A simmering row about the whole point of the G20 meeting on April 2 burst into the open when Larry Summers, chief economic adviser to President Obama, called on other countries to follow America’s lead in pumping even more money into stimulus plans to revive the world economic system.
The United States’ stimulus package of $787 billion is equivalent to about 5.5 per cent of its annual economic output, although it is spread over three years, whereas the EU has struggled to reach agreements on a sum that barely reaches 1.5 per cent of its total GDP.
Mr Summers’ plea was attacked by Jean-Claude Juncker, the Luxembourg Prime Minister, who heads the eurogroup of single currency countries. He declared: “The 16 euro-area ministers agreed that recent American appeals insisting that the Europeans make an additional budgetary effort to combat the effects of the crisis was not to our liking.”
Mr Juncker suggested that the eurozone countries would rather adopt a wait-and-see approach than rush to incur even more debt.
In bucking this, the Obama Administration is violating an important Elitist Snob Rule: the Europeans are always smarter than we are.
That put aside, Mr. Juncker is right. The stiumulus we’re throwing at this problem, helpful or hurtful, is dwarfed by the value of the “toxic” assets. Throwing in the additional money is dicey at this stage, especially since we don’t know if Round One will help or not.
What Obama and his people are being caught up in is emotionalism, an all too common fault of American life and politics. It got us into trouble during the Cold War. It’s ironic that people who think of themselves as so logical, educated, intelligent, etc., are allowing themselves to be swept into this mentality.