2012 election

Could GOP Sanctions on Europe Tank the Economy and Elect Romney?

Remember, "It's the Economy, Stupid?" So how come Democrats in Congress - over the objections of the Obama Administration - are helping Republicans press sanctions on Europeans who buy oil from Iran - sanctions that would increase unemployment in the U.S. during the 2012 campaign?

 

The National Defense Authorization Act now contains a Senate amendment by Republican Senator Mark Kirk - supported by many Democrats in Congress - that would sanction European banks and companies that do business with Iran's Central Bank, in order to stop Europeans from buying Iranian oil. This is a big deal, because Iran is the world's fifth-largest oil exporter, and blocking Iranian oil exports to Europe would raise the price of oil, in Europe and in the United States.

 

Kirk's amendment would hurt the U.S. economy, at a time when economic contraction in Europe could push the U.S. back into recession.

 

Is fear of the economic blowback of the sanctions on Europe that Kirk wants to impose justified? Many Europeans seem to think so.

 

On Tuesday, Reuters reported:

 

 

The European Union is becoming skeptical about slapping sanctions on imports of Iranian oil, diplomats and traders say, as awareness grows that the embargo could damage its own economy without doing much to undercut to Iran's oil revenues.

[...]
"Maybe the aim of sanctions is to help Italy, Spain and Greece to collapse and make the EU a smaller club," one trader joked.

 

The remark reflects the growing unease that EU sanctions would hit hardest some of the continent's weakest economies, because Iranian oil provides the highest share of their needs, not to mention the rest of the bloc.

 

A Progressive Primary to Push for Jobs and End the Wars

It's bad enough that we lost progressive champions like Russ Feingold, and that the leadership and committees of the House will be taken over by advocates of domestic austerity and endless war. In addition, the airwaves and print media will now be filled with pundits saying that the lesson of the election is that Obama must move to the right and cut the budget, except the military. But the worst thing we must now face is that the 2010 election is likely a preview of 2012, unless at least one of two things happen: decisive federal action to boost economic growth and employment, now much more difficult to achieve than before, and some dramatic new element is introduced into our national politics that changes the character of national debate.


Jonathan Chait pointed out last week that based on the state of the economy, historical trends predicted a Democratic loss of more than 40 seats, enough for Republicans to take the House. In other words, on average, based on historical trends, the fate of the election was sealed when the Obama Administration proposed and Congress enacted an economic stimulus package that was much too small to counter the fall in domestic demand resulting from the collapse of the housing bubble. Everything else that happened in the election has to be judged according to the baseline expectation of the Democrats losing at least 40 seats - enough to lose the House - due to the failure to restore economic growth and employment with a sufficient stimulus to counteract the fall in private economic demand.