Some weeks ago, I translated, posted and praised Chancellor Merkel's latest speech to the Bundestag on the crisis in the EU and the Eurozone. Weeks have passed, Merkel and Sarkoczy and trying to impose more fiscal uniformity upon the Euro zone, and now I am having second thoughts. To be sure, the Europeans are behaving more responsibly than our own politicians, and they think that they are holding themselves to a commendably high standard. I am not however so sure. The US is seriously threatened by a lack of governmental authority to do anything; Europe is threatened by possible governmental overreach. The happy medium seems to be lacking.
Germany has demonstrated admirable self-discipline for the last half century or more. The reason is clear: both Germany and the world suffered enormously during the first half of the twentieth century from the exact opposite. Both before and after reunification in 1991, the free German leadership has shown an unequaled sense of national purpose, including both political parties, business, and unions. They have kept their own fiscal house in order while focusing on production for export, and when the Euro was created the new European central bank was lodged in Frankfurt. Now, however, Merkel is staking everything on the idea that the rest of the Eurozone must be more like Germany, and this may end disastrously.
It seems to me that Germany stands in a similar relationship to the rest of the Eurozone as China stands to the US: Europe is Germany's customer, just as we are China's. To keep their industries running they hold enormous amounts of the dollars we spend on their goods. If the Germans want to keep their customers, and thus their exports, they must be willing, it seems to me, to allow the weaker countries to run current account deficits and find some way to recycle the money, as the Chinese have. Otherwise it will be necessary, as Paul Krugman has argued, to allow the weaker southern European countries to drop out of the Eurozone and return to their own freely floating currencies. Under Merkel's new plan those countries will surrender a large chunk of their sovereignty to the European Court of Justice, which will determine whether their national budgets conform to treaties. I would sympathize with any people that refused to make that sacrifice. Merkel's initiative looks all too much like Germany's and the rest of Europe's response to the Great Depression (before Hitler) to me. Germany this time doesn't have to worry about trade restrictions of foreign capital withdrawals, as it did in 1928-32, but it does have to worry about aggregate demand.
Still, the European situation remains almost inspiring in comparison to our own. To find a parallel between the relations between Congress and the President today one would have to go back to the last two years of Andrew Johnson's administration. The Republicans in both the House and the Senate remain determined not only to block any presidential legislative initiative, but essentially to make it impossible for the executive branch to function. The Senate Republicans are now preventing more and more appointments from coming to a vote. (The presidential appointment power, which the Radical Republicans tried to limit by law under Johnson, was the issue that led to Johnson's impeachment.) They are trying to put crippling restrictions on the functioning of new agencies, and they apparently want the payroll tax cut to expire on the assumption that they can blame the President. (Rising above partisanship for a moment, may I say that I hope it will expire. I said a year ago when the President proposed it that it was a terrible idea, and I still think so. But the Republicans are blocking any effective action to create jobs as well.)
The President's electoral prospects are improving daily. No one who knows Newt Gingrich thinks he can possibly survive a full general election campaign. The more we learn about him--in my case, in a wonderful interview that Terri Gross did with reporter Karen Tumulty last week--the more the contradictions in his career become apparent. He has railed against Washington cronyism while almost obsessively finding new ways to take advantage of it. Romney may overcome him, but he may be deeply damaged. The President evidently hopes to win re-election by default, and he might. What he can then do with the victory is another question altogether.
Our current crisis, to repeat, will not lead to the emergence of new totalitarian regimes in advanced countries. The era that created them is long gone. We are threatened not with too much government but with much too little. Success either in Europe or in America would offer some hope.