President Obama's campaign launched a new television ad this week attacking presumptive Republican nominee Mitt Romney's record on outsourcing and jobs. The ad will air in Iowa, Ohio and Virginia — three battleground states that will help determine the election. Recent polls have the president and the former Massachusetts governor in a dead heat among registered voters. Paul Krugman, the liberal Nobel-prize winning economist, says Obama's re-election "is by no means a slam dunk."
Krugman frequently criticizes Romney and the GOP in his New York Times columns and blog, but he recognizes that the presidential race will be a "cliffhanger to the end," partly because of the sputtering economic recovery. The government reported last Friday that the country grew at a 2.2 percent pace in the first three months of the year, a decline from the 3 percent pace of the fourth quarter of 2011. The U.S. unemployment rate has fallen nearly two percentage points since Obama took office but is stuck above eight percent. Housing and consumer spending numbers paint a conflicting portrait of the economy and many Americans are growing impatient with the current economic climate. Krugman says Romney, the former private equity titan who is campaigning on his business credentials, would make matters worse because his European-style austerity proposals would turn the economy negative in the short run.
"Romney, whatever he believes, if he believes anything, is certainly kowtowing to doctrines from the Republican party that would be a disaster," Krugman tells Henry Blodget and Daniel Gross in the above video. "Romney will cut spending, which means basically the poor. So in the very short run we're going to be taking money away from the people who would actually spend the money and give it to corporations who will sit on the cash because they don't see good reasons to invest in the economy."
Romney has thrown his support behind Congressman Paul Ryan's controversial budget, which Krugman describes as "the most transparent piece of fraudulent accounting I've ever seen." Ryan's proposed tax cuts would cost the government $4.6 trillion over the next 10 years and disproportionately benefit the wealthy while inflicting economic hardship on students, the middle class and the elderly, Krugman says. In his new book "End This Depression Now!" Krugman underscores the need for more government spending and aggressive Federal Reserve action, and decries the "tepid" response and "misguided" fiscal policies that have overtaken Washington -- i.e. the focus on deficit reduction and inflation instead of getting Americans back to work.
The Obama reelection campaign begins in earnest this weekend and Krugman believes Obama has a slight advantage over Romney at this stage in the election cycle. Obama's shaky economic track record may be a hard selling point to voters but the administration's rescue of the U.S. auto industry could be an issue that helps put Obama back in the White House.
"My God he saved the auto industry and he saved the industrial base in the American heartland which happens to be also the part of the country that's doing the best in this recovery," Krugman says. "The auto bailout may turn out to be the key to his re-election."