The United States does not share a currency with any European country. The United States can thus decouple itself from the European business cycle, if it so wishes and whenever it so wishes. When demand falls in Europe that does not mean that demand has to fall in the United States. When spreads rise in Europe that does not mean that spreads have to rise in the United States.
The Federal Reserve and the Treasury simply have to take appropriate action to make sure that any holes in aggregate demand that emerge from a European recession are filled by other means.
If Obama thinks that the European situation means that the U.S. will grow too slowly over, say, the next eleven months, he can convene a meeting with himself, Tim Geither, and Ben Bernanke and ask for a plan to ensure that the U.S. is decoupled from the European recession.
Duncan Black watches the Obama Administration miss this very basic point:
Eschaton: Operation Blame Yurp: No it isn't. It really isn't.
He is referring to Richard McGregor:
Obama’s morbid fear of EU meltdown: [W]within both the administration and Mr Obama’s campaign team in Chicago, there is a morbid fear about a eurozone meltdown and its flow-on impact on the US economy and the president’s re-election chances. “The thing that matters the most in determining the health of the US economy and job creation is what happens in Europe,” says a senior administration official….
Like the eurozone itself, the administration is captive of German domestic politics and Chancellor Angela Merkel’s juggling act balancing support for European unity with local taxpayer discontent about ever rising demands for funds to bail out its neighbours…
