Yesterday, I referred to a poll in which a plurality of respondents assigned primary blame for our weak economy to President Obama. He was followed by Congress, Wall Street, and former President Bush in that order.
As these were the only choices offered to the respondents, I would have answered “none of the above,” at least insofar as the current economic turn for the worse is concerned.
For me, the primary culprit is Europe. Fear over future European demand has caused U.S. manufacturing to decline for the first time in three years. The decline in manufacturing has adversely affected the job market, and that has led to a decline in consumer confidence. Moreover, uncertainty about Europe has probably prevented large portions of our stock markets from taking off, which also hurts consumer confidence.
And the news from Europe keeps getting worse. In Spain, where the unemployment rate exceeds that of the U.S. during the Great Depression, the economy shrank by 0.4 percent in the second quarter of this year. Spain’s borrowing costs have soared to all-time Euro-era highs. It appears almost certain that the European Central Bank will have to intervene again to keep Spain — the world’s 12th largest economy — afloat.
In the face of Spain’s troubled economy, as well as others in Europe, Moody’s Investors Service is lowering its outlook for the credit ratings of Germany, the Netherlands, and Luxembourg. These nations retain their AAA ratings, but the outlook for that rating moves from “stable” to “negative.” The outlook was lowered due to the deepening euro currency crisis and because Germany, the Netherlands, and Luxembourg are the countries that likely will be called on to bail out Spain and Italy.
In a sense, Obama is unlucky that Europe is pulling down our economy during an election year. But Obama is an admirer of the European system and his policies, including those pertaining to debt, have led us further down the road towards a European-style crisis of our own. So I guess there’s poetic justice here.