Crash-test dum­mies as Repub­li­can can­di­dates for pres­i­dent

The Pak Banker - - OPINION - Paul Krug­man

Will China's stock crash trig­ger another global fi­nan­cial cri­sis? Prob­a­bly not. Still, the big mar­ket swings of the past week have been a re­minder that the next pres­i­dent may well have to deal with some of the same prob­lems that faced Ge­orge W. Bush and Barack Obama. Fi­nan­cial in­sta­bil­ity abides. So this is a test: How would the men and women who would be pres­i­dent re­spond if cri­sis struck on their watch?

And the an­swer, on the Repub­li­can side at least, seems to be: with blus­ter and China-bash­ing. Nowhere is there a hint that any of the G.O.P. can­di­dates un­der­stand the prob­lem, or the steps that might be needed if the world econ­omy hits another pot­hole. Take, for ex­am­ple, Scott Walker, the gover­nor of Wis­con­sin. Mr. Walker was sup­posed to be a for­mi­da­ble con­tender, part of his party's "deep bench" of cur­rent or for­mer gover­nors who know how to get things done. So what was his sug­ges­tion to Pres­i­dent Obama? Why, can­cel the planned visit to Amer­ica by Xi Jin­ping, China's leader. That would fix things!

Then there's Don­ald Trump, who likes to take an oc­ca­sional break from his anti-im­mi­grant di­a­tribes to com­plain that China is tak­ing ad­van­tage of Amer­ica's weak lead­er­ship. You might think that a swoon­ing Chi­nese econ­omy would fit awk­wardly into that world­view. But no, he sim­ply de­clared that U.S. mar­kets seem trou­bled be­cause Mr. Obama has let China "dic­tate the agenda." What does that mean? I haven't a clue - but nei­ther does he. By the way, five years ago there were real rea­sons to com­plain about China's un­der­val­ued cur­rency. But Chi­nese in­fla­tion and the rise of new com­peti­tors have largely elim­i­nated that prob­lem. Back to the deep bench: Chris Christie, another gover­nor who not long ago was touted as the next big thing, was more com­pre­hen­si­ble. Ac­cord­ing to Mr. Christie, the rea­son U.S. mar­kets were roiled by events in China was U.S. bud­get deficits, which he claims have put us in debt to the Chi­nese and hence made us vul­ner­a­ble to their trou­bles. That al­most rises to the level of a co­her­ent eco­nomic story.

Did the U.S. mar­ket plunge be­cause Chi­nese in­vestors were cut­ting off credit? Well, no. If our debt to China were the prob­lem, we would have seen U.S. in­ter­est rates spik­ing as China crashed. In­stead, in­ter­est rates fell. But there's a slight ex­cuse for Mr. Christie's em­brace of this par­tic­u­lar fan­tasy: scare sto­ries in­volv­ing Chi­nese own­er­ship of U.S. debt have been a Repub­li­can sta­ple for years. They were, in par­tic­u­lar, a fa­vorite of Mitt Rom­ney's cam­paign in 2012. And you can see why. "Obama is en­dan­ger­ing Amer­ica by bor­row­ing from China" is a per­fect po­lit­i­cal line, play­ing into deficit fetishism, xeno­pho­bia and the peren­nial claim that Democrats don't stand up for Amer­ica! Amer­ica! Amer­ica! It's also com­plete non­sense, but that doesn't seem to mat­ter.

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