The White House denied last Thursday that the United States’ influence within the G20 has been diminished by the country’s recent credit downgrade, its long-term unemployment, or mounting public debt. However, as leaders of the euro zone look to China for help in financing a rescue plan that would prevent Greece from defaulting, the U.S. finds itself removed from the leadership role it once held in global financial matters – such as when it promoted Europe’s post-war recovery through the 1948 Marshall Plan and prevented the 1980 Latin American debt crisis and the 1990s Asian financial crisis.
President Barack Obama’s clout has also eroded compared to only two years ago when his freshly-minted presidency helped to convey a strong message of bold economic intervention during the G20 Summit in London. This time, the leader of the free world found his “short-term growth, longer-term deficit reduction” message taking the back seat to Europe’s package of draconian public spending cuts and deficit reduction.
America’s own pressing fiscal problems also placed Obama in the difficult position of telling European leaders to put their fiscal house in order without sounding hypocritical. Obama found himself pushing for an austerity-oriented program that would severely slash education budgets across Europe – a position that is at odds with his own domestic message of public spending as paramount for economic recovery and job preservation. This contradiction will haunt him as he fine-tunes his core economic message towards his 2012 reelection effort.
Another issue likely to be scrutinized during his G20 meeting – especially by the American left galvanized by the Occupy Wall Street movement – is the president’s final stance on the proposed global Financial Transactions Tax (FTT) endorsed by French president Nicolas Sarkozy and German Chancellor Angela Merkel (and even Bill Gates) but despised by Wall Street – another tightrope for Obama as he tries to rally his liberal base without upsetting potential donors from the private sector.
In all fairness, Obama’s performance at the G20 Summit is representative of an era in which emerging economies are being called to boost domestic consumption and promote trade to prevent their more developed counterparts from falling back into recession. The fact that the U.S. is leading the new European economic recovery “from behind” also means that American taxpayers won’t be slapped with yet another bailout – in an era when these types of rescues are deeply unpopular and believed to exacerbate the very same deficit problems the intend to address. Ironically, Obama’s critics won’t highlight this decision as a fiscally responsible one but as more evidence of what they believe is the demise of America in the Obama era.
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