Reporting Tim Kephart
Legislative Session Coverage
MIAMI (CBSMiami) – South Florida has relied on tourism to keep the area growing during the Great Recession. But, one key group of tourists, Europeans may be about to undergo even more economic hardship that could impact tourism and U.S. politics in an election year.
According to the Organization for Economic Cooperation and Development, the 17-country eurozone risks falling into a “severe recession” if quick action isn’t taken to slow down the rapidly deteriorating European economy.
The OECD said the eurozone economy could contract by as much as 2 percent this year, which had been pegged as the worst-case scenario last November. The report also said Europe would fall behind other countries, including the United States which economists predict will expand by 2.4 this year and 2.6 percent next year.
This presents problems for South Florida tourism, which has reached out to European tourists while the euro has been performing well against the dollar. If the entire Eurozone continues to deteriorate, South Florida will have to look elsewhere, likely to South America, to find new areas to target for tourists.
Politically, the eurozone’s decline puts Democrats and Republicans into a precarious position on the issue of budget deficits. Republicans, led by the tea party, have waged war on any deficit spending and have instead championed austerity-like cuts to the U.S. government.
Some Democrats have also bought into the idea of reducing the size of government in the face of recession, which historically goes in the face of decades of economic theory.
But, as the eurozone continues to decline as it enacts austerity measures across the region, the question becomes, is it the best policy to call for more cuts during a recession when economic theory dictates more government spending during a recession and less during growth periods?
It’s a question that goes to the very heart of the presidential campaign between President Barack Obama and Mitt Romney, growth or cuts.
Government has shrunk under President Obama by more than 500,000 workers at the federal level. But Republicans, and some Democrats, want further cuts, mainly targeting discretionary spending and will not consider any additional revenues.
The eurozone decline could go a long way towards deciding the presidential election in the United States. Which side the voters in the U.S. choose to believe, will ultimately determine not only part of the fate of the eurozone; but also the fate of the U.S. economy as well.