05/19/2012 12:06 am ET Updated May 19, 2012

Europe Austerity Backlash Holds Lesson For Romney: Focus On Growth

WASHINGTON -– Austerity is out. Growth is in. And Mitt Romney's campaign has taken notice.

Politicians in Europe and in President Barack Obama's administration can't get enough of the G word these days. "Growth must be a priority, at the same time as we put in place some fiscal compact to improve our finances," said the new French President Francois Hollande, during a visit with Obama in the Oval Office on Friday.

Hollande defeated incumbent Nicolas Sarkozy earlier this month, riding a backlash in France against programs that have sought to reduce sovereign debt by cutting government spending. Voters in Greece have rebelled even more fiercely against cuts to government jobs and benefits, placing their country on the verge of an exit from the European Union and a potential collapse.

Obama's national security adviser, Tom Donilon, told reporters this week that the administration "welcomed the evolution of the discussion in Europe towards growth and jobs -- but you see that now being discussed much more broadly in Europe."

White House press secretary Jay Carney said that Obama "has long made clear … that he believes that an approach that takes into account the need for further growth and job creation, a balanced approach that includes not just austerity but growth and job creation, is the right approach."

Romney campaign officials used rhetoric that was strikingly similar in conversations this week about Europe.

"There's a need to make sure you have both austerity and growth," said Glenn Hubbard, the dean of the Columbia University Business School and a senior adviser to Romney on economic issues.

But the verbiage papers over a few key differences between the Romney campaign and the Obama administration. For one, their definitions of austerity differ, and they will likely fight in the coming months over what, exactly, should be considered austere.

The Romney campaign will say their proposals to dramatically overhaul Medicare -– much like Rep. Paul Ryan (R-Wisc.) has proposed -– and to pare back federal non-defense spending are fiscally responsible.

"I hesitate to call it austerity, I think austerity is pretty severe," a top adviser to Romney, who spoke on the condition of anonymity, said in an interview. "I think when you talk about fiscal responsibility, that is part and parcel of a pro-growth approach to the economy,"

The president will argue that Romney, the former Massachusetts governor, wants to cut back severely in the same way that has caused heartburn in Greece, Italy, France and elsewhere.

The second major difference between Romney and Obama is that Romney's advisers are focused largely on the long-term economic picture, which they said they believe will do the most to alleviate short-term pain.

"The work that people like Alberto Alesina at Harvard and others have done shows that if you have fiscal consolidations on the spending side that are more of this glide path variety, you can actually increase growth, because you tell investors that future taxes will be lower and that there won't be this uncertainty in the size of government," Hubbard said.

The "glide path" that Hubbard refers to is mostly a reference to entitlement spending in programs like Medicare and Medicaid, and to a lesser extent Social Security. It also refers to rates of government spending and taxation. These are the biggest points of disagreement between Obama and Romney.

A focus on the long view means Romney's campaign considers calls for more government-fueled stimulus measures off-base.

"They seem to be congenitally against anything that could be called stimulus and could help boost jobs and growth in the short run," said Jared Bernstein, who was Vice President Biden's top economic adviser for the first three years of the administration. "I've argued with these people. They view it as counterproductive, a sort of sugar high at best and destructive at worst."

The other part of the Romney campaign's long-term view is that European leaders have erred in trying to impose immediate, draconian cuts.

"You don't have to do it all today. And I think in Europe there's been so much discussion on today without saying, well maybe what we need are structural long-term reforms. And then give these economies breathing room," Hubbard said.

The unnamed Romney adviser put it more bluntly.

"I think where the European leaders have made a mistake is in focusing on the austerity," he said. "I just don't think that these guys have really framed the discussion in the right way."

Of course, having a debate about the long-term picture is more possible in the U.S. than it is in Europe. The U.S. economy is still struggling to achieve the kind of growth that would put it on the path toward recovering its economic health. But it is not currently in crisis as Europe is.

And so the conversation in the U.S. has some time yet -– though some believe it's not a lot of time -– to focus on how the government will restructure major programs like Medicare to keep them solvent over the long term, and to reassure the bond market in order to keep borrowing costs under control.

The Supreme Court will have its say next month when it rules on Obama's health care overhaul. And then voters will decide in the fall between Romney's proposal to move toward a more market-based health care model that puts more of a burden on consumers in hopes that they will demand price transparency in a way that drives down costs, and Obama's mixture of government-regulated exchanges to encourage cost-effective strategies among providers.

Hubbard and the anonymous Romney campaign official both said that if the former Massachusetts governor is elected, he would move quickly to enact some version of the Medicare reform and the tax reforms he has proposed. Romney's prospects for success would hinge, of course, on whether Republicans retain control of the House and whether they are able to wrest control of the Senate away from Democrats.

"We have to do something pretty significant on entitlement reform soon," the anonymous adviser said. "I don't know if it's a day one thing, but it's certainly a first few months thing."

Hubbard said he sees similar priorities: "Whoever the president is has to deal with that and in my mind it starts with the spending restraint and glide path changes in entitlement programs, and then tax reform," he said.

"What has to be articulated well is how are we going to do this in a way that's both gradual and fair, gradual in the sense that it gives people time to adjust, and fair in the sense that most of the burden of adjustment will be born by the well to do," Hubbard said. "I think people are persuadable."