Romney and Ryan have also talked about restoring fiscal balance on the campaign trail, but nothing in their program points to it as an actual priority if they were to be elected.  In fact, the lack of fiscal probity would be one of the most important political advantages for selling the budget to wavering Senate Democrats.  Republicans could frame the Ryan budget to Democrats as a stimulus package and Democrats who back the budget could even point to it not balancing as proof of a concession that they wrung out of Romney and Ryan in exchange for their votes.  This was a part of Ronald Reagan’s strategy in the 1980s and it could very easily work again three decades later.

Still, both the Obama and Romney scenarios portrayed above have internal contradictions and entail considerable risk.  If Obama were to play hardball and the Republicans remain stalwart, he would risk triggering a second severe recession only four years after the financial crisis. This would have a worldwide impact and seal the image of Obama as a poor economic steward in the minds of most Americans.  If Romney successfully pushes through the Ryan budget, he would risk further credit downgrades, bringing an end to the private sector’s willingness to lend to the United States at low interest rates.  Romney would also alienate deficit hawks within the Republican Party.

Turning from the budget to U.S. international economic policy, the picture looks remarkably different.  In stark contrast to the sharply contrasting policies each candidate offers for the domestic economic agenda, there are likely to be few significant differences in international economic policy between an Obama and a Romney administration.

Romney trod the trail first blazed by Bill Clinton as a presidential candidate when it comes to relations with China.  Everyone has followed Clinton’s example by criticizing the incumbent president for having been “too soft” on China, but once in office, they have pursued a more moderate course.  On the campaign trail, Romney has sworn to declare China a currency manipulator on his first day in office.  The United States has done this before.  In 1992, 1993, and 1994, the U.S. officially accused China of currency manipulation.  U.S. law requires an administration to open negotiations with the offending country whenever it makes such a declaration, but it mandates no other action.  The talks during the mid-1990s regarding currency manipulation went nowhere and ended with no resolution.  New talks on the topic would likely suffer the same fate.  A second Obama administration would most likely not declare China a currency manipulator, but it would continue to use the World Trade Organization’s dispute settlement mechanism to curb China’s most egregious trade practices.  A Romney administration would be no less aggressive at the WTO.

A President Romney would most likely pursue a position similar to that of the Obama administration regarding the euro, namely, political encouragement for deeper European integration as part of a solution to the crisis, but no material support to help stabilize the currency.  A Romney administration would probably express greater sympathy than the Obama administration for the austerity policies Germany advocates, but only to a point, and would be critical of excessive austerity that crippled Europe as a trading partner.