Lack of economic leadership marks G-20 summit
WASHINGTON (MarketWatch) -- The photo op at the Group of 20 economic summit this week with President Barack Obama and Russia's Vladimir Putin showing their evident distaste for one another drew a lot of attention, but a less visible spectacle was that of Obama lecturing German Chancellor Angela Merkel on economics.
That's a picture -- much like the blind leading the blind.
How can Obama, who has bought into the deficit myth himself, possibly convince Merkel that she's on the wrong path by focusing on fiscal rectitude?
How can Obama, who has let himself be bullied by everyone from Wall Street honchos to Republican deficit hawks, possibly stand up to an iron chancellor who has already faced down every other leader in Europe?
Focusing on German public opinion regarding the "deadbeat" countries of southern Europe, Merkel has failed to realize that her own chances of re-election next year hinge on not letting the European economy implode. How can she possibly care about Obama's chances for re-election this year?
Reports from the G-20 meeting in the Mexican resort of Los Cabos say Obama urged European leaders to stimulate their economies. They countered that they already have too much debt to embark on any stimulus and he had no arguments to convince them otherwise.
What's missing on both sides of the Atlantic is anything resembling economic leadership. The G-20 was little more than a group of politicians watching today's opinion polls, which reflect the collective ignorance of a voting public that's waiting for someone to take care of this mess.
In the U.S., Republican deficit hawks intent on reducing the size of government browbeat voters with the notion that the deficit is the problem, when there is no evidence -- repeat, no evidence -- that the deficit is hurting the economy now.
And yet, there is no countervailing message that lack of demand is really the problem, because Democrats, starting with Obama, have also accepted the premise that the deficit is the issue.
According to reports from Los Cabos, Europeans rebuffed Obama's advice by bringing up the U.S.'s own "financial problems" -- and he agreed with them. Those financial problems would no doubt be the ones that enable the U.S. government to borrow money at virtually negative interest rates, right?
In Germany, voters too ready to believe that their prosperity rests solely on their virtue don't seem to have a clue about their responsibilities to the rest of Europe, which has fed that prosperity, thanks to a currency regime that favors Germany at other countries' expense.
And Merkel has done nothing to enlighten them, either perhaps because she doesn't grasp that fact herself or, more likely, because she doesn't consider it politically expedient.
Now Merkel, who feels vindicated by her success in bullying the Greeks into voting against their own best interests, seems intent on digging in her heels and keeping Europe on a path to a wide and deep recession that could engulf Germany, too.
As for Obama, he has added to the perception of his weakness in the face of an ideologically driven Congress with his inability to sway Merkel one inch from the course she has decided on.
The official G-20 communiqué was vague and largely ignored by the markets, which had low expectations to begin with. The best U.S. officials could muster was some off-the-record comments that there was indeed a heightened sense of urgency in Europe and a "change in tone."
Wow, that should give the markets renewed hope.
It is probably too late at this point for Obama to show any leadership on the economy. To the extent that his re-election depends on the economy, he seems likelier than ever to join Jimmy Carter and George H.W. Bush in the ranks of well-intentioned but weak one-term presidents.
Absent a dramatic change of course in Europe, Obama's chances now depend in large part on Federal Reserve Chairman Ben Bernanke and presumptive Republican nominee Mitt Romney.
But the Fed's disappointingly cautious action this week just to extend Operation Twist for six months may have marked the last opportunity for Bernanke to do anything that can buoy the economy before the election.
Romney could conceivably still do something seriously wrong in his campaign and let Obama squeak through to a second term, but after more than half a dozen years of practicing, the former governor of Massachusetts finally seems to be getting the hang of a national campaign.
It may be that Putin's body language in the photo session with Obama said it all: Don't bother me; I'll discuss these issues with your successor.