As President Obama prepares to meet other G-20 leaders in Cannes later this week, he previewed his pitch with an op-ed in the Financial Times. It read a bit like a half-time locker room pep talk to a team that had gotten knocked around on the field.
"C'mon guys! We saved the world once, we can do it again! Heck, I've been through much worse than this and I did great. Here's the game plan..."
Perhaps it is inevitable that such pep talks exaggerate past accomplishments and take on a tone of forced cheerfulness (particularly when the coach is entering his contract year). The danger, though, is that this approach can undermine credibility and invite scorn (David Nakamura in the Washington Post today describes the potential for such a reaction).
Unfortunately, the world appears distinctly unsaved at the moment.
- The president trumpets the success of coordinated stimulus in 2009. Yet U.S. unemployment hovers around 9 percent and roughly three-fourths of the country thinks it's on the wrong track. European stimulus practitioners, like the United States, have encountered severe budget problems. China faces serious concerns about the repercussions of its bank-lending approach to stimulus.
- The president trumpets his passage of the recent FTAs as a pro-growth achievement. That's fair, but it's hard to justify his four year delay. What's more, the repeated pledge of earlier G-20 meetings to conclude the much more significant WTO Doha Round seems to have been dropped altogether. The U.S. role has recently been to explain to fellow countries just why their proposals won't work.
- The president tactfully applauds his European counterparts for reaching agreement last week on a plan to address the euro crisis. That will likely get him a warmer reception than his past admonishments. Unfortunately, after a brief post-summit euphoria, significant doubts have emerged about the European plan. The most telling and concise critique has come from the Italian bond market, which has pushed and held bond yields above 6 percent on Friday and today. Europe is still teetering.
The president concludes with a call for renewed efforts to achieve balanced, sustainable growth. Last week's developments in Europe are doubly troubling in this regard. While previous Treasury efforts under G-20 auspices to push for redressing global imbalances have been laudable, they largely came to naught. China and Germany resisted proposals for how to identify problematic imbalances. Now that Europe is seeking China's funds for its bailout, the odds of it joining in any concerted effort to press China on rebalancing (e.g. via currency appreciation) seem remote.
The most glaring difference of approach lies in the area of spurring economic growth. The president repeats his enthusiasm for his American Jobs Act, which attempts to boost demand through another round of stimulus. Europeans have taken an approach more akin to that of Congressional Republicans: focus first on fixing structural problems.
There are a couple reasons one might opt for a structural reform focus over a stimulus approach. A skepticism about the efficacy of stimulus and a concern about the impact of untended growing structural problems can argue for the primacy of reform (see Ed Lazear's excellent Wall Street Journal piece along these lines). Or one can note that the coffers are beyond empty and decide that stimulus is no longer affordable.
In either case, the President is likely to meet the same sort of skepticism in France that he has at home. It's not clear that a pep talk will do much good.
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