnership, to say the least.
Instead of bashing Germany for its success, perhaps the White House should try to emulate Chancellor Merkel’s collaboration with the people and companies that have moved that country forward. I’m not holding my breath.