GOP candidates at debate: Italy is Europe’s problem

Lost among Herman Cain’s protests and Rick Perry’s stumbles Wednesday night were some provocative responses from the eight GOP presidential candidates on how they would deal with the economy on a global scale — with Italy and China as flashpoints.

The unfolding debt crisis in Italy was, in fact, the first question that came from the CNBC panel moderating the Michigan debate, and while the candidates’ answers were quickly overshadowed by questions about the sexual misconduct allegations against Cain and Perry’s deer-in-headlights moment, they were uniform in their approach to the European situation.

Not our problem, they said. Let Europe take care of Italy.

“Europe is able to take care of their own problems. We don’t want to step in and try and bail out their banks and bail out their governments,” said Mitt Romney. “They have the capacity to deal with that themselves. They’re a very large economy. And there will be, I’m sure, cries if Italy does default, if Italy does get in trouble, and we don’t know that’ll happen. But if they get to a point where they’re in crisis and banks throughout Europe could hold a lot of Italy debt, we’ll -- we’ll then face crisis. And there’ll have to be some kind of effort to try and uphold their financial system.”

While Romney at first seemed to be suggesting that some tipping point could be reached in which the United States would intervene, he then rejected the notion.

“There’s going to be an effort to try and draw us in and talk about how we need to help -- help Italy and help Europe,” the former Massachusetts governor said. “Europe is able to help Europe.”

Cain’s response was more of a non sequitur, an excuse to market his “9-9-9” tax plan right out of the box, but he essentially was in line with Romney, saying that the focus had to be on reviving the U.S. economy first.

And Rep. Ron Paul of Texas seemed to believe that the entire European financial system should be allowed to melt down while implying that it’s fine if U.S. banks suffer as well and threaten the investments of individual Americans.

“You have to let it -- you have to let it liquidate. We’ve had -- we took 40 years to build up this worldwide debt,” Paul said. “We’re in a debt crisis never seen before in our history. The sovereign debt of this world is equal to the GDP, as ours is in this country. If you prop it up, you’ll do exactly what we did in the Depression, prolong the agony.”

That appeared to be the last straw for CNBC’s Jim Cramer, who took the candidates to task.

“Italy’s too big to fail. It’s great,” he said. “I would love it if we were independent. It would be terrific to say it’s your fault and it’s your problem. But if this goes, the world banking system could shut down. Doesn’t that involve our banks too? ”

Jon Huntsman, while not advocating U.S. intervention in the European crisis, did appear to acknowledge that the instability could spread to these shores, terming it a “contagion.”

“I’m concerned that it impacts us in a way that moves into our banking sector, where we’ve got a huge problem called ‘too big to fail’ in this country,” Huntsman said. “We have six banks in this country that, combined, have assets worth 66% of our nation’s GDP, $9.4 trillion. These institutions get hit, they have an implied bailout by the taxpayers in this country. And that means we’re setting ourselves up for disaster again.”

Perry would chip in later, adding that “it doesn’t make any difference whether it’s Wall Street or whether it’s some corporate entity or whether it’s some European country. If you are too big to fail, you are too big.” It was an answer that had the crowd applauding, but one that seemed to equate national economies with corporate entities.

Huntsman would later go at it with Romney over China.

Romney advocated cracking down on the Asian superpower, saying he would slap tariffs on some goods because of China’s currency manipulation. Huntsman, in one of the few moments of profound disagreement during an otherwise genial debate, called Romney out.

“You can give applause lines and you kind of pander here and there. You start a trade war if you start slapping tariffs randomly on Chinese products,” the former U.S. ambassador to China said. “You start a trade war if you start slapping tariffs randomly on Chinese products based upon currency manipulation. That’s not a good idea.”

Pressed by the moderator, Huntsman essentially (if somewhat haltingly) accused Romney of pandering for votes.

“I’ve said it before; I think that that policy is one of simply pandering, just throwing a tariff on for the sake of an artificially valued currency, which is, in fact, the case,” he said. “But here’s what they do in response. They say: You have an artificially valued currency too, with those quantitative easing programs, you too are manipulating your currency, and we’re going to slap something on your products. And before long, you have a trade war.”

Romney pushed back, labeling China’s actions “predatory pricing.”

“I’ve seen people price their goods at an artificial level for an extended period of time such that they can drive other people out of business. And then when the other people are out of business, they can raise their prices. That’s what China’s doing by holding down the value of their currency,” he said. “Let us have a market mechanism determine the value of our respective currencies, as opposed to the Chinese government continuing to put an advantage there for their producers. This is no longer a time for us just to sit back and say we’re going to let them steal our jobs.”

Cain too was asked how would he level the global playing field with China. His response: 9-9-9.

“The tax code is what sends jobs overseas,” Cain said. “The tax code is what caused them to buy those articles from the Chinese. It starts with replacing the tax code.”

james.oliphant@latimes.com